Australian Competition and Consumer Commission v Pacific National Pty Ltd - [2020] FCAFC 77

FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Pacific National Pty Limited [2020] FCAFC 77

Appeal from:
Australian Competition and Consumer Commission v Pacific National Pty Limited (No 2) [2019] FCA 669

Australian Competition and Consumer Commission v Pacific National Pty Ltd (No 3) [2019] FCA 866

File number(s): VID 695 of 2019

Judge(s): MIDDLETON, PERRAM AND O'BRYAN JJ

Date of judgment: 6 May 2020

Catchwords:
COMPETITION – proposed acquisition of the Acacia Ridge Terminal in Brisbane – alleged contravention of s 50 of the Competition and Consumer Act 2010 (Cth) – market definition – economic tests for defining a price discrimination market – whether conduct likely to have the effect of substantially lessening competition in a market – meaning of “likely” – standard of proof to be applied to predictions about future facts and circumstances – vertical merger – ability and incentive to engage in price discrimination – whether raising barriers to entry sufficient to establish a substantial lessening of competition – likelihood of new entry – new entry a mere possibility

UNDERTAKING – whether undertaking to the Court proffered by acquirer should be accepted – whether Court has power to accept the undertaking – whether power arises under the Federal Court of Australia Act 1976 (Cth) or only under s 80 of the Competition and Consumer Act 2010 (Cth) – whether acceptance of the undertaking would infringe Chapter III of the Constitution by attempting to confer a non-judicial power on the Federal Court – where undertaking is outside of the relief sought by the Australian Competition and Consumer Commission – whether undertaking is sufficiently certain as to be enforceable – whether primary judge erred in fact or principle in accepting undertaking

Legislation:
Competition and Consumer Act 2010 (Cth) ss 2, 4E, 4G, 45AD, 45D, 45DA, 45DB, 46, 47, 50, 50A, 52, 80, 87B, 90, 163A

Competition and Consumer Amendment (Misuse of Market Power) Act2017 (Cth)

Corporations Act 2001 (Cth)

Evidence Act 1995 (Cth)

Federal Court of Australia Act 1976 (Cth)

Judiciary Act 1903 (Cth)

Statute Law (Miscellaneous Provisions) Act (No 1) 1983 (Cth)

Trade Practices Amendment Act 1977 (Cth)

Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth)

Federal Court Rules2011

Cases cited:
Air New Zealand Ltd v Australian Competition and Consumer Commission (2017) 262 CLR 207
Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301
Arnotts v Trade Practices Commission (1990) 24 FCR 313
Assistant Minister for Immigration and Board Protection v Splendido [2019] FCAFC 132
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited (2015) 236 FCR 78
Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154
Australian Competition and Consumer Commission v Cement Australia Pty Ltd (2013) 310 ALR 165
Australian Competition and Consumer Commission v Flight Centre Travel Group Pty Ltd (2016) 261 CLR 203
Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2006] ATPR 42-123
Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297
Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 282 ALR 464
Australian Competition and Consumer Commission v Pacific National Pty Ltd [2018] FCA 1221
Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79
Australian Competition and Consumer Commission v Z-Tek Computer (1997) 78 FCR 197
Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483
Australian Gas Light Company v Australian Competition and Consumer Commission (No 2) [2003] FCA 1229
Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317
Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 14 SASR 303
BMW Australia Ltd v Brewster (2019) 94 ALJR 51
Boral Besser Masonry Ltd v Australian Competition & Consumer Commission (2003) 215 CLR 374
Boughey v The Queen (1986) 161 CLR 10
Branir v Owston Nominees (No 2) (2001) 117 FCR 424
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238
Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 385
Fisher v Fisher (1986) 161 CLR 438
Foster v ACCC (2006) 149 FCR 135
Fox v Percy (2003) 214 CLR 118
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
House v The King (1936) 55 CLR 499
Iberian Trust Ltd v Founders Trust and Investment Ltd [1932] 2 KB 87
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248
In re Tooth & Co Ltd; In re Tooheys Ltd (1979) 39 FLR 1
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
James Hardie Industries NV v Australian Securities and Investments Commission (2010) 274 ALR 85
Jungarrayi v Olney (1992) 34 FCR 496
Kirkpatrick v Kotis (2004) 62 NSWLR 567
Malec v J C Hutton Pty Ltd (1990) 169 CLR 638
Masson v Parsons (2019) 93 ALJR 848
Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council [No 2] (2001) 50 NSWLR 665
Momcilovic v The Queen (2011) 245 CLR 1
Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110
News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410
News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563
NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90
Outboard Marine Australia Pty Ltd v Hecar Investments No 6 Pty Ltd (1982) 66 FLR 120
Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1
Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379
Precision Data Holdings Ltd v Wills (1991) 173 CLR 167
Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177
R v Kirby; Ex parte Boilermakers’ Society of Australia (1956) 94 CLR 254
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437
Rural Press Ltd v ACCC (2003) 216 CLR 53
Sellars v Adelaide Petroleum (1994) 179 CLR 332
Seven Network Limited v News Ltd (2009) 182 FCR 160
State Rail Authority of NSW v Earthline Constructions Pty Ltd (1999) 73 ALJR 306
Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) ATPR 41-752
Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) ATPR 41-783
Tabcorp Holdings Ltd v Victoria (2016) 90 ALJR 376
Thomas v Mowbray (2007) 233 CLR 307
Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150
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
Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529
White v Director of Military Prosecutions (2007) 231 CLR 570
Witham v Holloway (1995) 183 CLR 525
WorkPac Pty Ltd v Skene (2018) 264 FCR 536

Date of hearing: 17-20 February 2020

Registry: Victoria

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Economic Regulator, Competition and Access

Category: Catchwords

Number of paragraphs: 440

Counsel for the Appellant: Mr J Gleeson SC with Mr A McClelland QC, Mr C Lenehan SC, Ms C Van Proctor, Mr C Tran and Ms A Muhlebach

Solicitor for the Appellant: DLA Piper

Counsel for the First to fourth Respondents: Mr N Hutley SC with Ms R Higgins SC, Mr A Barraclough and Mr B Lim

Solicitor for the First to Fourth Respondents: Clayton Utz

Counsel for the Fifth to Eighth Respondents: Mr C Moore SC with Mr D Roche, Mr A d’Arville and Ms D Forrester

Solicitor for the Fifth to Eighth Respondents: Ashurst

ORDERS

VID 695 of 2019

BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Appellant

AND:
PACIFIC NATIONAL PTY LIMITED (ACN 098 060 550) (and others named in the Schedule)

First Respondent

AND BETWEEN:
PACIFIC NATIONAL PTY LIMITED (ACN 098 060 550) (and others named in the Schedule)

First Cross-Appellant

AND:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Cross Respondent

JUDGES:

MIDDLETON, PERRAM AND O'BRYAN JJ

DATE OF ORDER:

6 MAY 2020

THE COURT ORDERS THAT:
1.Within 14 days, the parties confer, and file in the Court an agreed minute of order (including as to the costs of the trial, the appeal and cross-appeals) and in default of agreement, short written submissions of no more than 3 pages in length as to each party’s proposed minute of order.

