Australian Competition and Consumer Commission v Metcash Trading Ltd - [2011] FCAFC 151

FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Metcash Trading Limited [2011] FCAFC 151

Citation: Australian Competition and Consumer Commission v Metcash Trading Limited [2011] FCAFC 151

Appeal from: Australian Competition and Consumer Commission v Metcash Trading Limited [2011] FCA 967

Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v METCASH TRADING LIMITED ACN 000 031 569 and PICK N PAY RETAILERS (PTY) LTD

File number(s): NSD 1533 of 2011

Judges: FINN, BUCHANAN, YATES JJ

Date of judgment: 30 November 2011

Catchwords:
COMPETITION – merger – competition test – whether acquisition of shares in the capital of a body corporate would be likely to have the effect of substantially lessening competition in a market – real chance test discussed

COMPETITION – counterfactual case – standard of proof – discussion of whether counterfactual case required to be established on balance of probabilities or on a real chance test – whether the primary judge erred in his evaluation of the counterfactual case as speculative

COMPETITION – market definition – hypothetical monopolist test – functional level – whether market properly defined as a wholesale market – whether market should be defined by reference to multiple functional levels

Legislation: Competition and Consumer Act 2010 (Cth) ss 50(1), 50(3)
Evidence Act 1995 (Cth) s 140

Cases cited:
Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2006) ATPR ¶42-123
Australian Gas Light Company v Australian Competition and Consumer Commission (2003) 137 FCR 317

Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 27 FLR 400

Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374

Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1

Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82

Howe v R (1980) 55 ALJR 5
Jones v Dunkel (1959) 101 CLR 298
Lithgow City Council v Jackson (2011) 85 ALJR 1130; 281 ALR 223
Luxton v Vines (1952) 85 CLR 352
Momcilovic v R (2011) 85 ALJR 957; 280 ALR 221

Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110
News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410
Outboard Marine Australia Pty Ltd v Hecar Investments (No 6) Pty Ltd (1982) 66 FLR 120
Re Fortescue Metals Group Ltd (2010) 242 FLR 136
Re QIW Ltd (1995) 132 ALR 225
Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169
Seven Network Limited v News Limited [2007] FCA 1062
Seven Network Ltd v News Ltd (2009) 182 FCR 160

Sheen v Fields Pty Ltd (1984) 58 ALJR 93

Singapore Airlines Limited v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158
Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354

Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1978) 34 FLR 494

Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 42 FLR 331

Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd (1978) 32 FLR 305
Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1

United States v EI du Pont de Nemours & Company (1956) 351 US 377
Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529

Heydon JD, Trade Practices Law (Lawbook Co., subscription service) at [3.245] (update 115)

Smith R and Walker J, “Part IIIA Efficiency and Functional Markets” (1998) 5 Aust Jnl of Corp Law 1

Date of hearing: 24 - 26 October 2011

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 392

Counsel for the Appellant: Mr A Myers QC with Mr J Halley SC and Mr C Arnott

Solicitor for the Appellant: Australian Government Solicitor

Counsel for the First Respondent: Mr P Brereton SC with Mr D Roche

Solicitor for the First Respondent: Freehills

Counsel for the Second Respondent: Mr J Griffiths SC with Mr C Moore SC and Mr R Yezerski

Solicitor for the Second Respondent: Blake Dawson

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1533 of 2011

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Appellant

AND:
METCASH TRADING LIMITED ACN 000 031 569
First Respondent

PICK N PAY RETAILERS (PTY) LTD
Second Respondent

JUDGES:

FINN, BUCHANAN, YATES JJ

DATE OF ORDER:

30 NOVEMBER 2011

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The appellant is to pay the respondents’ costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1533 of 2011

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Appellant

AND:
METCASH TRADING LIMITED ACN 000 031 569
First Respondent

PICK N PAY RETAILERS (PTY) LTD
Second Respondent

JUDGES:

FINN, BUCHANAN, YATES JJ

DATE:

30 NOVEMBER 2011

PLACE:

SYDNEY

REASONS FOR JUDGMENT
FINN J

I have had the advantage of reading the reasons of Buchanan J and of Yates J. I agree with the reasons, and the orders proposed by, Yates J. I would add that it is unnecessary for the reasons given by Yates J to express a concluded view on the proper construction of, and standard of proof that is to be applied in cases coming under, s 50(1) of the Competition and Consumer Act 2010 (Cth). I refrain from doing so.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.
Associate:
Dated: 30 November 2011

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1533 of 2011

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Appellant

AND:
METCASH TRADING LIMITED ACN 000 031 569
First Respondent

PICK N PAY RETAILERS (PTY) LTD
Second Respondent

JUDGES:

FINN, BUCHANAN, YATES JJ

DATE:

30 NOVEMBER 2011

PLACE:

SYDNEY

REASONS FOR JUDGMENT
BUCHANAN J
Introduction

I agree with Yates J that the appeal should be dismissed. His Honour’s analysis has relieved me of the burden of writing separate reasons to the same effect. However, there are some matters about which I wish to make some specific comments.
Hypotheses and comparisons
This case must be approached recognising the essentially uncertain foundation for the conclusions which the Court was asked to adopt, and the source of uncertainty. The first source of uncertainty was what would actually happen if the acquisition did not proceed. The second source of uncertainty was what would be the “likely” effect on competition if the acquisition did not proceed – i.e. by comparison with the assumptions made if it did proceed. The question of the standard of proof to be met to resolve those uncertainties is the main question I propose to address.
The Australian Competition and Consumer Commission (“ACCC”) claimed, in the present proceedings, to be entitled to succeed in blocking the proposed acquisition by Metcash of Franklins, and its (primarily) retail assets if:
(i)it could show that there was a “real chance” of the occurrence of an hypothesis advanced by it about what would happen if the proposed acquisition was blocked; and
(ii)on that hypothesis (i.e. as a “real chance” of it occurring even if not probable) there was a “real chance” that there would be a substantial lessening of competition (i.e. as compared with what would (presumably) happen if the acquisition proceeded).
The ACCC claimed that the twin tests it proposed were supported by authority in this Court. The trial judge accepted that he should apply the “real chance” test at the second stage, but not the first. His Honour took the view that, at the first stage, the ACCC was obliged to establish its chosen hypothesis (or any hypothetical position) on the balance of probabilities.
The circumstances of the present case are such as to call into question the soundness of the authorities relied on by the ACCC. In any event, they do not go so far as to support the application of a “real chance” test at the first stage proposed by the ACCC. If the ACCC was correct about its two stage application of the “real chance” test, the case would have to be decided upon a position where speculation was heaped on speculation. That outcome would not, in my view, be consistent with the application of a proper judicial method. Nor is it required by statute. Further, in my view, application of the “real chance” test even at the second stage also presents problems. The circumstances of the present case, with its concentration on comparisons which are all in the future, provide an illustration of the danger of descending into the realm of conjecture. That seems to me to provide a reason to question the correctness of the statutory construction which lies behind the adoption of the test in some cases and it should be revisited.
Before I deal with those questions, I need to say something briefly about some other matters which were to the forefront of the ACCC’s case.
Assumptions and economic theory
The ACCC’s case theory seemed to me to incorporate the following broad assumptions:
1.Monopolies lead to abuse of market power;
2.Profits higher than “normal” are uncompetitive because they illustrate that an abuse of market power has occurred, or at least that there is an absence of desirable levels of competition;
3.The possibility that a profit higher than “normal” might be made is sufficient proof of an absence of desirable levels of competition;
4.The possibility that existing levels of profit might increase to be higher than “normal” is sufficient proof of likely lessening of competition.
However useful assumptions of this kind (and the economic theories on which they are based) may be as the foundation for an economic model from which to begin examination of a particular factual situation (or hypothesis) as a matter of theory, great care must be taken that such assumptions do not become embedded in the application of statutory or other legal tests as a substitute for the fact finding and analysis required by a proper application of the judicial method.
In the present case, the statutory tests to be applied are set out in s 50 of the Competition and Consumer Act 2010 (Cth) (“Competition Act”). The case against Metcash was obliged to satisfy those tests, rather than some more theoretical position. In that context, “market” is defined. It means “a substantial market for goods or services” (s 50(6)). The task of examining whether a substantial lessening of competition is likely in given circumstances obviously requires that a sufficiently relevant market be identified. Clearly, having regard to the statutory context, that is intended to reflect commercial reality, rather than be driven by economic theory. In the present case, there was little reason to depart very far from a consideration of the actual commercial environment in which the competing possibilities would play themselves out.
The market in the present case
In the present case, the ACCC’s efforts were largely devoted to identifying, describing and limiting a market which would provide a sufficient illustration of the fourth assumption set out above. Accordingly, it proposed a market in which the major retailers were absent and most of Franklins’ own operations were excluded. The ACCC defined the market in a way which excluded the 80 Franklins corporate stores, and included wholesale supply of only nominated packaged goods to 10 franchise stores. The market was confined to limited goods which did not represent the whole range of goods supplied by Metcash to its own customers or those supplied by Franklins to its franchisees. This proposed market excluded all services offered and supplied by Metcash to its customers which were connected with the retail operations of those customers, even though on the evidence the supply of those services was fully integrated with, and part of the service of, the supply of goods at a wholesale level – both those included by the ACCC and those which were not.
In my view, this approach, and the theories which were called in aid to justify it, represented a distraction from the real questions for attention. The postulated market was correctly rejected by the trial judge. The market was not identified by reference to the dynamics and constraints really at work, but by reference to the need to supply a foundation for the hypothesis which the ACCC wished to offer about the future state of the “market”. As the trial judge found, however, the market forces operating as a constraint upon Metcash were not satisfactorily identified by the ACCC’s thesis. Those forces were at work in a broader context that necessarily included reference to retail operations and retail sales. Once the market suggested by the ACCC was rejected its case could not succeed. That obstacle is insurmountable. It is a reason why the appeal cannot succeed on any view.
The “wholesale assets”
There was a further problem with the approach taken by the ACCC. Its hypothesis for “likely” competition, if the acquisition by Metcash was prevented, depended on the proposition that Franklins’ “wholesale assets” would be acquired by a third party and on the suggestion that a new, successful, wholesale supply business, of a different kind from that operated by Franklins, would spring up if Metcash was prevented from acquiring Franklins’ retail business. However, the way that the so-called “wholesale assets” were identified immediately called into question the ACCC’s attempt to define the market in the way it did (which theoretically excluded retail activity).
The “wholesale assets” the ACCC identified in its pleadings were only deployed by Franklins itself in the suggested wholesale market to a very limited degree. The three types of “wholesale assets” identified were:
(a)agreements with IT licensors, logistics providers, manufacturers and other suppliers under which Franklins acquires and supplies ‘wholesale packaged groceries’ … to its Eighty Corporate Stores and Ten Franchise Stores, for retail sale to the public;
(b)associated assets owned or controlled by Interfrank which assist in acquiring and supplying wholesale packaged groceries to its Eighty Corporate Stores and Ten Franchise Stores; and
(c)retail support assets including pricing systems, expertise in promotions and advice provided to its Eighty Corporate Stores and Ten Franchise Stores.
It is apparent from the way these assets are identified that it is inaccurate to describe them as “wholesale assets”. In each case those assets were deployed to service the 80 corporate stores (which the ACCC excluded from its defined market) as well as the franchise stores. The so-called “wholesale assets” represented the infrastructure and arrangements whereby Franklins conducted the whole of its vertically integrated retail business and, out of which, as a minor part of its own activities, and a very small part of the suggested wholesale market, also serviced its franchise stores.
The ACCC’s case was that at least a significant majority of the 80 corporate Franklins stores would be acquired by “a third party or third parties”. The connection between this suggestion and a cogent argument about likely future competition in the “market” chosen by the ACCC proved difficult to establish. If the suggested purchaser self-supplied, supply of goods (using the “wholesale assets”) to such stores could not be part of the “market” defined by the ACCC. The other possibilities were that the suggested purchaser would use the “wholesale assets” to establish a wholesale business to supply the stores (i.e. presumably in the hands of some other ultimate purchaser(s)) or would sponsor someone else to establish a wholesale business to supply the stores, if it retained ownership of them. None of these possibilities provides much of a foundation for the proposition that in the separate wholesale market postulated by the ACCC a new entrant would appear and either do what Franklins had not done, or operate in the same way as Franklins and succeed where Franklins had not. The basic scenario was, therefore, itself full of difficulties and conjecture.
In my view, there was no adequate foundation for the supposition that a new wholesale business, of a kind not earlier existing, would come into existence, based somehow on the acquisition of the “wholesale assets”. If it did, it would not reflect what had been done by Franklins. Franklins had failed. Any competition it represented was at an end, independently of anything Metcash did.
The hypothetical purchaser
Apart from the difficulties just referred to, there were substantial difficulties in satisfactorily identifying a suggested purchaser. The possibilities for the hypothetical purchaser were identified, in the ACCC’s pleadings, as follows:
(a)     the SPAR Group;
(b)     Bidco [this was the KKKL consortium];
(c)     other private equity interests, presently unknown to the Commission or which have not yet expressed interest, looking to make a return on investing in the Wholesale Assets (as the Spar Group, the Bidco consortium and Metcash are each seeking to do) in the event that the Proposed Transaction does not proceed; and
(d)     other vertically integrated overseas supermarket chains, presently unknown to the Commission or which have not yet expressed interest, looking to expand into Australia (as Pick n Pay did when it first invested in the Franklins business) in the event that the Proposed Transaction does not proceed; or
(e)     a joint consortium of purchases by the above in combination with one another or other financiers presently unknown to the Commission.
The possibilities in (a), (c), (d) and (e) may be immediately dismissed. The last three were entirely speculative and were never developed. During the course of its case any reliance by the ACCC on SPAR was also abandoned. Attention was then concentrated on “Bidco”, which was the suggested KKKL consortium. The consortium consisted of proprietors and ultimate owners of retail businesses. The trial judge decisively rejected this hypothesis and the idea that the consortium was likely (in any sense) to establish a wholesale business of the kind postulated. Nevertheless, on the appeal, the ACCC pursued the idea that it was entitled to argue for a “real chance” of that hypothesis coming to fruition, and entitled to succeed on that basis.
The contention cannot survive the factual findings of the trial judge but it leads me to the further discussion which follows. The consequence revealed by the present case, of the application of the “real chance” test upon which the ACCC insisted, seems potentially so unsatisfactory that I cannot refrain from questioning, in the light of the facts of the present case at least, the foundation for the test upon which the ACCC relied.
The standard of proof
The argument by the ACCC about the “real chance” test is necessarily an argument about the elements which must be satisfied in a case under s 50 of the Competition Act, and the burden and standard of proof associated with establishing those elements.
Section 50(1), (3) and (6) provide:
50(1)A corporation must not directly or indirectly:
(a)       acquire shares in the capital of a body corporate; or
(b)       acquire any assets of a person;
if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market.
…
(3)Without limiting the matters that may be taken into account for the purposes of subsections (1) and (2) in determining whether the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market, the following matters must be taken into account:
(a)       the actual and potential level of import competition in the market;
(b)       the height of barriers to entry to the market;
(c)       the level of concentration in the market;
(d)       the degree of countervailing power in the market;
(e)the likelihood that the acquisition would result in the acquirer being able to significantly and sustainably increase prices or profit margins;
(f)the extent to which substitutes are available in the market or are likely to be available in the market;
(g)the dynamic characteristics of the market, including growth, innovation and product differentiation;
(h)the likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor;
(i)        the nature and extent of vertical integration in the market.
…
(6)In this section:
market means a substantial market for goods or services in:
(a)Australia; or
(b)a State; or
(c)a Territory; or
(d)a region of Australia.

Section 50 erects a statutory prohibition. That prohibition may, in an appropriate case, be enforced by the Court by way of injunction or declaration. When such relief is sought, in aid of the statutory scheme, it is necessary for the party seeking relief to make out a proper case for that relief.
The trial judge, applying authorities to which I shall refer, accepted that whether a suggested effect on competition was “likely” was to be tested by asking whether there was a “real chance” of it occurring. However, his Honour took the view that the factual foundation upon which such a question should be answered would first need to be established on the balance of probabilities. Applying that approach to the issues in the present case, his Honour applied a “balance of probabilities” test to the ACCC’s hypothesis about likely competitors to Metcash if the acquisition did not proceed, and a “real chance” test to the question whether, if the hypothesis was accepted, it was likely that substantially lessened competition would be the result.
On the appeal the ACCC argued that the “real chance” test should be applied to all aspects of the question arising under s 50, including whether it had made good the hypothetical factual foundation upon which to then ask whether it was likely that substantial lessening of competition would occur. In my view, this argument should not be accepted. Indeed, I do not agree that the “real chance” test should be applied at all to the application of s 50.
First, a general observation might be made that there are generally only two standards of proof contemplated in proceedings involving the exercise of federal judicial power – proof to the criminal standard and proof to the civil standard. It is worth noting that the Evidence Act 1995 (Cth) provides in s 140:
140(1)In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2)Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:
(a)     the nature of the cause of action or defence; and
(b)     the nature of the subject-matter of the proceeding; and
(c)     the gravity of the matters alleged.
The Evidence Act applies to all proceedings in a federal court (s 4). It does not, with limited exceptions, affect the operation of the provisions of any other Act (s 8). However, there is nothing in the Competition Act or in s 50 of the Competition Act which, in my view, alters the general rule stated in s 140 of the Evidence Act. It seems to me to follow that a case for relief in this Court, relying on s 50, must be established on the balance of probabilities. That said, deference to authority requires a more detailed analysis.
The establishment of any case requires conclusions about facts, to which a relevant legal standard may be applied. In the present context, the relevant legal standard is stated by s 50. I shall return in a short while to discuss the nature of the test upon which the operation of the prohibition in s 50 depends. First, it is necessary to say something about the way in which the facts, to which the legal standard must be applied, are to be established.
On the appeal the ACCC argued that the factual foundation to which the test in s 50 should be applied in the present case, need not be established to the standard expressed in s 140 of the Evidence Act. The ACCC argued that, not only need it only prove as a “real chance” that a substantial lessening of competition would result from the hypothesis it advanced, but also that it need only show a “real chance” that the hypothesis might come about. It follows from this approach that the ACCC argued that the Court would enforce the statutory prohibition in s 50 even if satisfied that it was more likely than not that the hypothesis advanced by the ACCC would not come to pass. That seems a very unsure foundation for the enforcement of a statutory prohibition having serious commercial consequences. It amounts to a suggestion that the authority of the Court would be used to prevent an acquisition when the Court assessed that the hypothetical facts used as a foundation to suggest a likely substantial lessening of competition would, in all likelihood, not be in place. That, indeed, was the effect of the factual findings in the present case. That would impose an almost inescapable obstacle to a very wide range of potential acquisitions. The application of a “real chance” test to the assessment required by s 50 concerning a likely effect on competition has similar consequences. I shall discuss that shortly.
Facts may be established directly or by inferring them from other facts which have themselves been proved. Necessarily, where prediction about the future is involved, the whole process of predicting future facts involves inference from otherwise demonstrated circumstances. Inferential reasoning, in a legal context, must take place by reference to the standard of proof which is involved.
In a criminal case, proof beyond reasonable doubt necessitates proof of every element of an offence, also beyond reasonable doubt, to maintain the overall integrity of the criminal process (see Momcilovic v R (2011) 85 ALJR 957; 280 ALR 221 per French CJ at [53] citing Howe v R (1980) 55 ALJR 5 at 7; 32 ALR 478 at 483). Inference does not mean conjecture, even in a civil case. In civil proceedings the inferential process “may fall short of certainty, [but] must be more than an inference of equal degree of probability with other inferences, so as to avoid guess or conjecture” (see Lithgow City Council v Jackson (2011) 85 ALJR 1130; 281 ALR 223 per Crennan J at [94], Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 6, Luxton v Vines (1952) 85 CLR 352 at 358, Jones v Dunkel (1959) 101 CLR 298 at 305). A court is not authorised to choose between guesses, even on the ground that one guess seems more likely than another or others.
These strictures applied, in my view, to the establishment of the factual foundation upon which the ACCC wished to contend that the acquisition by Metcash of the Franklins’ assets would be likely to have the effect of substantially lessening competition in a market. Even if assessment of that contention could (let me accept it is so for this purpose) proceed by reference to whether there was a “real chance” that those factual circumstances would have the effect of substantially lessening competition in a market, that would not, in my view, authorise a process of fact finding which departed from the necessity to find or infer facts to the ordinary civil standard. The “real chance” test, if it applies, does not reach backwards to affect or reduce the discipline or level of proof required in establishing a proper factual foundation from which to argue for ultimate conclusions to sustain a cause of action. It follows that I agree with the approach taken by the trial judge to this issue. Any other approach amounts to saying that the civil standard of proof of factual matters has been abandoned with respect to s 50 and many other provisions of the Competition Act so that the serious (and sometimes commercially damaging) restraints imposed by the Competition Act may be activated at the election of a regulator upon the basis of hypotheses and suppositions which reach only a level of respectability – i.e. respectable “guesses” as opposed to the application of the ordinary judicial method.
In many cases, a proposed acquisition will present for consideration a well defined factual consequence. If, for example, there are two (or a small number) of well established competitors and one proposed simply to take over, merge with, or absorb another the future possibilities may be very straightforward. They may be as simple as comparing a market with two (or three or four) well established competitors with a market involving one less, and one with enhanced capacity. If one starts with two competitors only, the “likely” (whatever that word means) result may be monopoly. If one starts with three, the “likely” result may be market dominance. The alternative may be status quo. This is straightforward. It is not the present case.
Independently of any acquisition by Metcash, Franklins was leaving the market, whatever it was. It was leaving the market because its business was unprofitable and was failing. That was the commercial reality. The owners of Franklins, and its associated assets, had commenced the process of realising what they could for those assets. Upon Franklins’ exit from the market any competition which it offered would cease. It was not the possibility of acquisition by Metcash which would have any initial effect on competition. This was not a takeover case. It was not a case where the status quo might be retained if the acquisition did not proceed.
As Franklins was not going to remain in the market, whatever happened, there was no status quo available for comparison. All comparisons were with future possibilities. All future possibilities required predictions. To propose that the ACCC could meet its obligation of providing a factual foundation for the comparison it proposed about likely competition by saying there was a “real chance” of something happening, unmistakeably invites speculation.
In my view, it was necessary to establish, on the balance of probabilities, what would happen if the acquisition proceeded and, importantly for the present case, if it did not proceed. Only then could the test in s 50 be applied. The application of a “real chance” test, even at this (second) point, also has the consequence, so far as s 50 is concerned, that the Court may be required to find the statutory prohibition operative when, in all likelihood, the suggested possible effect on competition will not occur. That also seems a strange, and unsatisfactory, result.
The meaning of “likely”
Miller’s Australian Competition and Consumer Law Annotated (33^rd ed) 2011 says this (at [1.50.30], 717):
The word “likely” has various shades of meaning. It may mean “probable” in the sense of “more probable than not”, “more than a 50 per cent chance”. It may mean “material risk” as seen by a reasonable man “such as might happen”. It may mean “some possibility” more than a remote or bare chance or it may mean that the conduct engaged in is inherently of such a character that it would ordinarily cause the effect specified …
Miller also suggests (at [1.45.45]): “It would appear that, in ss 45, 46 and 47 [of the Competition Act], the term ‘likely’ means that there is a real chance or possibility, rather than ‘more likely than not’ …”. Three cases are cited in support of that conclusion: Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110 (“Monroe Topple”); Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529 (“Universal Music”); and Seven Network Ltd v News Ltd (2009) 182 FCR 160 (“Seven Network”). I shall refer to each of them in due course. By contradistinction, Miller suggests that the meaning of “likely” in s 50 of the Competition Act has not been settled.
The same, or a similar, drafting technique of juxtaposing reference to a factual circumstance (“has the effect” (s 45 and s 47(10)), “would have the effect” (s 45D and s 50), “is misleading or deceptive” (Sched 2, s 18)) with a less determinative conclusion (“is likely to have the effect” (s 45 and s 47(10)), “would be likely to have the effect” (s 45D and s 50), “is likely to mislead or deceive” (Sched 2, s 18)) occurs in a number of places in the Competition Act. In some cases it is relatively easy to see that the drafter has drawn a distinction between what has happened and what might happen (ss 45 and 47(10)). Similarly, a distinction between something that is misleading or deceptive and something that is likely to mislead or deceive (Sched 2, s 18) is not conceptually too difficult. Necessarily, in the situations so far mentioned, the concept of “likely” arises in connection with a prediction about something not then manifest. In other cases (e.g. involving s 50) the distinction is less clear. Postulating that something would have a particular effect may be a firmer prediction than saying it would be likely to have that effect, but neither involves identification of an effect already manifest. Both require prediction.
In some (but not all) of the cases to which I shall turn shortly the perceived (but in my view non-existent) tension between the two ways of expressing the test has led to the conclusion that the first must be established on the balance of probabilities and (as a result) the second by reference to some lesser standard, often referred to as the “real chance” test. In my respectful view, that is an error of analysis and an incorrect approach to the issue of construction. The first limb of the test allows a prediction of probable (therefore likely) consequence, without account being taken of, or allowance needed for, other contingencies. The second limb concentrates on the quality of the circumstances, and the probable consequence, without permitting falsification of that probability by proof of the actual occurrence of some inherently less probable result. In other words, establishing a probable consequence will suffice, even if in fact it did not occur. In the leading case on the issue, that is what happened. Both limbs of the test, as found for example in s 50, in my view require the same standard of proof (balance of probabilities) and they should probably be regarded as constituent elements of a compound conception. As a matter of ordinary language I see no tension or inconsistency between them. As a matter of ordinary language I see no adequate foundation for concluding that the second limb of such a test imports and applies, at any stage of the process, a departure from the ordinary civil standard of proof on the balance of probabilities.
Some of the authorities support this view; some do not. At present, the authorities against it are the more influential. The test (“real chance”) to which they give support was followed by the trial judge.
Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 27 FLR 400 (“Krieg”) dealt, amongst other things, with a statutory liability for interference with or damage to property under the control of the Australian Postmaster-General where there was “reasonable cause to believe that the doing of the work [was] likely” to result in such interference or damage. Bray CJ observed that the section (s 139B of the Post and Telegraph Act 1901-1973) had never been the subject of judicial interpretation. Bray CJ posed the question for his decision as follows (at 406):
The real point of the case turns on the word “likely” in sub-s. (1) (a). Is that synonymous with “probable” or, in other words, with there being more than a fifty per cent chance of the event happening? Or is it enough if Mr. Field had reasonable cause to believe that there was some possibility more than remote or “bare”, to use the phrase preferred by Mr. von Doussa, of damage or interference?
Bray CJ thought that the word “likely” bore its ordinary meaning, as a synonym of the word “probable”, or more likely to happen than not. His Honour went on, as follows (at 407):
… After all, the converse of “likely” is “unlikely” and the converse of “probable” is “improbable” and if an event can properly be described as likely though not probable, or probable though not likely, then it can also be described as unlikely though probable or improbable though likely. This seems contrary to common usage and, I am inclined to say, to commonsense.
It may be sufficient to say that the natural and ordinary meaning of the word “likely” is the one I have indicated and prima facie that is its meaning in the statute and that there is nothing in the context of this statute that I can see to indicate any other meaning. But, in deference to Mr. von Doussa’s able and subtle argument based on the concepts of likelihood and probability as contained in traditional formulations of the common law of negligence, I will say something more.
There followed an extended discussion of the common law position. Then Bray CJ said (at 410):
I do not, however, regard these difficult semantic questions about the proper meaning of familiar adjectives in the various formulations of common law doctrine as decisive of the point in issue, or even very relevant. The common law depends on concepts, not on words. It is not bound to the particular phraseology adopted by a particular court. It can be refined on and expounded in more or less detail according to the circumstances of the particular case. Here we are concerned with the word “likely” in a statute. As I have said, the ordinary and natural meaning of the word is synonymous with the ordinary and natural meaning of the word “probable” and both words mean, to adopt the expression of Lord Hodson in the passage previously quoted, that there is an odds-on chance of the thing happening. That is the way in which statutes containing the words have usually been construed: see, for example, Re Bayer Products’ Ltd.’s Application, per Lord Greene M.R. and per Asquith L.J.; Dowling v. South Canterbury Electric Power Board; Transport Ministry v. Simmonds. Particularly is this so when the statute is a penal statute (see Transport Ministry v. Simmonds or, I think, where, as here, an additional liability in tort beyond the common law liability is being imposed.
I think that is the meaning which should be attached to the word “likely” in sub-s. (1) (a). It is the natural and ordinary meaning and there is nothing to show that another meaning was intended. Like the learned special magistrate, therefore, I think that “likely” in the subsection means “probable” and I think that that means that there is a more than fifty per cent chance of the thing happening.
Two years later this Court dealt with a case which directly involved s 50 of the Trade Practices Act 1974 (Cth) (“TP Act”) (now s 50 of the Competition Act) although, as will be seen, some differences in the statutory test must be noted. In Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd (1978) 32 FLR 305 (“Ansett Industries”) Ansett Transport Industries Ltd offered to purchase all the issued shares in the capital of Avis Rent-A-Car System Pty Ltd. The offer was accepted. The Trade Practices Commission commenced proceedings seeking an injunction alleging that the acquisition of shares contravened s 50.
Section 50 was then in different terms. It did not refer to competition but referred to a corporation being (or being likely to be) “in a position to control or dominate a market for goods or services”. A previous version of s 50, however, had been in a form which is closer to the present formulation. Northrop J referred to those matters as follows (at 316 and 317):
The relevant market having been identified, it is necessary to determine whether, as a result of the acquisition of the shares in the capital of Avis, Ansett Operations “would be or be likely to be, in a position to control or dominate” that market. Before turning to the evidence, it is necessary to discuss the interpretation of s. 50 of the Act.
…
Section 50 as contained in the 1974 Act was markedly different from s. 50 as introduced by the 1977 Act. The former s. 50(1) was in the following form: “A corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate where the acquisition is likely to have the effect of substantially lessening competition in a market for goods or services”. That section proscribed the acquisition of shares where the acquisition was “likely to have the effect of substantially lessening competition in a market”.
It will be noted that, in the original formulation, the only test was whether an acquisition would be “likely to” have a particular effect. In the altered formulation introduced in 1977 the formulation referred to both actual and likely circumstances. Northrop J found, for reasons which were very extensively expressed, that the result of the share acquisition was not to immediately place Avis in a position to dominate the car rental market in Australia. His Honour then turned to another aspect, saying (at 339–340):
It now becomes necessary to consider the secondary case put by the commission. This depends upon additional factors being provided by Ansett Operations and by which the position of Avis is enhanced to such an extent that Ansett Operations will be in a position to dominate the car rental market in Australia. … I have held that Avis is not in a position to dominate the market, and it follows that the mere acquisition of all the shares in the capital of Avis by Ansett Operations does not of itself place Ansett Operations in a position to dominate the market. For present purposes, the crucial words are “would be likely to be”. This expression connotes a consideration of what is likely to happen in the future.