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

REASONS FOR JUDGMENT
MIDDLETON AND O’BRYAN JJ:
A. INTRODUCTION

This proceeding concerns the proposed sale of the Acacia Ridge Terminal (ART) by entities within the Aurizon group of companies (Aurizon) to entities within the Pacific National group of companies (Pacific National) pursuant to a Business Sale Agreement executed on 28 July 2017. The ART is a rail terminal located in Queensland, approximately 16 km south of the Brisbane central business district. It contains two terminals: the Brisbane Multi User Terminal, which is a standard gauge rail terminal that connects to the standard gauge interstate rail network; and the Queensland Terminal, which is a narrow gauge rail terminal that connects to the narrow gauge rail network within Queensland. Pacific National supplies rail linehaul services on the North-South and East-West standard gauge interstate railway lines and between terminals on the narrow gauge railway line in Queensland that runs along the coast between Brisbane and Cairns, referred to as the North Coast Line. Pacific National is the largest provider of rail linehaul services in Australia by revenue and volume of freight transported.
Pursuant to clause 5.1 of the Business Sale Agreement, completion of the sale was conditional on, amongst other things, the parties receiving competition law clearance for the sale in one of three ways: written confirmation from the Australian Competition and Consumer Commission (ACCC) that it did not propose to intervene in the acquisition pursuant to s 50 of the Competition and Consumer Act 2010 (Cth) (Act) (commonly referred to as informal clearance); authorisation of the acquisition by the Australian Competition Tribunal under Part VII of the Act; or the Federal Court declaring or making orders to the effect that the acquisition would not contravene s 50 of the Act.
The ACCC did not give the parties informal clearance. On 18 July 2018, it commenced a proceeding in the Federal Court alleging, amongst other things, that the sale of the ART pursuant to the Business Sale Agreement would contravene s 50 of the Act and sought orders restraining the parties from completing the sale. At the time of trial, the ACCC’s allegation was that the acquisition of the ART by Pacific National would be likely to have the effect of substantially lessening competition in markets (defined with greater specificity below) for interstate rail linehaul services on the North-South corridor (essentially between Melbourne, Sydney and Brisbane) and on the East-West corridor (essentially between Perth, Adelaide and either Melbourne or Sydney), whether considered as separate markets or part of a single market. The relief sought by the ACCC included a declaration pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) that the acquisition would contravene s 50 of the Act and an injunction under s 80(1)(a)(i) of the Act restraining Pacific National from acquiring the ART.
On 15 May 2019, the primary judge delivered judgment: Australian Competition and Consumer Commission v Pacific National Pty Limited (No 2) [2019] FCA 669. His Honour concluded that, upon the Court accepting an undertaking proffered by Pacific National relating to the future conduct of the ART (the Undertaking), the proposed sale of the ART by Aurizon to Pacific National would not contravene s 50 of the Act (at [1611]). The primary judge stated that, if he had not accepted the Undertaking (which he referred to as a hypothetical scenario), “on balance, and not without some hesitation” he would have accepted the ACCC’s s 50 case (at [1612]). More specifically, his Honour would have found that the acquisition of the ART by Pacific National would be likely to have the effect of substantially lessening competition in either:
(a)a single market comprising the supply of rail linehaul services for the transport of intermodal freight (excluding bulk steel) over long distances on the North-South and East-West corridors to beneficial freight owners and freight forwarders for whom neither road services nor sea services provides an effective substitute for rail linehaul services; or
(b)separate markets for the North-South and East-West corridors,
which are referred to in the reasons of the primary judge as the “Interstate markets” (adopting a definition used in the ACCC’s pleading). We prefer to use the descriptive term “interstate rail linehaul markets” to distinguish these markets from markets in which freight owners and freight forwarders consider that road services or sea services provide an effective substitute for rail linehaul services (which might be described as intermodal transport markets). His Honour found that the analysis of the competitive effects of the proposed acquisition of the ART is not affected by whether the relevant markets are defined as a single combined market or two separate markets, and there is no challenge to that finding on the appeal.
The primary judge made final orders on 6 June 2019, dismissing the ACCC’s application and ordering the ACCC to pay 50% of the respondents’ party-party costs of the proceeding: ACCC v Pacific National Pty Ltd (No 3) [2019] FCA 866.
On 26 June 2019, the ACCC filed a notice of appeal, which was subsequently amended on 26 November 2019. By the amended notice of appeal, the ACCC challenged the primary judge’s acceptance of, and reliance on, the Undertaking in finding that the sale of the ART would not contravene s 50. The ACCC advanced two principal contentions.
First, the ACCC contends that the primary judge did not have power to accept the Undertaking. A central argument advanced by the ACCC is that the power to accept an undertaking in the circumstances of a case such as the present is a power that is enlivened once a contravention of s 50 is found, and the Court may then accept an undertaking in lieu of granting injunctive relief as a remedy for the contravention. The ACCC submitted that the primary judge erred by taking the Undertaking into account as part of the factual matrix in assessing whether the sale of the ART would contravene s 50.
Second, the ACCC contends in the alternative that, if the primary judge was empowered to accept the Undertaking, his Honour erred in doing so. The central argument advanced by the ACCC was that the primary judge erred in concluding that the Undertaking would be effective in preventing Pacific National from engaging in anti-competitive conduct in the operation of the ART following the acquisition and that the Undertaking was not formulated with the necessary precision such as to be capable of being readily obeyed and enforced.
On 18 July 2019, each of Pacific National and Aurizon filed notices of cross-appeal, which were subsequently amended on 8 November 2019. The grounds of cross-appeal raised by the respondents were similar but not identical. However, because the interests of the respondents in the appeal are mutual, if a ground of appeal of either respondent is upheld by the Court, the other respondent will benefit from the successful appeal. Substantively, the respondents challenged the primary judge’s reasoning with respect to market definition and the assessment of the likely competitive effects of the sale of the ART.
In relation to market definition, the respondents contend that the primary judge erred in concluding that interstate rail linehaul markets exist that are confined to a subset of Pacific National’s rail linehaul customers, being those customers for whom neither road services nor sea services provides an effective substitute for rail linehaul services (so-called “captive” customers). The respondents contend that the primary judge erred in failing to find that the existence of such markets is dependent on two preconditions: first, that suppliers can identify and target “captive” customers with higher prices (that is, price discriminate); and, second, that profitable arbitrage must not be possible (that is, the non-captive customers must not be able to resell the product to the captive ones or purchase it on their behalf, thereby defeating the price discrimination). The respondents contend further that the evidence did not support a conclusion that Pacific National could identify and target “captive” customers with a sufficient degree of accuracy to engage in price discrimination profitably.
In relation to the likely effect of the acquisition on competition, the central argument advanced by the respondents was that the primary judge erred in concluding that the acquisition of the ART by Pacific National would have the likely effect of substantially lessening competition by increasing barriers to entry into the interstate rail linehaul markets in circumstances where: (i) in the medium term, a competing rail terminal would be built (through the Inland Rail Project); and (ii) barriers to entry were already high and there was no realistic prospect of new entry within that timeframe in any event.
Aurizon also advanced the contention that the primary judge erred in construing the word “likely” in s 50 as synonymous with there being a “real chance”. Aurizon contends that the word means “more probable than not”.
The respondents further contend that, if the primary judge erred by taking the Undertaking into account as part of the factual matrix in assessing whether the sale of the ART would contravene s 50 as the ACCC contends, his Honour should have accepted the Undertaking in lieu of granting the injunction sought by the ACCC because, for substantially the reasons his Honour gave, the Undertaking sufficiently addressed the likely anti-competitive effects of the acquisition.
On 26 November 2019, the ACCC filed a notice of contention in response to the respondents’ amended notices of cross-appeal. The notice raises two matters. The first concerns the assessment of the competitive effect of the acquisition, and specifically the timeframe within which the primary judge ought to have considered the potential for new entry. The second concerns the Undertaking and advances a contention that the Court is not empowered to accept the Undertaking in lieu of the injunctive relief sought by the ACCC for reasons that include:
(a)the power to accept an undertaking in lieu of injunctive relief granted pursuant to s 80(1) of the Act is limited to an undertaking in a form that reflects the relief sought by the ACCC; and
(b)the acceptance of the Undertaking would not involve an exercise of the judicial power of the Commonwealth and would infringe Chapter III of the Constitution.