His Honour addressed that question by applying the conventional standard of proof on the balance of probabilities. His Honour said, for example (at 344):
The mere existence of an economically strong company in a corporate relationship with an operator in a particular market in Australia does not lead by itself to the conclusion, on the balance of probabilities, that the economically strong company would be or be likely to be in a position to dominate that particular market.
and, more directly (at 346):
Although it is sufficient for the commission to establish that Ansett Operations would be likely to be in a position to dominate the car rental market as a result of the acquisition of the shares in Avis, the issue of whether Ansett Operations is in that position must be judged in the light of commercial probabilities.
His Honour made a further reference to satisfaction on the balance of probabilities at 347.
With respect, this was a firm, straightforward and conventional approach to an issue which is at the heart of the operation of the civil justice system – namely, the standard of proof to be met by a party initiating civil proceedings against another.
The point of departure from the approach taken by Bray CJ in Krieg and Northrop J in Ansett Industries is the judgment of Deane J in Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 42 FLR 331 (“Tillmanns Butcheries”), although it should be noted that no reference at all was made in Tillmanns Butcheries to the judgment of Northrop J in Ansett Industries.
Tillmanns Butcheries concerned s 45D of the TP Act (also s 45D of the Competition Act). Section 45D required proof of a number of elements: acting in concert; hindering or preventing the supply of goods or services; for the purpose of causing substantial loss or damage; and “the conduct … would have or be likely to have the effect” of causing substantial loss or damage. The case at first instance was heard by St John J (Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1978) 34 FLR 494). St John J took the view, on the facts of that case, that loss or damage within the meaning of s 45D had not been proved. As it would have been open to the plaintiff to prove that substantial loss or damage had, in fact, been caused by the impugned conduct St John J took the view that (at 498):
… the plaintiff company is not entitled to argue that the conduct would be likely to cause substantial loss where the means of proving whether in fact it did cause substantial loss is in its power.
That approach was reversed on appeal, because the view was taken that the conduct of the respondent union was of a character, and undertaken with such a purpose, that it was likely to cause substantial loss or damage (at whatever standard proof was necessary) whether or not it actually did so in that case. It was also relevant that the effect of the conduct had been limited by an injunction which prevented it continuing. This was a case, therefore, where a probable result could be said to be contradicted by what happened. Once that was removed as an obstacle of construction the case for relief was a clear one.
It was not necessary, in order to determine the appeal and uphold it, to reach or express a firm or final view about the standard of proof to be employed. Bowen CJ, with whom Evatt J agreed, explicitly declined to do so.
Bowen CJ said (at 339):
The word “likely” is one which has various shades of meaning. It may mean “probable” in the sense of “more probable than not” — “more than a fifty per cent chance”. It may mean “material risk” as seen by a reasonable man “such as might happen”. It may mean “some possibility” — more than a remote or bare chance. Or, it may mean that the conduct engaged in is inherently of such a character that it would ordinarily cause the effect specified.
After referring to some cases (both Australian and American) in the general area of discourse Bowen CJ said (at 340):
The circumstances to which s. 45D may apply are so various that I hesitate to place a gloss on the section by preferring one meaning of “likely” rather than another for the determination of this particular case. It is unnecessary to do so, because I have formed the view that whichever meaning is adopted the evidence leads me to the conclusion that the likelihood of substantial loss or damage has been established.
It was urged upon us by counsel for the second respondent to the present appeal that we should exercise similar restraint. That is a suggestion which has a good deal to recommend it but the circumstances are now quite different. Substantial confusion has in my view arisen about this issue and it would be better to address it. In addition, the issue has arisen directly in the present case. It was one with which was necessary for the trial judge to grapple and it is one in respect of which the appellant has argued, in substance as I see it, for a further relaxation of the standard of proof.
Deane J in Tillmanns Butcheries dealt with the matter at greater length. His Honour said (at 346):
The word “likely” can, in some context, mean “probably” in the sense in which that word is commonly used by lawyers and laymen, that is to say, more likely than not or more than a fifty per cent chance … It can also, in an appropriate context, refer to a real or not remote chance or possibility regardless of whether it is less or more than fifty per cent. When used with the latter meaning in a phrase which is descriptive of conduct, the word is equivalent to “prone”, “with a propensity” or “liable”. ... Thus, if I fire a rifle through drawn curtains into a quiet lane in a country village, it is not likely, in the sense of more likely than not or an odds-on chance, that I will injure anyone. It would, however, be difficult to deny that there was a real chance or possibility (or likelihood in that sense) that an occasional passer-by would be wounded by the bullet. Plainly, the act of firing a rifle through drawn curtains into a lane used by pedestrians would be an act which was, in the circumstances, prone or liable (likely in that sense) to cause injury to a passing pedestrian.
(References omitted)
Deane J expressed his conclusion about this issue in the following way (at 347–348):
The conclusion which I have reached is that, in the context of s. 45D (1), the preferable view is that the word “likely” is not synonymous with “more likely than not” and that if relevant conduct is engaged in for the purpose of causing loss or damage to the business of the relevant corporation, it will suffice, for the purposes of the subsection, if that conduct is, in the circumstances, such that there is a real chance or possibility that it will, if pursued, cause such loss or damage. Whether or not such conduct is likely (in that sense) to have that effect is a question to be determined by reference to well-established standards of what could reasonably be expected to be the consequence of the relevant conduct in the circumstances. In determining the answer to that question, it will be relevant that the persons engaging in the conduct did so with the purpose of causing such loss or damage.
(Emphasis added)
It will be apparent from what I said earlier, that Deane J’s analysis of the statutory test (and his rejection elsewhere in the judgment of the approach taken by Bray CJ in Krieg) are not matters with which I agree. However, even accepting the analysis for present purposes it does not, in my view, apply to s 50 of the Competition Act.
The phrases I have emphasised in the last extract seem to me to be of real significance to his Honour’s reasoning in the statutory context in which the discussion occurred. Purpose and likelihood were (and are) conjoined elements in the overall satisfaction of the statutory test under s 45D of the Competition Act. That may not be said about s 50.
In my respectful view, it is necessary to approach the reasoning employed by Deane J in Tillmanns Butcheries with the realisation firmly in mind that the notion of purpose was directly linked by his Honour, through the prism of foreseeability, with anticipated results – “what could reasonably be expected to be the consequence of the relevant conduct in the circumstances” – i.e. having regard to the purpose of causing loss or damage. That set of circumstances finds no counterpart in s 50 and, in my respectful view, the reasoning employed by Deane J in Tillmanns Butcheries is not appropriate to the construction of s 50.
Bowen CJ referred to the purpose for the conduct in the case in the following terms (at 339):
In the case before us the ban affected the raw materials for Tillmanns’ business and even though it was a large and diversified butchery and smallgoods producer it nevertheless depended on meat. There is evidence for an inference that the ban was intended to be a total one. There is evidence too that Mr. Tillmann was not prepared to relent and that the union was quite prepared for the ban to last indefinitely. In my view, having regard to the number of beasts involved in the ban in the present case and the circumstances proved, the proper conclusion is that the purpose was to cause substantial loss or damage.
It was a natural inference to draw that conduct involving an outright ban of supplies which might last indefinitely until capitulation, and which was done for the purpose of causing the target business substantial loss and damage, was likely to cause that loss or damage. Bowen CJ and Evatt J were satisfied about that element whatever standard of proof was involved. There is no reason to think that Deane J was satisfied to some lesser standard of proof. The contrary is clearly the case. Deane J said (at 350):
There was no end in sight of the ban on processing of livestock for the appellant. The quantities of livestock and carcasses involved make it clear that, at the time, the appellant used the facilities of the particular abattoir to a considerable extent. It can be assumed that the appellant did not have livestock slaughtered at the abattoir in the pursuit of some macabre pleasure and that the carcasses of livestock assigned to be slaughtered were required for the purposes of the appellant’s business. In these circumstances, it appears to me that, at the time the proceedings were instituted and the injunction first granted, the relevant conduct was plainly likely to cause substantial damage to the appellant’s business as a wholesale and retail butcher regardless of which of the alternative meanings be given to the word “substantial” [about which Deane J expressed no view].
In the circumstances of Tillmanns Butcheries, therefore, there was no necessity for the application of some lesser standard of proof than the ordinary civil standard. It is also clear that Deane J’s analysis was connected with the idea that a particular purpose of causing loss or damage was the origin of the conduct in question. An assumption of the necessary quality is not available in a case involving s 50 of the Competition Act. An assumption that a business acquiring shares in the capital of another does so to assist its own commercial position does not go nearly the distance which is evident from the discussion in Tillmanns Butcheries.
Even the illustration provided by Deane J, of firing a rifle careless of any passer by, is accompanied by pejorative overtones which are simply not available in a case such as the present.
Finally, as I said earlier, no doubt was expressed about the soundness of the approach taken by Northrop J in Ansett Industries, so far as it concerned s 50, which had been decided in only the previous year.
The next important development was the apparent approval of the observations of Deane J in Tillmanns Butcheries, by the High Court in Sheen v Fields Pty Ltd (1984) 58 ALJR 93. The statutory context was quite different. The case concerned Rules made under the Factories and Shops Act 1960 (Qld). The report of the case states:
Rule 1, cl. 21 of the Rules made under the Factories and Shops Act 1960 (Q.) required that protection in accordance with the Australian Standards for Industrial Eye Protection (CZ7-1967, Z7-1967 and Z45-1967) should be provided in cases where there was a “likelihood of injury” to the eyes of an employee in a factory. The Standards required that if a “hazard” existed, eye protectors should be issued, and that if the employee was exposed to flying particles, the provision of safety spectacles was the minimum acceptable method of protection.
The standard of care thereby identified clearly did not depend on a probability of injury before eye protection was obligatory.
Gibbs CJ (with whom Mason, Wilson and Dawson JJ agreed) accepted for that purpose that a “likelihood of injury” means “a real or not remote chance or possibility regardless of whether it is less or more than 50 percent” applying the observations of Deane J in Tillmanns Butcheries, but observed that this conclusion did “not decide the present case”. Again, it was not actually necessary for a “real chance” test to be applied. Liability was denied by the High Court, even on that lesser test, because the injury to the employee was, in the particular circumstances of the case, not reasonably foreseeable. He was using an unauthorised work method. The authorised methods would not have involved risk of eye injury. His unauthorised method did, but he had chosen not to wear his safety goggles.
In my respectful view, despite the endorsement in that statutory context, of the “real chance” test, Sheen v Fields does not support its application to the operation of s 50 of the Competition Act.
Later that year (1984) a Full Court of this Court approved the application of the “real chance” test to the operation of s 52 of the TP Act (now Sched 2, s 18 of the Competition Act) (Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 (“Global Sportsman”)). The Court said (at 87):
A contravention of s. 52(1) is established by conduct which is misleading or deceptive or which is likely to mislead or deceive. Conduct is likely to mislead or deceive if that is a “real or not remote chance or possibility regardless of whether it is less or more than fifty per cent”: cf. Tillmanns Butcheries Pty Ltd v. Australasian Meat Industry Employees’ Union (1979) 42 F.L.R. 331 at 346, per Deane J.; Sheen v. Fields Pty Ltd (1984) 58 A.L.J.R. 93.
However, no occasion arose to apply the test to actual facts. The proceedings involved a stated case. As the Court said (at 89):
One of the disadvantages of the Stated Case procedure in this matter is that questions which the parties anticipate may arise must be considered in the abstract.
The question in the proceedings was identified in these terms (at 92):
The basic dispute between the parties concerns the respondents’ contention that the publication of statements including statements of opinion made in the ordinary course of the publication of news in those parts of a newspaper which are not advertising material cannot be conduct which is misleading or deceptive or likely to mislead or deceive within the meaning of s. 52(1) of the Act. For the reasons which we have stated, we are of opinion that the respondents’ assertion is incorrect.
(Emphasis in original)
In the circumstances, in my respectful view, the apparent endorsement of the “real chance” test cannot bear too much weight, as a result of its apparent approval in Global Sportsman, if a sufficient reason exists to revisit the question in a concrete setting, such as provided by the present case.
In Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 (“TNT”) Franki J dealt, in a very substantial piece of litigation, with allegations of contravention of s 45 of the TP Act (also s 45 of the Competition Act, but now in different terms). That provision dealt with contracts, arrangements or understandings in restraint of trade or commerce. Such a contract, arrangement or understanding was not in restraint of trade or commerce unless “the restraint has or is likely to have a significant effect on competition”. Franki J referred to Tillmanns Butcheries. His Honour said (at 49):
… I consider that the word in s 45(2) now under consideration is to be read with due regard to the fact that it appears in a penal statute, that it is linked with the word “significant” and that this means that, whilst the meaning need not be restricted to a situation where the odds are greater rather than equally balanced or somewhat less than equally balanced, the probability must be something not very far short of “more probably than not”, except in unusual circumstances as, for example, the situation mentioned by Deane J of firing a rifle through drawn curtains into a quiet lane in a country village.
(Emphasis added)
With respect, this is not a completely satisfactory approach to the issue. Having regard to the provisions of the Evidence Act to which I earlier referred, the civil standard applies to the disposition of a cause of action unless it is possible to conclude that some other statute has effectively modified the position. I confess I do not understand exactly what Franki J was intending to convey in the passage I have emphasised, except that it seems a less than wholehearted embrace of the “real chance” test. It does seem clear that Franki J regarded the example offered by Deane J as an exceptional one.
Now I may turn to the cases offered by Miller as illustrations of the proposition that the “real chance” test appears to apply with respect to the operation of ss 45, 46 and 47 of the Competition Act (although perhaps not for s 50).
In Monroe Topple the trial judge had dismissed an application relying on ss 45, 46, 47 and 51AC of the TP Act. Section 45(2)(a)(ii) and s 45(2)(b)(ii) prohibited a corporation from making or giving effect to a provision of a contract which has the purpose or which had or is likely to have the effect of substantially lessening competition. A case for relief had not been established. An appeal failed. It is important to understand that the appeal failed when tested against the lesser standard of proof of “real chance”. In the Full Court, on appeal, Heerey J (with whom Black CJ and Tamberlin J agreed) said (at [111]):
111As to effect, it is to be noted that the section is also satisfied if the conduct is likely to have the effect of substantially lessening competition. This involves assessing the future effect of the conduct, considered as at the time it is engaged in: Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 50. “Likely” does not mean “more likely than not”. It is sufficient that there is a real chance or possibility that a substantial lessening of competition will occur: Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 42 FLR 331 at 346-348 per Deane J. Tillmanns was a case under s 45D of the Act, but the reasoning of Deane J is equally applicable to the concept of likely effect in s 47(10).
(Emphasis in original)
No further discussion was necessary. The appeal failed on the lesser test expressed by Deane J in Tillmanns Butcheries. I intend no disrespect to the judges who constituted that Full Court by saying that the matter did not appear to receive (and did not need to receive) more than passing attention in the circumstances.
In Universal Music somewhat reserved endorsement was given to the statements of Heerey J in Monroe Topple. In Universal Music the Court said simply (at [247]):
247… We are prepared to assume, for the purposes of argument, that likely does not mean more likely than not, but rather that there is a real chance or possibility that a substantial lessening will occur (Monroe Topple per Heerey J at [111]).
Seven Network is the judgment on appeal from Sackville J in the C7 litigation. The C7 litigation also concerned the operation of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act. At [747] Dowsett and Lander JJ set out the passage from the judgment of Heerey J in Monroe Topple extracted above. Their Honours said (at [749]–[750]):
749News’s submissions on this question focus upon matters of policy. It is said that the Court will normally construe legislation having a penal aspect so as to favour the subject in the event of any ambiguity. It also submits that there may be considerable difficulties for a competitor in deciding whether or not there is a real chance of an anti-competitive outcome as a consequence of proposed conduct. Further, it is said that the basis upon which the cases have adopted the “real chance” test has been that the alternative approach would give the words little functional effect. This, News submits, is not a proper basis for construing the word “likely” as meaning “a real chance” in the context of s 45(2).
750 … That is not our view of the case. We … consider that we should follow the decision in applying s 45 unless we are satisfied that it is clearly wrong. Reconsideration of policy matters will not generally be an appropriate basis for such satisfaction, at least in the absence of any evidence as to wide-spread inconvenience or injustice caused by the established approach. The decision in Monroe Topple 122 FCR 110 has stood since 2002. News’s submissions do not cause us to doubt its correctness.