For the reasons that follow, we would allow the cross-appeals and dismiss the appeal.
By way of summary, in respect of the respondents’ cross-appeals, we are of the view that:
(a)the primary judge did not err in defining the relevant markets in which to assess the competitive effects of the proposed acquisition;
(b)the primary judge did not err in construing the word “likely” in s 50 as meaning a real commercial likelihood, whether or not the likelihood is greater or less than 50%;
(c)respectfully, the primary judge erred in concluding that, in the absence of the Undertaking, the proposed acquisition would contravene s 50.
The finding that the proposed acquisition would not contravene s 50 requires the dismissal of the ACCC’s appeal and renders the ACCC’s grounds of appeal moot. Although it is not strictly necessary to address the ACCC’s grounds of appeal, it is appropriate to do so in case the matter goes further and also because the issues are of some importance and the Court has heard full argument. In summary, we are of the view that the power to accept an undertaking in the circumstances of a case such as the present is a power that is enlivened once a contravention of s 50 is found, and the Court may then accept an undertaking in lieu of granting injunctive relief as a remedy for the contravention. It follows, in our respectful view, that the primary judge erred in taking the Undertaking proffered by the respondents into account as part of the relevant factual matrix and, on that basis, reaching a conclusion that the acquisition of the ART by Pacific National would not contravene s 50. However, the form of undertaking that may be accepted by the Court in lieu of injunctive relief is not limited to the form of injunctive relief sought by the ACCC in the proceeding. It would therefore have been open to the primary judge, as a matter of legal power, to accept an undertaking that ameliorated the anti-competitive effects of the proposed acquisition in lieu of granting an injunction to prevent the proposed acquisition. We are not persuaded that, if the primary judge had exercised the discretionary power to accept the Undertaking in lieu of injunctive relief, the exercise of power would have been erroneous.
B. BACKGROUND FACTS
The following is a summary of the background facts, as found by the primary judge, which are relevant to the disposition of the appeal and are not contested on the appeal. It should be noted that there are many facts referred to in the reasons of the primary judge that were relevant to the allegations made by the ACCC at trial, including the allegations concerning the Terminal Services Subcontract, but which are not relevant to the issues raised on the appeal. In particular, at trial, the ACCC alleged that the interstate rail linehaul markets also comprised the supply of services for the transport of bulk steel, and there were a large number of findings made in respect of the transport of bulk steel. The primary judge concluded that the transport of bulk steel comprised a separate market (at [371], [520] and [529]), and there is no challenge to that finding by the ACCC. Accordingly, it is unnecessary to refer to the bulk steel aspect of the case below.
Certain findings made by the primary judge were redacted for confidentiality in the published reasons. Unless necessary to explain our reasons, we have not referred to those findings that were redacted.
B.1 The parties to the sale transaction
As already noted, the parties to the sale transaction were entities within the Aurizon group and entities within the Pacific National group.
Aurizon
Aurizon is and was a vertically integrated rail linehaul operator and freight forwarder. It continues to own the ART, pending the outcome of this litigation initiated by the ACCC. The business of the ART is described below.
At all relevant times until December 2017, Aurizon operated an interstate intermodal business that provided rail linehaul services for intermodal freight on interstate routes. When Aurizon provided rail linehaul services on interstate routes to or from Queensland, Aurizon’s trains travelled to and from the Brisbane Multi User Terminal (within the ART), where they were unloaded and loaded. Aurizon elected to close its interstate intermodal business in December 2017.
Up to 14 January 2019, Aurizon also operated a Queensland (intrastate) intermodal business. Through that business, Aurizon supplied rail linehaul services between terminals on the North Coast Line to freight forwarders and freight owners. Aurizon offered freight owners a full freight solution, including both rail linehaul services on the North Coast Line and “pick-up and delivery services”, and, in some cases, also services to consolidate and deconsolidate freight owners’ freight. When Aurizon provided rail linehaul services on the North Coast Line, Aurizon’s trains travelled to and from the Queensland Terminal (within the ART). Aurizon was the only rail operator that used the Queensland Terminal. On 14 January 2019, Aurizon sold its Queensland intermodal business to Linfox Australia Pty Ltd (Linfox).
Aurizon does not provide road freight services or sea freight services.
Pacific National
Pacific National provides rail linehaul services on interstate routes and between terminals on the North Coast Line. It is the largest provider of rail linehaul services in Australia by revenue and volume of freight transported. It principally supplies those services to freight forwarders, such as Toll and Linfox, rather than directly to freight owners.
When Pacific National provides rail linehaul services for intermodal freight on interstate routes to or from Queensland, Pacific National's trains travel to and from the Brisbane Multi User Terminal, where they are unloaded and loaded. Since Aurizon's closure of its interstate intermodal business in December 2017, Pacific National has been the only rail operator to use the Brisbane Multi User Terminal.
When Pacific National provides rail linehaul services on the North Coast Line for intermodal freight, Pacific National's trains travel to and from the narrow gauge terminal located at Tennyson (Tennyson terminal), where they are loaded and unloaded. The Tennsyon terminal is located approximately 10 km from the ART and approximately 9 km from the Brisbane CBD. Freight from far north Queensland to be moved interstate by rail is transported by truck between the Tennyson terminal and the ART, and vice versa for freight moving from interstate to far north Queensland.
Pacific National does not provide road services or sea services or, generally, “pick-up and delivery” services.
B.2 The Acacia Ridge Terminal
The ART is a rail terminal located in Queensland, approximately 16 km from the Brisbane central business district. The ART contains two terminals: the Brisbane Multi User Terminal, which is a standard gauge terminal that connects to the standard gauge interstate network; and the Queensland Terminal, which is a narrow gauge terminal that connects to the narrow gauge network within Queensland. The Brisbane Multi User Terminal and the Queensland Terminal are connected by a dual gauge railway line, and serviced by marshalling yards and associated sidings and facilities.
The ART facilitates the movement of intermodal freight into, out of and within Queensland, as it connects to both the standard gauge interstate network from the south and the narrow gauge rail network to the north, leading to the North Coast Line. The ART also facilitates transhipment of intermodal freight from standard to narrow gauge and vice versa, whether by rail, in which case trains can be broken up and shunted from the Queensland Terminal to the Brisbane Multi User Terminal and vice versa, or by road, in which case containers are transported by truck between the two terminals.
The ART is located near to rail sidings, depots, distribution centres and warehouses that are owned or operated by major customers of the rail operators which use the ART, including logistics companies and freight owners.
Currently, the ART is owned by Aurizon. As part of the transaction entered into between Aurizon and Pacific National described below, Aurizon engaged Pacific National to provide certain terminal services at the Brisbane Multi User Terminal with effect from 1 December 2018 pursuant to a contract called the Terminal Services Subcontract. Until 30 November 2018, Aurizon engaged Qube Logistics (Qld) Pty Ltd, an entity within the Qube group of companies (Qube), to provide similar terminal services at the Brisbane Multi User Terminal. The Terminal Services Subcontract does not apply to the Queensland Terminal.
B.3 The relevant transactions
The primary judge set out the background to the relevant transactions at [9]-[13] and [51]-[80]. Given the narrowing of the ACCC’s case at trial, and the further narrowing of issues on this appeal, it is unnecessary to refer to the detailed chronology of the relevant transactions. The following is a summary of the principal events.
In February 2017, Aurizon initiated Project Eyre, which was an assessment of market interest in the sale or shutdown of, or joint venture to own and operate, its intermodal business including the ART, the interstate intermodal business and the Queensland intermodal business.
From April 2017, Aurizon conducted a sale process for the ART, the interstate intermodal business and the Queensland intermodal business. In May 2017, Aurizon received six non-binding offers for parts or all of that business:
(a)two indicative offers from Qube and Oaktree for the whole of the intermodal business, including the ART, the interstate intermodal business and the Queensland intermodal business;
(b)two indicative offers from Genesee & Wyoming and Pacific National for the Queensland intermodal business and the ART only; and
(c)two indicative offers from the Australian Rail Track Corporation (ARTC) and Charter Hall for the ART.
Aurizon invited Pacific National, Qube and three other bidders to make binding bids by 4 August 2017.
On 20 July 2017, Pacific National made a pre-emptive binding bid for the ART. Following subsequent negotiations, on 28 July 2017 Aurizon and Pacific National entered into a package of agreements:
(a)the Business Sale Agreement, pursuant to which Aurizon agreed to sell, and Pacific National agreed to buy, the ART for a purchase price of $170 million, as adjusted in accordance with the terms of the agreement; and
(b)the Terminal Services Subcontract, pursuant to which Pacific National was appointed as operator of the Brisbane Multi User Terminal in place of Qube from 1 December 2018.
On 11 August 2017, Aurizon and Pacific National also executed an agreement under which Pacific National agreed to acquire the Queensland intermodal business for a payment of $20 million, also conditional on competition law clearance. On the same day, Aurizon resolved to close its interstate intermodal business, which was announced on 14 August 2017. In December 2017, Aurizon closed its interstate intermodal business.
On 12 February 2018 and 15 March 2018, Aurizon announced that it would close its Queensland intermodal business if it was not able to gain ACCC approval for its sale to Pacific National.
In its originating application filed on 18 July 2018, the ACCC sought an interlocutory injunction requiring Aurizon to carry on its Queensland intermodal business in the ordinary and usual course. On 13 August 2018, the primary judge granted that interlocutory injunction: Australian Competition and Consumer Commission v Pacific National Pty Ltd [2018] FCA 1221.
In January 2019, Aurizon sold its Queensland intermodal business to Linfox under arrangements whereby Aurizon supplies a “hook and pull” service to Linfox, described below.
B.4 Intermodal freight
Intermodal freight is freight that is packed in containers or pallets, which allow the freight to be transferred between modes of transport such as road, rail and/or sea without the freight itself being handled. A wide variety of products can be transported as intermodal freight, including food, beverages, finished steel products and household and personal effects.
Intermodal freight can be distinguished from freight known as "bulk freight", which generally refers to large quantities of homogenous, loose commodity products such as coal, minerals and agricultural products where they are not containerised. The present proceeding does not concern the transport of any form of "bulk" freight, except to the extent that "bulk" freight is on occasion transported in containers (in which case it is categorised as "intermodal" freight).
B.5 Relevant railway infrastructure
The railway networks that are relevant to this proceeding are either narrow or standard gauge. Locomotives and rail wagons (together referred to as rolling stock) can generally only be used on either narrow or standard gauge railway lines. However, it is possible for sections of a railway to be dual gauge; that is, to be built such that there are more than two parallel rails on the track placed in a way that enables both standard gauge and narrow gauge rolling stock to use the track.
The interstate railway network for rail linehaul services is a standard gauge network, which runs from the southern entrance of the ART, via Sydney to Melbourne, and through to Kalgoorlie in Western Australia. This network is owned or operated under long term leases by the ARTC.
Within Queensland, railway lines are almost exclusively narrow gauge. Three parts of the Queensland railway network, each of which are owned by Queensland Rail, are relevant to this proceeding:
(a)the North Coast Line, which is a narrow gauge railway line that runs along the coast between Brisbane and Cairns, and various destinations in between.
(b)the dual gauge section of railway track that runs from the border of the ARTC network at the southern entrance to the ART to Fisherman Island at the Port of Brisbane, where it terminates (dual gauge section); and
(c)the narrow gauge metropolitan network in and around Brisbane.
The use of different gauges between the interstate routes and within Queensland means that freight travelling by rail into Queensland and then north beyond Brisbane must be transferred from the standard gauge network to the narrow gauge network. Freight travelling by rail from within Queensland to Brisbane and then interstate must be transferred from the narrow gauge network to the standard gauge network.
B.6 Movement of intermodal freight within Australia
Intermodal freight can be transported by one or more of road, rail and, in some cases, sea. In some cases, transport providers deal directly with the party seeking transport for their freight, and in other cases a freight forwarder organises transport on behalf of that party.
Intermodal rail terminals play an important role in the transport of intermodal freight because they are the location at which intermodal freight is transferred from road transport to rail transport (or vice versa), and at which numerous other significant ancillary services are provided.
The movement of intermodal freight within Australia predominantly occurs using rail and/or road, with sea used to a smaller extent. Rail transport involves the movement of freight using a rail network, and can be combined with the use of a second mode of transport, usually road, for some legs of the journey. Road transport involves the movement of freight using vehicles travelling by road. It is also used in conjunction with other modes of transport, to transport freight on the first and last leg of a journey. Coastal shipping is used for transport between mainland ports and Tasmania. There is limited coastal shipping between mainland ports, but coastal shipping has in some instances been used to move freight between the east and west coasts of Australia.
The movement of intermodal freight by rail typically involves three distinct stages. The first stage is the use of a truck to collect freight from the origin point nominated by the customer, and the transport of that freight by road to a terminal where it is loaded onto a train. The second stage is the transport of that freight by train from the terminal (the terminal of origin) to a terminal near to the customer's nominated destination point (the destination terminal), where it is unloaded from the train. The third stage is the use of a truck to collect the freight from the destination terminal and deliver it to the destination point nominated by the customer ("pick-up and delivery" services).
The movement of intermodal freight by road can occur in two ways. In some cases, the process is similar to that described above. The truck collects the freight from the customer, and transports it to a depot or terminal. At the depot or terminal, the freight is loaded on to a truck that is suitable for transporting intermodal freight over long distances. The freight is transported by truck from the depot or terminal of origin to a depot or terminal near to the customer's nominated destination point, where the freight is loaded onto a truck that is suitable for transporting intermodal freight over shorter distances (“pick-up and delivery” services). In other cases, it may not be necessary for the freight to be taken to some or all of the depots or terminals referred to. That is, a truck may collect the freight from the customer's nominated origin point and transport it directly to the customer's destination point, without the need to attend any depot or terminal. Alternatively, a truck may collect the freight from the customer's nominated origin point and transport it directly to the destination depot/terminal without attending a depot/terminal of origin or collect the freight from the depot/terminal of origin and transport it directly to the customer's destination point.
The movement of freight by sea occurs in the same way as described in relation to rail freight above, except that the freight is transported to and from a terminal for loading onto a ship rather than a train.
For each of rail, road and sea transport, the long-distance leg of the freight task is referred to as the "linehaul" component and the service of supplying this component of the freight task is referred to as a "linehaul" service. In these reasons, the terminals at which freight is transferred from one mode of transport to another are referred to as "intermodal terminals".
Broadly speaking, there are up to three participants involved in the transport of intermodal freight being:
(a)freight owners, which are the ultimate owners of the freight to be transported;
(b)freight forwarders, which are businesses that organise the entire movement of the freight from its point of origin to its point of destination on behalf of the freight owner; and
(c)linehaul providers, which operate the rail, road or sea linehaul service used to transport the freight owner's freight.
Freight owners often contract with a freight forwarder to arrange the movement of intermodal freight, but in some instances contract directly with a rail linehaul provider. The freight forwarder often operates one or more of the transport modes themselves (for example, they may operate the “pick-up and delivery” services and, in some cases, also rail or road services), and otherwise acquires from another operator any transport services that they do not themselves provide. In some cases the freight forwarder's service includes the service of packing freight into containers, and in other cases this task is undertaken by the freight owner. The freight forwarder is, in this sense, an intermediary between the freight owner and the transport provider.
If a freight owner requires transport for a volume of intermodal freight that is less than a full container load, a freight forwarder may combine that freight with other freight (referred to as consolidation). This allows the freight forwarder to increase container utilisation, and thereby decrease the unit costs of transporting the freight. If a freight forwarder does this, they may transport the freight from the freight owner's point of origin to an intermediate facility (such as its own depot) for consolidation before the freight is further transported as described above, and then to another intermediate facility to separate a freight owner's consolidated freight from other freight (referred to as deconsolidation), before the freight owner's freight is transported to the destination point.
B.7 Rail transport suppliers