Two observations may be made about the approach which their Honours took. First, it is clear that the statements were made in response to submissions which, as their Honours said, focussed “upon matters of policy”. Secondly, it seems equally clear that their Honours were not invited to embark on a more detailed analysis to assess the persuasive force of the legal reasoning which, as I have endeavoured to show, is really derived from the judgment of Deane J in Tillmanns Butcheries in quite different circumstances. In the circumstances, while of course their Honours’ conclusions are entitled to substantial weight, their endorsement of Monroe Topple does not add to the analysis in a way which makes it impermissible for it now to be revisited.
None of the cases to which I have so far referred (including Tillmanns Butcheries) provide, in my respectful view, sufficiently persuasive support for the application of the “real chance” test when assessing whether something is likely to happen. For my own part, I prefer the earlier approach by Bray CJ in Krieg and the never disapproved judgment of Northrop J in Ansett Industries. However, there are two cases which seem to command greater attention, owing to the deliberate and considered statements they contain. One concerns s 50 of the Competition Act and one does not.
In News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 (at 564, 565, 571) a Full Court explicitly endorsed Tillmanns Butcheries and referred to Global Sportsman, when considering the definition of the term “exclusionary provision” in s 4D of the TP Act and, in particular, when a person was deemed to be competitive with another within the meaning of that definition. The Court said (at 565):
As Deane J pointed out in Tillmanns at 487, the phrase “would be likely to have” conveys a lower degree of likelihood than the phrase “would have”. Similarly, the phrase “would be likely to be” in s 4D(2) conveys a lower degree of likelihood than the phrase “would be”. Given that “likely” has the meaning attributed to it by Deane J when used within the expression “would be likely to be”, it must also bear the same meaning when used in the expression “is likely to be”.
In that case, the Court went on to actually apply the test it had stated (at 571). The ultimate result was that certain Commitment and Loyalty Agreements were found to be in breach of s 45(2)(a)(i) of the TP Act. The case involved the same statutory provision, therefore, as Seven Network.
So far as s 50 itself is concerned the strongest statement in support of the application of the approach expressed by Deane J in Tillmanns Butcheries is to be found in the judgment of French J (when his Honour was a judge of this Court) in Australian Gas Light Company v Australian Competition and Consumer Commission (2003) 137 FCR 317 (“AGL”). This was the authority applied by the trial judge. French J acknowledged (at [343]) that there had been “some divergence in the construction of ‘likely’ in various provisions of the Act”. He also said (at [344]) “[d]ifferent views have been expressed from time to time in connection with s 50” in that respect. His Honour referred to some of those matters including a number of the cases to which I have referred.
Consideration of all those matters led to conclusions stated as follows (at [347]–[348]):
347The collocation “would have the effect, or be likely to have the effect, of substantially lessening competition” appears in similar and identical versions in other provisions of Pt IV. It appears in ss 45, 45A, 45B, 45C, 47(10) and 50A. In my opinion that formulation is intended to have the same construction throughout Pt IV. Neither language nor policy mandates a variation in its construction from section to section. In any event as a matter of construction if “likely” simply meant more probable than not, it would be difficult to distinguish the application of that limb of the formula from the application of the first limb which, having regard to the onus of proof applicable in proceedings under Pt IV, could be established on the balance of probabilities.
348The meaning of “likely” reflecting a “real chance or possibility” does not encompass a mere possibility. The word can offer no quantitative guidance but requires a qualitative judgment about the effects of an acquisition or proposed acquisition. The judgment it requires must not set the bar so high as effectively to expose acquiring corporations to a finding of contravention simply on the basis of possibilities, however plausible they may seem, generated by economic theory alone. On the other hand it must not set the bar so low as effectively to allow all acquisitions to proceed save those with the most obvious, direct and dramatic effects upon competition. By the language it adopts and the function thereby cast upon the Court and the regulator in their consideration of acquisitions s 50 gives effect to a kind of competition risk management policy. The application of that policy, reflected in judgments about the application of the section, must operate in the real world. The assessment of the risk or real chance of a substantial lessening of competition cannot rest upon speculation or theory. To borrow the words of the Tribunal in the Howard Smith case, the Court is concerned with “commercial likelihoods relevant to the proposed merger”. The word “likely” has to be applied at a level which is commercially relevant or meaningful as must be the assessment of the substantial lessening of competition under consideration — Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [41].
With respect, the conclusion that the “assessment of the risk or real chance of a substantial lessening of competition cannot rest upon speculation or theory” must be accepted as compelling. However it does not seem to me, with respect, to be accurate to postulate that the ordinary requirement to prove a case (including this element of a case) to the usual civil standard would “set the bar so low as effectively to allow all acquisitions to proceed save those with the most obvious, direct and dramatic effects upon competition”. I also, speaking for myself, entertain considerable doubt about the notion that the Court is intended to have a function of applying “a kind of competition risk management policy”. That may be a legitimate function for a regulator considering acquisitions under s 50, and making decisions whether proceedings are to be commenced to restrain them, but once those decisions are made and proceedings commenced I see no real alternative to the Court attempting to deal with them on the basis of identifiable legal standards which are sufficiently certain and well established to yield predictable outcomes. Asking whether there is a “real chance” of something occurring seems to me, with respect, to invite and endorse speculation and conjecture. The range of possibilities (greater than “mere possibility”) existing below a more than equal chance or possibility seems potentially so extensive as to create great uncertainty. The problem cannot be overcome by employing the technique favoured by Franki J in TNT of suggesting that the probability “must be something not very far short of ‘more probably than not’, except in unusual circumstances”. That approach betrays the potential uncertainty of departing from the usual civil standard.
I accept the persuasive force, and the authoritative source, of the judicial pronouncements (particularly those of Deane J in Tillmanns Butcheries and French J in AGL where the matter has received closest attention and analysis) in support of the “real chance” approach. If I were sitting at first instance I would feel obliged, as did the trial judge in the present case, to give effect to that approach. As a member of a Full Court, however, I feel at liberty to express reservations about the matter, which I have endeavoured to do in the preceding discussion. In my view, the “real chance” test should not be applied to s 50 of the Act.
If it is appropriate to apply that test at all, I agree with the approach taken by the trial judge. Moreover, in the circumstances of the present case, even adopting the full scope of the approach urged by the ACCC would not have changed my view about the outcome of the appeal. Even if I had been persuaded that the trial judge had erred in applying a requirement of proof on the balance of probabilities to the establishment of the facts constituting the so-called “counterfactual” (which I am not), testing the matter on the basis of whether it should have been concluded that there was a “real chance” of the outcome suggested by the ACCC would have made no difference. The trial judge decisively rejected that suggested outcome as involving any “real chance”. He said, plainly, that he had come to that view applying the “real chance” test to that issue, in case it was necessary to do so. Contrary to the submissions advanced for the ACCC the analysis which preceded that statement is not confined by the terms in which it is expressed to the application of a test on the balance of probabilities. The trial judge said repeatedly that it was unlikely that various elements of the scenario suggested by the ACCC would occur. It follows necessarily that he did not accept that it was likely that they would occur, whether as a “real chance” or otherwise, nor that the overall hypothesis had a “real chance” of recurring.
Conclusion
For the reasons I have given I agree that the appeal should be dismissed.