The businesses of Aurizon and Pacific National have been described above. As there noted, Aurizon closed its interstate intermodal business in December 2017 and sold its Queensland intermodal business to Linfox in January 2019. At the time of the proceeding, the other suppliers of rail linehaul services in Australia were SCT Logistics and Linfox (following its acquisition of the Queensland intermodal business).
SCT Logistics
At all relevant times, SCT was, and continues to be, a vertically integrated rail operator and freight forwarder, operating rail linehaul services for intermodal freight on interstate routes, and also providing associated “pick-up and delivery” services. SCT supplies services directly to freight owners and does not generally deal with other freight forwarders.
In December 2014, SCT sought access to the Brisbane Multi User Terminal, but was refused access by Aurizon on the basis that the Brisbane Multi User Terminal was capacity constrained. Until January 2017, SCT provided intermodal rail services between Melbourne and Brisbane under a "hook and pull" arrangement with Aurizon. In January 2016, Aurizon gave SCT twelve months' notice of its intention to cancel the hook and pull arrangements it had previously agreed with SCT. As a result, SCT constructed its own intermodal terminal at Bromelton to service customers on the Melbourne–to-Brisbane corridor. That terminal opened in January 2017.
Historically, the majority of the intermodal freight SCT has transported was non-containerised. SCT principally provides rail linehaul services using a fleet of louvered vans (also referred to as "wagons"), although SCT's terminals have container handling facilities and SCT provides container haulage on both the North-South and East-West corridors.
When SCT provides rail linehaul services for intermodal freight on interstate routes, its trains travel to and from a standard gauge intermodal terminal at Bromelton. SCT does not operate any rail linehaul services on narrow gauge railways within Queensland.
Linfox
Mr Ian Strachan, President of Linfox’s intermodal operations across Australia, whose evidence was accepted by the primary judge, deposed that Linfox is a vertically-integrated road linehaul operator and intermodal freight-forwarder with operations in all states of Australia, other than Tasmania. Prior to acquiring Aurizon’s Queensland intermodal business, Linfox’s operations in Queensland were very limited.
On 12 October 2018, Aurizon and Linfox entered into the following agreements in relation to the Queensland intermodal business:
(a)A Business Sale Agreement to transfer ownership of the Queensland intermodal business, excluding Aurizon's fleet of locomotives and certain other assets relating to rail haulage services, to Linfox.
(b)A Hook/Pull and Maintenance Services Agreement under which Aurizon provides Linfox with rail haulage services for the Queensland intermodal business. Under that agreement, Aurizon provides locomotives (which are retained by Aurizon) to pull wagons (which would then be owned by Linfox) to carry out the rail haulage required for the Queensland intermodal business. Aurizon also provides Linfox with the requisite rail infrastructure access rights so that the wagons can be hauled under Aurizon's rail operator accreditation for the purposes of the rail safety legislation. Aurizon also provides maintenance services in respect of Linfox's wagons. Linfox has an option to purchase Aurizon's Queensland intermodal business fleet of locomotives at the end of the term of the agreement.
(c)A RIM Services Agreement under which Aurizon provides Linfox with rail infrastructure manager services (for the purposes of the rail safety legislation) at various terminal locations used by the Queensland intermodal business for a period of five years from completion of the Queensland intermodal business sale or until Linfox obtains the requisite regulatory accreditations.
(d)Three Terminal Services Agreements under which Aurizon provides terminal services to Linfox at the Aurizon terminals at Townsville and Mt Miller and at the Queensland Terminal for a period of five years from completion of the sale of the Queensland intermodal business, with a further two five-year periods at Linfox's option.
(e)A Transitional Services Agreement under which Aurizon provides Linfox with information technology services on a transitional basis following completion of the business sale.
Aurizon and Linfox also agreed on leases over the business sites at Townsville, Emerald, Rockhampton and Mackay and a licence over certain areas (including the freight distribution centre) located at the ART.
According to Mr Strachan, Linfox's acquisition of the Queensland intermodal business is important because it facilitates Linfox's entry into Queensland. As a result of the transactions with Aurizon, Mr Strachan deposed that Linfox will obtain:
(a)a national footprint to compete with other national competitors like Toll, i.e. by offering a national end-to-end freight forwarding service;
(b)the ability to undertake services into and out of Far North Queensland;
(c)the opportunity to compete for and win new freight forwarding customers and other contract logistics opportunities in Queensland; and
(d)access to terminals and other facilities including the ART in Queensland.
In relation to Linfox’s use of the Queensland Terminal within the ART, Mr Strachan gave evidence that Linfox has executed a terminal services agreement and freight distribution centre licence with Aurizon which enable Linfox to access relevant parts of the ART as part of its operation of the Queensland intermodal business and to receive certain services from Aurizon, such as the loading and unloading of trains, shunting and container storage. Such arrangements specifically contemplate that Aurizon will novate these arrangements to Pacific National in the event that Aurizon sells the ART to Pacific National. Mr Strachan understands that this will also require Pacific National's consent to the novation and that Pacific National has agreed to give its consent. Such arrangements also contemplate novation if the ART is sold to another party.
In relation to the Brisbane Multi User Terminal within the ART, Linfox has a rail linehaul agreement with Pacific National under which Linfox freight carried by Pacific National can access the Brisbane Multi User Terminal. For the term of Linfox's rail linehaul agreement with Pacific National, Mr Strachan said that he was not presently concerned about the Terminal Services Subcontract between Aurizon and Pacific National. Given the arrangements described in the previous paragraph, and given that the Queensland Terminal is separate from the Brisbane Multi User Terminal, according to Mr Strachan, the provision of terminal services by Pacific National at the Brisbane Multi User Terminal would not affect Linfox's access to, or use of, the Queensland Terminal.
B.8 Pricing of rail linehaul services
Pacific National and Aurizon adopt different contractual arrangements for the supply of rail linehaul services to freight forwarders and to freight owners.
Pacific National
Pacific National's contracts with customers seeking rail linehaul services for intermodal freight consist of standard terms and conditions, a rate card which identifies the rates to be charged for the relevant rail linehaul services, and, in some instances, a rail haulage agreement (sometimes referred to as a "partnership agreement") that generally has a term of 3 to 5 years and contains terms and conditions specific to the customer.
Pacific National has five categories of rate cards that apply nationally: one rate card offers Pacific National's standard prices, and the other four rate cards each offer different levels of discounts to Pacific National's standard prices. Pacific National applies different rates cards to different customers, based principally on the volume of freight that the customer transports. The particular prices that a customer pays under any one rate card depend on the size of the container, the volume being shipped, the origin-destination pair of the route over which the freight is shipped, the direction of travel and the day of the service. In addition to these five rate cards, Pacific National also applies specialised rate cards for customers with particular freight types, such as removalists, and customers transporting automotive or express freight.
Approximately 80% of Pacific National's customers receive services under a rate card and Pacific National's standard terms and conditions without a rail haulage agreement; approximately 20% of Pacific National's customers have a rail haulage agreement. Customers with a rail haulage agreement generated 55% of Pacific National's intermodal freight volume in the 2018 financial year.
In addition to the arrangements described above, there are also occasions when Pacific National provides customers, usually freight forwarders, with rate assistance for a particular tender. Pacific National does this by entering into a commodity rate agreement. This is an agreement negotiated between Pacific National and its customer under which Pacific National agrees to provide transport for a specific freight task or tasks at a specific rate (a "commodity rate") that is lower than the rate that would otherwise apply under the arrangements described above. The commodity rate is negotiated between Pacific National and its customer. If the customer is successful in winning the tender, the commodity rate applies to the particular freight task won under that tender. That freight task is defined, and hence the application of the commodity rate is limited, by reference to one or more of the following factors: the routes over which transport is to be provided; the nature of the freight to be carried; and the identity of the freight owner whose freight is to be carried. So, for example, if Pacific National offered a freight forwarder commodity rates to help it to win work to carry particular volumes for a particular freight owner on particular routes, and the freight forwarder won that tender, the freight forwarder would pay Pacific National the relevant commodity rates for that particular volume on those particular routes. But the commodity rates would not apply to any other volumes or routes carried for that particular freight owner or to freight carried for other freight owners. Commodity rate agreements require the customer to identify the commodity rate code when seeking to use that rate.
Most commodity rate agreements apply to customers who have a rail haulage agreement, and have the effect of modifying the rates payable under the rail haulage agreement in relation to the particular business the subject of the relevant tender. However, Pacific National has also entered into commodity rate agreements with customers, such as removalists, who are not a party to a rail haulage agreement. The particular prices that a customer pays under any one commodity rate agreement depend on the size of the container, the volume being shipped, the origin-destination pair of the freight being shipped and the day of the service.
In the period from 1 October 2016 to 30 September 2018, Pacific National had at least 650 commodity rate agreements in place in relation to services provided on the North-South corridor.
Aurizon
Aurizon has supplied rail linehaul services, including as part of its freight forwarding services, on both a contracted and uncontracted basis. For uncontracted customers, Aurizon supplied rail linehaul services in accordance with its standard terms and conditions. For contracted customers, Aurizon supplied such services in accordance with its standard terms and conditions and rates agreed between Aurizon and the customer. The rates that applied to a particular customer could be either scheduled rates or negotiated rates. Scheduled rates are rates set out in one of four separate schedules of rates - one schedule contains "standard" rates, one contains rates specific to removalists, and the two other schedules contain rates at two different levels of discounts from the standard rates. The selection as to which scheduled rates apply to a particular customer depends on whether the customer is contracted or uncontracted, the volume of freight they wish to have transported and, in the case of removalists, the nature of that freight. However, contracted customers who have been prepared to make a volume commitment to Aurizon and/or to do so on a desirable corridor where Aurizon had linehaul capacity, could generally negotiate lower rates with Aurizon. In some other cases high volume customers could receive rail linehaul services at costed rates, which could be significantly lower than the scheduled rates.
In addition, further charges, discounts, rebates, rate review mechanisms and sign-on payments for contracted customers have been negotiated between Aurizon and the customer, and additional fees could be added for particular contracted and uncontracted customers depending on the nature of the service they required.
B.9 The role of intermodal rail terminals
Generally speaking, the following activities take place at the ART and other intermodal terminals:
(a)freight forwarders or freight owners deliver intermodal freight, which are stored until they are loaded onto trains;
(b)trains arrive at the terminal and are allowed to enter the terminal from the connecting rail network under the management of train controllers who manage the terminal's interface with the provider of access to the connecting network;
(c)trains are unloaded using equipment such as forklifts and gantry cranes and freight is moved from the train to the ground (for later relocation), a waiting truck, another train or a storage area;
(d)the unloaded containers are, if not directly loaded onto another train or truck, stored;
(e)if the terminal is a dual gauge terminal, freight may be moved from a standard gauge train to a narrow gauge train and vice versa;
(f)trains are subject to safety checks;
(g)wagons may be stored for periods of time;
(h)trains undergo a level of servicing, including wagon checks or repairs, locomotive fuelling and locomotive provisioning, which involves supplying the rail operator with water, fuel and sand required for the locomotive;
(i)damaged or unsafe wagons are removed from trains;
(j)trains are reconfigured, meaning that they are broken up and reassembled into different length trains - for example, trains may need to be reconfigured into smaller lengths if they would otherwise be too long to use the terminal or particular infrastructure at the terminal, which involves attaching and detaching locomotives, uncoupling and stowing wagons and shunting (that is, pushing or pulling) wagons;
(k)trains are loaded;
(l)trains are allowed to exit the terminal onto the connecting rail network, under the management of train controllers who manage the terminal's interface with the provider of access to the connecting network;
(m)freight forwarders or freight owners collect intermodal freight for delivery to its final destination; and
(n)the track and loading equipment at the terminal undergo maintenance.
Because of the wide range of activities conducted at a terminal, rail operators, freight forwarders, freight owners and road operators each "use" a rail terminal. Rail operators use a terminal for operating, servicing and loading or unloading trains. Freight forwarders, freight owners and their road operators use a terminal for delivering and collecting freight in the course of providing “pick-up and delivery” services.
In order to use a rail terminal, a rail operator requires:
(a)access to capacity on the rail network that connects to the terminal - rail capacity is allocated in the form of a "train path", which is the right granted by the relevant track owner to run a train of specified maximum length and weight from an origin to a destination at a specified time; and
(b)access to capacity at the terminal - terminal capacity is allocated in the form of a "terminal window", which is a defined period of time during which a train can occupy rail tracks within a terminal for loading and unloading, train storage and, potentially, provisioning.
A rail operator needs to obtain terminal windows and train paths that align, in the sense that the train path must allow the train to arrive at and depart from the terminal within its terminal window. But not all capacity is "equal" and differing train paths and terminal windows will have different attractiveness to a rail operator's customers, different operating efficiency and cost implications and differing interconnectivity with other networks.
From the perspective of a rail operator, the fundamental task of any intermodal rail terminal is to allow rail operators to load containers onto, or unload containers from, trains and trucks at the terminal in an efficient and timely manner. It is important to rail operators that they can provide a cost-effective and competitive rail haulage offering, which requires the following things:
(a)First, rail operators require terminal windows of adequate quality to enable them to compete with other rail providers. For instance, a rail operator requires windows that align with relevant train paths, are at an appropriate time of day to allow the operator to meet their own customers' needs, and are of an appropriate duration to allow them to load, unload and provision their locomotives. An important consideration for interstate departures from Queensland is to avoid the train being held up on the outskirts of Sydney during peak passenger periods, when restrictions are imposed on freight trains operating in the Sydney network.
(b)Second, rail operators require that the terminal windows allocated to the operator are in fact made available to the operator on a day-to day-basis in accordance with that allocation.
(c)Third, rail operators require that trains that are not running to timetable (that is, running early or late) are still serviced quickly and efficiently.
(d)Fourth, rail operators require that services at the terminal are provided quickly and efficiently, including that loading occurs according to the loading plan provided by the rail operator.
Where a terminal is operated by a rail operator which uses the terminal, it is important to other rail operators that:
(a)they receive service quality and pricing that is comparable to that which the terminal operator applies in relation to its own rail operations;
(b)the terminal is operated safely, and that safety requirements are implemented in a pragmatic and non-discriminatory way; and
(c)their confidential information is protected and not able to be used by the terminal operator to assist them in their own rail business.
In selecting a freight forwarder for a freight task and, where relevant, in selecting rail as the freight mode of choice, a freight owner usually obtains a commitment from the freight forwarder that the freight owner’s freight will arrive at its destination according to schedule. As a result of its obligations to the freight owner, the freight forwarder will have regard to a range of services provided at an intermodal rail terminal, including the following:
(a)the time by which they must deliver goods to the terminal in order for those goods to be loaded onto a particular train (the "cut-off time");
(b)whether the train can depart on time;
(c)the time it takes for a truck to enter the terminal, deliver or collect freight and leave the terminal (referred to as the "truck turnaround time");
(d)whether containers are damaged whilst at the terminal; and
(e)the time that their freight is available for collection at its destination (known as "freight availability").
B.10 Choice of transport mode