I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.
Associate:
Dated: 30 November 2011

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1533 of 2011

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Appellant

AND:
METCASH TRADING LIMITED ACN 000 031 569
First Respondent

PICK N PAY RETAILERS (PTY) LTD
Second Respondent

JUDGES:

FINN, BUCHANAN, YATES JJ

DATE:

30 NOVEMBER 2011

PLACE:

SYDNEY

REASONS FOR JUDGMENT
YATES J

INTRODUCTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [92]

BACKGROUND........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [106]

Overall distribution arrangements........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [108]

Independent retailers........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [111]

Metcash and the IGA banner group........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [118]

Franklins........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [130]

SPAR........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [143]

THE COMMISSION’S COUNTERFACTUAL CASE........ ........ ........ ........ ........ ........ ...... [148]

The future with the share acquisition by Metcash........ ........ ........ ........ ........ ........ ........ ... [155]

The future without the share acquisition by Metcash........ ........ ........ ........ ........ ........ ..... [158]

The Pick n Pay store sale process........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [158]

The TMT Consortium offer........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [160]

The KKKL consortium........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [177]

The Commission’s grounds of appeal........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [211]

The parties’ submissions on appeal........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [215]

Consideration........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [226]

THE COMMISSION’S CASE ON MARKET DEFINITION........ ........ ........ ........ ........ .. [238]

The process and purpose of market definition........ ........ ........ ........ ........ ........ ........ ........ . [244]

The primary judge’s findings on constraints operating on Metcash........ ........ ........ ....... [269]

The perception of competitive constraints........ ........ ........ ........ ........ ........ ........ ........ ..... [272]

The major supermarket chains as a constraint........ ........ ........ ........ ........ ........ ........ ...... [278]

Threat of sale as a constraint........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [284]

The threat of constraint by Woolworths as a wholesaler........ ........ ........ ........ ........ ....... [286]

Franklins as a constraint........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [288]

The primary judge’s conclusions on market definition........ ........ ........ ........ ........ ........ .... [298]

The Commission’s grounds of appeal........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [304]

Consideration........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [310]

The hypothetical monopolist test........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [310]

The product dimension of the market........ ........ ........ ........ ........ ........ ........ ........ ........ .... [331]

The functional dimension of the market........ ........ ........ ........ ........ ........ ........ ........ ........ . [336]

Failure to consider functionally separate markets........ ........ ........ ........ ........ ........ ........ . [339]

The pricing discretion of independent retailers........ ........ ........ ........ ........ ........ ........ ...... [344]

Metcash’s pricing discretion – Project Energise – Project Ling Chi........ ........ ........ ..... [362]

Store sales as a constraint........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [376]

Conclusion on functional dimension........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [378]

Conclusion........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [379]

EFFECT ON COMPETITION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [386]

DISPOSITION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [392]
INTRODUCTION

The Australian Competition and Consumer Commission (the Commission) appeals from a judgment dismissing its application for injunctive relief in relation to the acquisition by Metcash Trading Limited (Metcash) of shares in Interfrank Group Holdings Pty Limited (Franklins) from Pick n Pay Retailers (Pty) Limited (Pick n Pay).
On 1 July 2010 Metcash entered into an agreement with Pick n Pay to acquire all the issued shares in the capital of Franklins for $215 million. On 8 December 2010 the Commission commenced its proceeding in this Court seeking, in effect, to restrain the share acquisition from proceeding to completion.
The Commission’s case was that the effect or likely effect of the share acquisition would be to substantially lessen competition in what it defined as the Independent Wholesale Grocery Market (the defined market), in contravention of s 50(1) of the Competition and Consumer Act 2010 (Cth) (the Act).
This market was defined as a market in New South Wales and the Australian Capital Territory (the defined territory) in which:
(a)the suppliers were Metcash, Franklins and SPAR Australia Limited (SPAR);
(b)the acquirers were Independent Supermarket Retailers, as defined by the Commission; and
(c)the products were a range of Wholesale Packaged Groceries, as defined by the Commission.
I will return to describe aspects of the definition of this market. For present purposes it is sufficient to note that this market was one that was functionally delineated as a wholesale market.
The primary judge was not persuaded that there was a separate market for the wholesale supply of packaged groceries to independent supermarket retailers, as defined by the Commission. It followed, on his Honour’s reasoning, that the Commission’s application must fail on its pleaded case.
Nevertheless, the primary judge proceeded to consider the Commission’s so-called “counterfactual” case as to why Metcash’s share acquisition would have the effect, or would be likely to have the effect, of substantially lessening competition in the defined market. Ultimately, however, his Honour rejected that case. His Honour was not persuaded that there was a real chance, let alone a case on the balance of probabilities, that the counterfactuals for which the Commission contended would come to pass.
The primary judge regarded the Commission’s counterfactual case as one based on possibilities that were no more than speculation. It followed that his Honour was not persuaded that, if the acquisition proceeded to completion, there would be, or would be a real chance of, a substantial lessening of competition in the defined market. Indeed, his Honour considered that it was quite likely that the share acquisition would strengthen the capacity of independent retailers operating under Metcash’s IGA banner to compete more vigorously with the major supermarket chains.
In the end result, the primary judge concluded that the share acquisition would not contravene s 50(1) of the Act.
The Commission’s case on appeal was that the primary judge erred in his application of economic and legal principles in considering the question of market definition: his Honour should have found that the relevant market to assess the potential competitive harm identified by the Commission was a wholesale market for the supply of packaged groceries to independent retailers in the defined territory.
Moreover, the Commission contended that the primary judge erred in his consideration of the Commission’s counterfactual case by adopting and applying a standard that was too high for the purposes of assessing whether the share acquisition was likely to lead to a substantial lessening of competition.
The Commission also contended that the primary judge failed to apply the factors listed in s 50(3) of the Act to determine whether the acquisition would be likely to lead to a substantial lessening of competition in the defined market.
After the primary judge gave judgment, the share acquisition proceeded to completion on 30 September 2011.
On appeal, the Commission sought a declaration of contravention and stated that, if successful, it intended to commence divestiture proceedings.
BACKGROUND
In order to understand the Commission’s case and the primary judge’s rejection of it, it is necessary to have some appreciation of the chains of distribution of products that come to be supplied, in the defined territory, as grocery items to the consuming public.

The primary judge was called upon to make an evaluative judgment about the product dimension of the market, taking into account the totality of the evidence before him. As I have said, his Honour’s finding was one to which he was entitled to come on that evidence. In my view the Commission has not demonstrated that the primary judge’s rejection of its market definition in this respect was an error, as opposed to simply a different conclusion on the evidence, on which reasonable minds could differ.
The functional dimension of the market
The Commission submitted that the primary judge erred in a number of respects when dealing with the functional dimension of the relevant market.
These submissions reflected the substance of the Commission’s submissions at trial, which were to the following effect. The major supermarket chains operated as an uneven constraint on the pricing behaviour of independent retailers, many of whom exhibited a degree of relative pricing discretion. This meant that the major supermarket chains were not a close competitive constraint on the upstream activities of Metcash as a wholesaler. This was said to be reflected in the fact that Metcash itself exhibited a relative degree of pricing discretion. On the other hand, Metcash responded directly to the threat of Franklins as a wholesale supplier. This was illustrated by Metcash effectively cutting prices and locking in supply under Project Energise, and by taking retaliatory action under Project Ling Chi. These features showed that Franklins provided a greater constraint than the major supermarket chains on Metcash as a wholesaler. Accordingly, the correct framework to analyse the competitive effect of Metcash’s acquisition was a wholesale market, and the primary judge was in error in concluding otherwise.
I turn now to consider the elements of the Commission’s case on appeal in this regard.
Failure to consider functionally separate markets
The Commission submitted that the primary judge failed to consider that functionally separate wholesale operations indicated a functionally separate wholesale market. It referred to the fact that Metcash was not vertically integrated (despite its contractual relationship with IGA suppliers) and supplied only independent retailers, many of whom did not operate under the IGA banner and therefore did not receive the range of ancillary services offered by Metcash to IGA retailers.
In my view this submission cannot be sustained. It is plain that the primary judge did consider and take into account the existence and extent of transactions occurring at the wholesale level when dealing with this aspect of the Commission’s case. There was, however, a significant body of other evidence before the primary judge which served to show, on his Honour’s findings, that the true market behavioural constraints on Metcash came, to a great extent, from the major supermarket chains.
In this connection his Honour was strongly influenced by an appreciation that a firm supplying goods at the wholesale level may be constrained not only by other firms operating at that level but also by firms operating downstream, particularly where supply chains show significant vertical integration, principally, in this case, through the major supermarket chains. The primary judge was mindful of the captive production involved in that supply and of the strong competition at the retail level exerted by the major supermarket chains against independent retailers.
The primary judge (at [268]) observed:
The demand of independent retailers for groceries at the wholesale level depends on the demands of their retail customers. Accordingly, where there is an increase in price at the wholesale level, vertically integrated firms that do not face that increase are able to take market share from non-integrated firms. Where there is an integration of wholesale and retail activities, the exercise of market power at either of the two upstream functional levels is closely connected with, and capable of affecting, competition downstream in the relevant chain.
Thus, far from ignoring the existence of transactions at the wholesale level, the primary judge gauged the significance of those transactions in the light of the captive production of the major supermarket chains.
The pricing discretion of independent retailers
The Commission submitted that the primary judge erred in finding (at [340]) that the major supermarket chains exerted a “very significant” constraint on independent retailers. It submitted that this finding was based on an earlier finding by the primary judge (at [240]) that independent retailers must match or be close to the major supermarket chains on price. It submitted that this earlier finding was, itself, based on no more than speculation and ignored evidence that many independent retailers supplied by Metcash did not price match or price closely to the major supermarket chains. The Commission submitted that the pricing evidence showed that the degree of constraint by the major supermarket chains on independent retailers was limited and uneven. It submitted that the primary judge incorrectly assumed very strong substitution by retail customers between independent retailers and major supermarket chains in response to differences in retail prices.
These submissions were made in the context of a broader submission that the primary judge failed to recognise that many independent retailers had the discretion to set prices significantly above the major supermarket chains.
To illustrate its submissions in this regard, the Commission pointed to the fact that, within the IGA banner group, 66% of the stores supplied be Metcash were IGA or IGA X-press stores; that the prices charged by IGA X-press stores were significantly higher than the prices charged by IGA stores; and that the prices charged by IGA stores were materially higher than the prices charged by Supa IGA stores. It submitted that the primary judge did not consider the evidence of operators of IGA X-press and IGA stores about the extent to which they priced above the major supermarket chains.
The Commission also sought to illustrate its submissions by pointing to an analysis it had performed in respect of “zone 60 pricing”. It said that this analysis demonstrated that there were significant pricing disparities (greater than 2%) between the major supermarket chains (Woolworths in particular) and independent retailers supplied by Metcash.
There are a number of things to be said about these submissions.
First, the primary judge’s finding about the degree of constraint exercised by the major supermarket chains on independent retailers related to the capacity of the independent retailers to increase price or decrease other services without the likely loss of business. In other words, his Honour’s finding related to the constraint placed on independent retailers to compete on price and non-price factors; it was not simply a finding about price competition at the retail level.
In this connection the primary judge found (at [256]) that retailers unable to meet the major supermarket chains on price looked for other ways to remain competitive with them by emphasising other advantages of their offerings, including location, convenience, access to parking, breadth and depth of product range, community involvement and local connections, levels of customer service, trading hours, quality of fresh produce, and store layout and appearance. The primary judge saw these factors as being very important elements in the process of competition between the major supermarket chains and independent retailers.
The primary judge also found (at [259]) that Metcash provided non-price services to independent retailers to assist them in competing with the major supermarket chains. These services included providing a private label range (the Black & Gold product range), negotiating schemes whereby suppliers fund donations by retailers to local communities, providing loans to retailers to finance store refurbishments, and funding marketing activity to promote the IGA brand with a view to attracting custom away from the major supermarket chains.
In light of the primary judge’s findings about non-price competition, the fact that pricing differences existed between retailers does not demonstrate error in the primary judge’s conclusion regarding the degree of constraint exercised by the major supermarket chains on those retailers.
Secondly, contrary to the Commission’s submission, the primary judge did consider pricing differences between stores operating under the IGA banner in different formats. In that connection, however, the primary judge found (at [254]) that, nationally, sales to IGA X-press stores represented only 2-3% of the total volume of Metcash’s sales. His Honour reasoned that information about those stores was, therefore, minimally significant to the question of constraint exercised by the major supermarket chains. In my view that reasoning does not reflect error.
Thirdly, the primary judge (at [250]-[254]) did consider the Commission’s zone 60 pricing analysis, but identified a number of flaws in it. In that connection his Honour observed that the analysis did not show pricing requested by retailers who were not in the IGA banner group. Even then the analysis did not cover the pricing requested by approximately one third of Super IGA and IGA retailers in the defined territory. Further, the analysis did not take into account promotional pricing, which the primary judge found (at [253]) to be an important element of price competition. In that connection his Honour found that 40 to 50% of the volume of the IGA-Distribution division was sold “on promotion”. Moreover, the Commission’s analysis failed to take into account sales volume more generally. I have already referred, in that regard, to his Honour’s finding that the IGA X-press stores represented only 2-3% percent of the volume of Metcash’s sales.
In my view these were matters that the primary judge was entitled to take into account when considering the usefulness of the Commission’s zone 60 pricing analysis and the weight to be given to it in all the circumstances.
One particular criticism challenged by the Commission was the primary judge’s observation that the zone 60 pricing analysis did not take account of promotional pricing. The Commission submitted that there was no evidence to support a finding that the inclusion of promotional pricing would have affected its analysis. This submission, however, simply deflects attention from the substance of the primary judge’s criticism, which was that conducting a zone 60 analysis without detailed consideration of the implications of promotional pricing was likely to lead to erroneous conclusions. This was because promotional pricing allowed independent retailers to engage in “investment buying”. By this means retailers could acquire stock at discounted prices in quantities beyond their immediate needs, thus giving them the ability to charge prices on those goods below recommended standard shelf prices for periods that extended beyond the normal period for promotions.
The Commission also sought to challenge the correctness of some incidental and very generalised observations made by the primary judge when considering the Commission’s zone 60 pricing analysis. For example, when observing that it did not follow that retailers who sought supply from Metcash at prices 2 or more percent higher than zone 60 prices were not closely constrained by vigorous competition, the primary judge referred to the possibility that some retailers might charge prices above the major supermarket chains because of higher costs rather than as an attempt to make supra-normal profits. His Honour also said that stores with a lower turnover will have higher unit costs and are likely, therefore, to need to charge higher prices to make a profit.
The Commission submitted that there was no evidence before the primary judge that smaller stores supplied by Metcash had higher costs. In this connection it relied on a report prepared for Metcash by PricewaterhouseCoopers which indicated that, as a percentage of revenue, IGA stores had a lower cost of doing business than Supa IGA stores, and that IGA X-press stores had a similar cost of doing business to Supa IGA stores. It also relied on that report to show, more generally, that IGA and IGA X-press stores generated higher retail margins than Supa IGA stores and that while 73% of Supa IGA stores were in a competitive area, only 40% of IGA stores were in such an area.
There is an immediate difficulty that confronts the Commission’s submissions in this regard. The PricewaterhouseCoopers Report makes clear that it was based on incomplete data, the accuracy of which its authors could not, in any event, vouch for. The report noted that the need to extrapolate from store survey data to derive retailer EBIT rendered the analysis, in that regard, inherently inaccurate. The incompleteness of the data used in the report is reflected in the fact that only 38% of all stores responded to the survey, with only 32% of IGA stores and only 21% of IGA X-press stores responding. Significantly there were, for whatever reason, no responses from IGA X-press stores in New South Wales.
Thus the report provides a poor foundation from which to challenge the primary judge’s very generalised observations about costs. Even then, the report says nothing about the position of retailers who were not within the IGA banner group. Furthermore, in making these observations, the primary judge was drawing attention to the fact that, in undertaking this particular pricing analysis, the Commission did not itself attempt to address the cost to Metcash of supplying the smaller stores, or the other fixed and variable costs faced by those stores compared with larger supermarkets.
In my view none of the matters to which the Commission pointed shows that the primary judge’s findings about the nature and degree of the constraint placed upon independent retailers by the major supermarket chains were made in error. It was open to the primary judge to come to these conclusions based on the evidence before him, which included the evidence of independent retailers who spoke of their pricing policies. Those retailers also spoke of the need to compete not just on price. As the primary judge noted, Metcash and its retailers had a common interest in ensuring that the retailers remained competitive with the major supermarket chains so that Metcash was able to protect, and seek to build, its volume of sales.
Metcash’s pricing discretion – Project Energise – Project Ling Chi
The Commission submitted that the primary judge erred by failing to recognise that Metcash enjoyed a degree of pricing discretion and that that freedom demonstrated that it did not face close constraint from the major supermarket chains. The Commission submitted that this pricing discretion was illustrated by a number of matters.
First, the Commission pointed to what it says were targeted price support programs that Metcash offered to those of its retailers that faced the most direct competition from the major supermarket chains at the retail level. One of those programs was called Project Lion. The primary judge found (at [312]) that this was a targeted support program that was offered by Metcash in 2009-2010 to IGA retailers facing direct competition from the major supermarket chains. However, the fact that the price support was, in some instances, targeted, illustrates no more than that Metcash made a business decision to provide particular support where it thought that that support was most needed in order to protect its own interests. In this regard, its own interests were best protected by ensuring that it could maintain and, if possible, enhance its volume of sales to retailers by ensuring that those retailers were price competitive with the major supermarket chains. If anything, the existence of price support programmes, targeted or otherwise, demonstrates, rather than denies, the reality of the constraint which the primary judge found the major supermarket chains exercised on Metcash.
Secondly, the Commission pointed to Metcash’s imposition, over objection, of a five cent per carton increase in the service fee it charged to retailers, as illustrating the degree of its pricing discretion. The primary judge dealt extensively with the circumstances under which this increase came to be implemented: [49]-[65]. The primary judge’s findings include the fact that Metcash had originally proposed a ten cent per carton increase to the service fee. The proposed increase was discussed at an executive management committee meeting of Metcash on 25 August 2006 in the context of providing a fund for rental subsidies to enable the IGA banner group access to major shopping centres and to provide subsidies (termed “price into product” subsidies) to meet competition. It also seems that part of the increase was to recover increased costs incurred by Metcash, particularly over the preceding 18 months. There had been no increase to the service fee since 2001.
The primary judge’s findings in respect of the imposition of this increase certainly show that there was significant and widespread resistance to it. This, of itself, is not surprising. However, Metcash did not simply impose the increase unilaterally. It consulted with the national and State boards of IGA retailers. Faced with the opposition it found, Metcash finally resolved to impose a smaller increase of five cents per carton, with effect from 1 November 2006. The primary judge found (at [264]) that this was the first increase in Metcash’s service fee in a number of years, and was a relatively modest increase. The primary judge reasoned that these circumstances supported, rather than gainsaid, Metcash’s contention that it was constrained by reason of the vigorous downstream competition between independent retailers and the major supermarket chains. In my view that was a conclusion to which his Honour was entitled to come on the evidence.
Thirdly, the Commission pointed to Project Energise as exemplifying the existence of Metcash’s pricing discretion. As I have already noted, the primary judge found that Project Energise was as much a response to the major supermarket chains as it was to Franklins. The Commission submitted that the primary judge erred in that conclusion.
In that connection the Commission submitted that Project Energise was simply Metcash’s response to the threat of entry by Franklins as a wholesaler. It represented no more than a price cut to retailers in the face of that threat. The Commission pointed to the fact that Project Energise was only introduced in New South Wales and the Australian Capital Territory and submitted that its offering was more generous than the offering under an unrelated Victorian program. It also pointed to the fact that even more favourable terms were offered to Supabarn and some other retailers. It submitted that Project Energise was a “natural experiment” demonstrating actual market behaviour in response to the threat of Franklins’ emergence as an alternative supplier to independent retailers and thus provided persuasive evidence of the correct framework (namely, a wholesale market) in which to analyse Metcash’s acquisition: Liquorland at [444].
Project Energise was a program available to all independent retailers within the IGA banner group, under which those retailers were not only given incentives to achieve targets, in part referable to purchases made from Metcash, but also to develop five year business plans detailing refurbishment strategies. These aspects of the program reflected a concern on the part of Metcash to ensure that its sales volumes were protected, if not enhanced, by retailers being able to provide improved offerings by way of price and non-price forms of competition with other retailers not supplied by Metcash. Given the primary judge’s finding that independent retailers regarded the major supermarket chains as their competitors, and the fact that Woolworths and Coles had 80% of the national grocery market share, it can be seen that the focus of these incentives was the enhancement of the ability of retailers supplied by Metcash to compete with the major supermarket chains. Indeed, one of the project’s stated aims was to grow the market share of the New South Wales IGA banner group to 12%.

The primary judge found (at [321]) that Metcash did in fact receive tangible benefits from the project. Even though Metcash had lost the Franklins business, it gained, through this project, significant new business, reflected in enhanced profits. Furthermore, Project Energise conferred on Metcash a right of first refusal to purchase the stores of participating retailers. There was evidence that this element of the project was, in part, responsive to the threat of Woolworths and Coles purchasing the stores of independent retailers and thus foreclosing supply that would otherwise be provided by Metcash.
In my view the primary judge did not err in finding that Project Energise was as much a response to the major supermarket chains as it was to Franklins. This conclusion was supported by the evidence and open to be made by his Honour.
Fourthly, the Commission pointed to Project Ling Chi as a targeted response to Franklins’ wholesaling activities. It submitted that the primary judge erred by concluding that Project Ling Chi did not bear significantly on the degree of competitive constraint imposed by Franklins on Metcash.
It may be accepted that Project Ling Chi was a response to Franklins as a competitor. The primary judge did not think otherwise. But the significance of this project, in all the circumstances, was really a matter of weight for his Honour.
Project Ling Chi was planned as a formalised ten month campaign with a support budget of $1 million. Its aim was to attack Franklins’ wholesale operations by means such as placing pressure, in various ways, on Franklins’ supplier of logistic services as well as the suppliers of its private label products, who were also suppliers of such services and similar products to Metcash, and by spreading false information about Franklins.
The primary judge found that there was no evidence about how much Metcash did in fact spend on this campaign. His Honour reasoned that even if Metcash did spend $1 million in implementing it, that amount was fairly minimal in the scheme of things. There was also evidence before the primary judge that, rather than lasting the proposed 10 months, the project lasted only six to eight weeks.
In my view the primary judge’s assessment of the relative significance of that project, in light of all the other factors and considerations to which his Honour referred on the question of constraints, does not reflect error.
Store sales as a constraint
The Commission submitted that the primary judge erred in finding (at [279]) that there was competition between Metcash and the major supermarket chains for the retention and acquisition of retail stores and sites. The Commission submitted that these acquisitions occurred in a different market and, at best, could only constitute evidence of an ultimate constraint on Metcash. It submitted that the primary judge confused exit from a market with a competitive constraint within a market. It also submitted that many independent retailers’ stores were likely to be too small to be of interest to the major supermarket chains.
In my view these submissions do not really engage with the significance of the primary judge’s finding. It was clearly in Metcash’s interests to ensure that the major supermarket chains did not acquire the stores of independent retailers supplied by Metcash, where they thought it desirable to do so. Plainly enough, any such acquisition would represent a loss of sales to Metcash. This was the motivation for Metcash implementing the Barons Strategy of acquiring a minority equity interest in large successful independent retailers as a means of preventing the erosion of the volume of its sales through the expansion of the major supermarket chains beyond large scale format stores into medium and smaller stores. In my view this was a relevant consideration for the primary judge to take into account when identifying the constraints placed upon Metcash. In my view the Commission has not demonstrated error in his Honour’s conclusion.
Conclusion on functional dimension
The Commission’s submissions on appeal with respect to this aspect of the question of market definition really reflect the substance of its submissions at trial. Its focus on appeal was not to challenge many of the primary judge’s findings of primary fact but, rather, to challenge the correctness of his Honour’s conclusions drawn from those facts. In my view the Commission has not demonstrated that the primary judge’s conclusions about the existence and extent of the constraints placed upon independent retailers and Metcash by the major supermarket chains were not open to be made on the facts as the primary judge found them to be.
Conclusion
In order to identify the relevant market for the purpose of the case before him, the primary judge was called upon to make an evaluative judgment that was informed not only by his Honour’s findings of primary fact but also by principles, elucidated in a substantial body of case law, relating to the identification of markets for competition law purposes. In the main, those principles are not contentious.
The Commission’s overarching contention was that the primary judge failed to apply the relevant principles identified in Davids Holdings to determine the product and functional dimensions of the market for s 50(1) purposes. It is clear from the primary judge’s reasons (at [204]) that, at trial, the Commission relied on Davids Holdings to advance a finding that there were clearly separate and distinct wholesale and retail transactions relating to packaged groceries that were of significance and indicated separate functional markets.
In its appeal the Commission, although acknowledging that much depends on the facts as found, really sought a parallel application to the present case of the ultimate findings in Davids Holdings about the relevant market.
In my view the Commission has not demonstrated that the primary judge proceeded on a wrong principle when considering the question of market definition in the present case. The primary judge’s prefatory remarks at [150]-[165] and [174]-[175] show that his Honour was seized of the relevant principles. Furthermore, the primary judge approached the task of defining the market by taking account of commercial reality, not simply economic theory. His Honour proceeded on the basis that the economic concept of a market must be applied in a practical way to accommodate the concerns of the Act with those of business and commerce. In my respectful view, this was the correct approach to take. The parties did not suggest otherwise.
It is plain from the primary judge’s reasons that his Honour had regard to a considerable body of evidence that was called on the question of market definition. It is equally plain that his Honour undertook a detailed and systematic analysis of that evidence in reaching his conclusions about the market definition proffered by the Commission. For the reasons I have indicated, those conclusions were, in my view, open to the primary judge.
Critical to the primary judge’s conclusions in this regard were his findings concerning the difference in the constraint imposed on Metcash by the major supermarket chains compared with Franklins. Based on the evidence before him, the primary judge considered that the major supermarket chains imposed a much more powerful constraint than Franklins on Metcash’s market behaviour. In light of that fact, and the significant degree of vertical integration in the supply of groceries, it was open to the primary judge to view the appropriate market, for the purposes of determining the s 50(1) question before him, as one incorporating the activities of the self-supplying chains.
Having said this, a case could be made, on the evidence, that the market of interest was a wholesale market, with the major supermarket chains providing an indirect constraint on the participants in that market. As I have noted, the primary judge was alive to this possibility but rejected it. His Honour considered that, in the present case, the separation of wholesaling and retailing functions tended to confuse the analysis and that, in light of the more powerful constraint imposed by the major supermarket chains on Metcash, compared with the lesser constraint imposed by Franklins, it was not possible to determine the competition consequences of Metcash’s acquisition without taking into account the constraints from the major supermarket chains as market participants. I am not persuaded that, in the particular circumstances of the present case, his Honour erred in coming to that ultimate conclusion and, thus, in rejecting the existence of a separate wholesale market.
EFFECT ON COMPETITION
Having rejected the Commission’s market definition, and its counterfactual case, the primary judge concluded, correctly, that it was not necessary to consider whether, as a real chance, competition would be substantially lessened by Metcash’s acquisition. The primary judge nevertheless summarised the competing contentions of the parties in respect of the factors listed in s 50(3) of the Act as mandatory factors to be taken into account in applying the competition test in s 50(1). His Honour concluded (at [460]) that it was quite likely that the acquisition of Franklins by Metcash would strengthen the capacity of independent retailers operating under the IGA banner to compete more vigorously with the major supermarket chains. Moreover, in light of the speculative possibility that the KKKL consortium would ever be able to make an offer that would be accepted by Pick n Pay, the primary judge was not persuaded that the Metcash acquisition of Franklins would substantially lessen competition in the market propounded by the Commission.
The Commission challenged the primary judge’s ultimate assessment in that regard.
First, it contended that the primary judge failed to consider the potential for close competition in the pleaded market if Metcash’s acquisition did not proceed. It also submitted that the primary judge erred in finding that, given the very small level of involvement of Franklins as a wholesaler in the pleaded market, market concentration would not markedly increase, irrespective of the acquisition. The Commission submitted that, in each case, the primary judge failed to consider the extent to which the Franklins wholesale assets would be utilised as potential competition to Metcash in a scenario where the acquisition did not proceed.
In my view those submissions cannot be sustained. The primary judge was called upon to consider the case on the basis on which it was put to the Court, not on some hypothetical basis that was not advanced by any of the parties, and in particular by the Commission as the moving party. The only possible acquirer of the Franklins wholesale assets advanced by the Commission was the KKKL consortium. The primary judge rejected that possibility as speculative. Having done so, it was not incumbent on the primary judge to conjure other possibilities not advanced by the parties which, one can assume, could only stand as even more remote possibilities. The Commission’s recourse to the potential for close competition, in those circumstances, is illusory.
Secondly, the Commission contended that the primary judge erred in not finding that barriers to entry in the pleaded market were high. In fact, the primary judge made no findings about the height of barriers to entry. In my view it is far from clear that his Honour’s failure to make the finding for which the Commission contends could be, in the circumstances, an appealable error: Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 at [4]. It was no more than a failure to make a specific finding that would have been, at best, a subsidiary finding on a question that was, in light of his Honour’s other conclusions, merely hypothetical. In any event, his Honour’s failure (if it be such) to make that specific finding was completely without consequence in light of his rejection of the market propounded by the Commission as well as its counterfactual case.
Thirdly, the Commission contended that, in considering the effect of the Metcash acquisition on competition, the primary judge erred in failing to take into account the potential for Metcash to increase profit margins or prices significantly and sustainably. Once again, this submission cannot be sustained. It is simply a repetition of the Commission’s case that the degree of constraint imposed by the major supermarket chains was limited and uneven. The primary judge found (at [271]) that, because of the constraint imposed on Metcash by the major supermarket chains, there was no scope for it to raise its wholesale prices and obtain monopoly profits.
DISPOSITION
In my view the appeal should be dismissed, with costs.

I certify that the preceding three hundred and one (301) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.
Associate:
Dated: 30 November 2011

Citation:		Australian Competition and Consumer Commission v Metcash Trading Limited [2011] FCAFC 151
Appeal from:		Australian Competition and Consumer Commission v Metcash Trading Limited [2011] FCA 967
Parties:		AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v METCASH TRADING LIMITED ACN 000 031 569 and PICK N PAY RETAILERS (PTY) LTD
File number(s):		NSD 1533 of 2011
Judges:		FINN, BUCHANAN, YATES JJ
Date of judgment:		30 November 2011
Catchwords:		COMPETITION – merger – competition test – whether acquisition of shares in the capital of a body corporate would be likely to have the effect of substantially lessening competition in a market – real chance test discussed COMPETITION – counterfactual case – standard of proof – discussion of whether counterfactual case required to be established on balance of probabilities or on a real chance test – whether the primary judge erred in his evaluation of the counterfactual case as speculative COMPETITION – market definition – hypothetical monopolist test – functional level – whether market properly defined as a wholesale market – whether market should be defined by reference to multiple functional levels
Legislation:		Competition and Consumer Act 2010 (Cth) ss 50(1), 50(3) Evidence Act 1995 (Cth) s 140
Cases cited:		Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2006) ATPR ¶42-123 Australian Gas Light Company v Australian Competition and Consumer Commission (2003) 137 FCR 317 Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 27 FLR 400 Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 Howe v R (1980) 55 ALJR 5 Jones v Dunkel (1959) 101 CLR 298 Lithgow City Council v Jackson (2011) 85 ALJR 1130; 281 ALR 223 Luxton v Vines (1952) 85 CLR 352 Momcilovic v R (2011) 85 ALJR 957; 280 ALR 221 Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110 News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 Outboard Marine Australia Pty Ltd v Hecar Investments (No 6) Pty Ltd (1982) 66 FLR 120 Re Fortescue Metals Group Ltd (2010) 242 FLR 136 Re QIW Ltd (1995) 132 ALR 225 Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 Seven Network Limited v News Limited [2007] FCA 1062 Seven Network Ltd v News Ltd (2009) 182 FCR 160 Sheen v Fields Pty Ltd (1984) 58 ALJR 93 Singapore Airlines Limited v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1978) 34 FLR 494 Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 42 FLR 331 Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd (1978) 32 FLR 305 Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 United States v EI du Pont de Nemours & Company (1956) 351 US 377 Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529 Heydon JD, Trade Practices Law (Lawbook Co., subscription service) at [3.245] (update 115) Smith R and Walker J, “Part IIIA Efficiency and Functional Markets” (1998) 5 Aust Jnl of Corp Law 1
Date of hearing:	24 - 26 October 2011
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	392
Counsel for the Appellant:	Mr A Myers QC with Mr J Halley SC and Mr C Arnott
Solicitor for the Appellant:	Australian Government Solicitor
Counsel for the First Respondent:	Mr P Brereton SC with Mr D Roche
Solicitor for the First Respondent:	Freehills
Counsel for the Second Respondent:	Mr J Griffiths SC with Mr C Moore SC and Mr R Yezerski
Solicitor for the Second Respondent:	Blake Dawson

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1533 of 2011

JUDGES:	FINN, BUCHANAN, YATES JJ
DATE OF ORDER:	30 NOVEMBER 2011
WHERE MADE:	SYDNEY

JUDGES:	FINN, BUCHANAN, YATES JJ
DATE:	30 NOVEMBER 2011
PLACE:	SYDNEY

INTRODUCTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[92]
BACKGROUND........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[106]
Overall distribution arrangements........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[108]
Independent retailers........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[111]
Metcash and the IGA banner group........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[118]
Franklins........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[130]
SPAR........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[143]
THE COMMISSION’S COUNTERFACTUAL CASE........ ........ ........ ........ ........ ........ ......	[148]
The future with the share acquisition by Metcash........ ........ ........ ........ ........ ........ ........ ...	[155]
The future without the share acquisition by Metcash........ ........ ........ ........ ........ ........ .....	[158]
The Pick n Pay store sale process........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[158]
The TMT Consortium offer........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[160]
The KKKL consortium........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[177]
The Commission’s grounds of appeal........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[211]
The parties’ submissions on appeal........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[215]
Consideration........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[226]
THE COMMISSION’S CASE ON MARKET DEFINITION........ ........ ........ ........ ........ ..	[238]
The process and purpose of market definition........ ........ ........ ........ ........ ........ ........ ........ .	[244]
The primary judge’s findings on constraints operating on Metcash........ ........ ........ .......	[269]
The perception of competitive constraints........ ........ ........ ........ ........ ........ ........ ........ .....	[272]
The major supermarket chains as a constraint........ ........ ........ ........ ........ ........ ........ ......	[278]
Threat of sale as a constraint........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[284]
The threat of constraint by Woolworths as a wholesaler........ ........ ........ ........ ........ .......	[286]
Franklins as a constraint........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[288]
The primary judge’s conclusions on market definition........ ........ ........ ........ ........ ........ ....	[298]
The Commission’s grounds of appeal........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[304]
Consideration........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[310]
The hypothetical monopolist test........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[310]
The product dimension of the market........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[331]
The functional dimension of the market........ ........ ........ ........ ........ ........ ........ ........ ........ .	[336]
Failure to consider functionally separate markets........ ........ ........ ........ ........ ........ ........ .	[339]
The pricing discretion of independent retailers........ ........ ........ ........ ........ ........ ........ ......	[344]
Metcash’s pricing discretion – Project Energise – Project Ling Chi........ ........ ........ .....	[362]
Store sales as a constraint........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[376]
Conclusion on functional dimension........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[378]
Conclusion........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[379]
EFFECT ON COMPETITION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[386]
DISPOSITION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[392]