Freight forwarders or freight owners consider a wide range of factors when deciding whether to acquire rail linehaul services or to acquire road or sea linehaul services instead. For some freight forwarders and freight owners, having regard to the characteristics of their freight, the transport they require and the routes over which they require it, neither road linehaul services nor sea linehaul services are an effective substitute for rail linehaul services. Before Aurizon closed its interstate intermodal business, such freight forwarders and freight owners benefitted from competition between Pacific National and Aurizon in relation to the supply of the relevant rail linehaul services in the form of lower prices and improved service quality.
Acquirers of rail linehaul services (whether freight forwarders or freight owners) usually consider a variety of factors specific to their needs in deciding whether to acquire a rail linehaul service. Those factors include the following:
(a)The total cost of using the rail linehaul service, any required “pick-up and delivery” services and any costs to the freight owner that are associated with use of those services arising due to internal processes such as inventory management (for example, business costs relating to the need to maintain inventory, or the fact that particular stores only have limited off-shelf storage).
(b)The total cost of using road or sea linehaul services instead of a rail linehaul service, any required “pick-up and delivery” services and any associated internal costs of the type just referred to.
(c)The freight owner's requirements about delivery, including speed of delivery, frequency of delivery and the degree to which the freight owner requires a time or date specific delivery window.
(d)Whether the attributes of the freight being transported, including the volume, weight, perishability, number of products to be transported or other characteristics of the relevant freight, leads the freight owner to favour a particular transport mode.
(e)The appropriateness of any relevant schedules, flexibility in the departure time and the effect of service interruptions like breakdowns or flooding.
(f)The ability of a rail linehaul service, a road service and/or a sea service to meet the freight owner's needs for reliable delivery, including guaranteed capacity for high volumes of freight.
(g)The origin and destination of the transport service the customer requires, and the distance of a suitable terminal or port from the origin and destination points for the freight. For example, the greater the distance between the rail terminal and the customer's origin or destination point, the greater the cost of “pick-up and delivery” services. These increased costs may reduce or eliminate a freight forwarder's competitive advantage having regard to the location of its existing facility, and can affect the choice between rail linehaul services and road services.
(h)Whether the freight owner has invested in, or is otherwise effectively tied to, using particular infrastructure that is specific to a particular mode of transport, for example, rail sidings or delivery docks that are not suitable for receiving freight from the types of trucks used for long distance transport.
(i)Safety considerations.
(j)Environmental concerns.
A number of factors can lead freight owners or freight forwarders to acquire a rail linehaul service or a road service, rather than a sea service, notwithstanding that sea services can be cheaper than road or rail linehaul services. These include the following factors:
(a)The location of ports relative to the points of origin and destination may mean that delivery by sea services involves additional handling and delivery costs compared to rail linehaul services or road services.
(b)Sea services are typically less frequent than rail linehaul services. There are no regular services of the kind that are often needed by freight owners (e.g. a daily or twice-weekly service), which means that a higher volume of freight must be shipped at any one time. Those higher volumes may exceed a freight owner's demand for transport. But even if they do not, the need to transport greater volumes on a single service could increase inventory management costs.
(c)The availability of sea services is less reliable than road services or rail linehaul services. Sea services are provided by international container vessels and their availability depends on shipping lines having capacity to take containers for domestic legs of their journeys.
(d)Door-to-door transit time is generally longer, meaning that it takes longer to transport freight using sea services than it does using rail linehaul services.
(e)Sea is not suitable for certain goods, such as steel grades which may rust.
(f)Unlike road services and rail linehaul services, it is not possible to guarantee the price of sea services on a long-term basis. Rather, the pricing of sea services is volatile, particularly when chartered opportunistically.
A number of factors can lead freight owners or freight forwarders to acquire a rail linehaul service rather than a road service. These include the following factors:
(a)Overall cost: rail linehaul services are more cost effective than road services over longer distances.
(b)Volume: rail linehaul services may better accommodate the transportation of larger volumes than road services, and may be scaled up without as much investment.
(c)Safety: rail linehaul services have a lower interaction with the public, given that they run on a fixed line. Heavy vehicles on the road may pose a particular danger to the public particularly, for example, in far north Queensland where road access is limited.
(d)Environmental concerns: rail linehaul services create less road traffic and air pollution than do road services.
(e)Time: rail linehaul services may be quicker over longer distances than road services, although this may not be true for shorter and medium distances.
B.11 Historical competition in the supply of rail linehaul services
North-South rail linehaul services
North-South rail linehaul services are rail linehaul services supplied interstate and over long distances between terminals in Queensland, New South Wales and Victoria.
Prior to the closure of Aurizon’s interstate intermodal business in December 2017, Aurizon, Pacific National and SCT supplied North-South rail linehaul services in relation to intermodal freight. Aurizon and Pacific National were each other’s closest competitors. SCT was not as close a competitor, as SCT did not generally deal with freight forwarders and SCT’s louvered wagons were not suitable for most customers who sought to transport containerised freight. Following the closure of Aurizon’s interstate intermodal business, Pacific National and SCT are each other’s only competitors, but some of the limitations affecting SCT persist.
As a result of the factors set out in section B.10 above, there are some freight owners (or freight forwarders acting on their behalf) requiring transport of intermodal freight between cities serviced by North-South rail linehaul services for whom road services and sea services do not provide an effective substitute. Those customers include:
(a)Woolworths, a grocery retailer, which uses North-South rail linehaul services for part of its secondary freight from Melbourne to Brisbane due to a mix of safety, service, cost and corporate and community objectives;
(b)Metcash, a grocery wholesaler and retailer, which transports freight from its distribution centre in Laverton to Queensland using North-South rail linehaul services;
(c)Wridgways, a removalist, which uses North-South rail linehaul services between Brisbane, Sydney and Melbourne;
(d)Allied Pickfords, a removalist, which uses rail for part of its interstate freight tasks;
(e)K&S, a freight forwarder, which uses North-South rail linehaul services;
(f)Austrans, a freight forwarder of ambient goods (goods that can be transported at room temperatures), which uses North-South rail linehaul services between Melbourne and Brisbane;
(g)Orica, a provider of explosives and blasting systems, which transports sodium cyanide from Brisbane to Kalgoorlie and relies on North-South rail linehaul services for the north-south leg of this route; and
(h)McColl’s Transport, a transport company, which regularly uses North-South rail linehaul services to transport bulk chemicals.
East-West rail linehaul services
East-West rail linehaul services are rail linehaul services supplied interstate and over long distances:
(a)between terminals in Western Australia and terminals in one or more of New South Wales, Victoria and South Australia; and
(b)between terminals in South Australia and terminals in one or more of Western Australia, New South Wales and Victoria.
Prior to the closure of Aurizon’s interstate intermodal business in December 2017, Aurizon, Pacific National and SCT supplied East-West rail linehaul services in relation to intermodal freight. Aurizon and Pacific National were each other's closest competitors. SCT was not as close a competitor to those businesses for the reasons given in respect of the North-South route. Following the closure of Aurizon’s interstate intermodal business, Pacific National and SCT are each other’s only competitors, but some of the limitations affecting SCT persist.
In like manner to the North-South corridor, there are some freight owners (or freight forwarders acting on their behalf) requiring transport of intermodal freight between cities serviced by East-West rail linehaul services for whom road services and sea services do not provide an effective substitute.
C. RELEVANT LEGISLATIVE PROVISIONS
Section 50(1) of the Act provides:
(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 any market.
In determining whether a proposed acquisition would have the effect, or would be likely to have the effect, of substantially lessening competition, s 50(3) provides a non-exhaustive list of factors that must be taken into account:
(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.
Section 50(6) stipulates that “market” means any market for goods or services in Australia, a State, a Territory or a region of Australia.
The concept of a market in the Act is further defined in s 4E as follows:
For the purposes of this Act, unless the contrary intention appears, market means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first‑mentioned goods or services.
The concept of lessening competition is expanded by s 4G as follows:
For the purposes of this Act, references to the lessening of competition shall be read as including references to preventing or hindering competition.
The principal concept in s 50, competition within a market, has been the subject of considerable judicial analysis and is well understood. For present purposes, it is unnecessary to go further than the oft-cited statements of the Trade Practice Tribunal in Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 (QCMA) at 187-189:
Competition may be valued for many reasons as serving economic, social and political goals. But in identifying the existence of competition in particular industries or markets, we must focus upon its economic role as a device for controlling the disposition of society’s resources. Thus we think of competition as a mechanism for discovery of market information and for enforcement of business decisions in the light of this information. It is a mechanism, first, for firms discovering the kinds of goods and services the community wants and the manner in which these may be supplied in the cheapest possible way. Prices and profits are the signals which register the play of these forces of demand and supply. At the same time, competition is a mechanism of enforcement: firms disregard these signals at their peril, being fully aware that there are other firms, either currently in existence or as yet unborn, which would be only too willing to encroach upon their market share and ultimately supplant them.
This does not mean that we view competition as a series of passive, mechanical responses to “impersonal market forces”. There is, of course, a creative role for firms in devising the new product, the new technology, the more effective service or improved cost efficiency. And there are opportunities and rewards as well as punishments. Competition is a dynamic process; but that process is generated by market pressure from alternative sources of supply and the desire to keep ahead.
…
Competition expresses itself as rivalrous market behaviour. In the course of these proceedings, two rather different emphases were placed upon the most useful form such rivalry can take. On the one hand it was put to us that price competition is the most valuable and desirable form of competition. On the other hand it was said that if there is rivalry in other dimensions of business conduct — in service, in technology, in quality and consistency of product — an absence of price competition need not be of great concern.
In our view effective competition requires both that prices should be flexible, reflecting the forces of demand and supply, and that there should be independent rivalry in all dimensions of the price-product-service packages offered to consumers and customers.
Competition is a process rather than a situation. Nevertheless, whether firms compete is very much a matter of the structure of the markets in which they operate. The elements of market structure which we would stress as needing to be scanned in any case are these:
(1) the number and size distribution of independent sellers, especially the degree of market concentration;
(2) the height of barriers to entry, that is the ease with which new firms may enter and secure a viable market;
(3) the extent to which the products of the industry are characterized by extreme product differentiation and sales promotion;
(4) the character of “vertical relationships” with customers and with suppliers and the extent of vertical integration; and
(5) the nature of any formal, stable and fundamental arrangements between firms which restrict their ability to function as independent entities.
Of all these elements of market structure, no doubt the most important is (2), the condition of entry. For it is the ease with which firms may enter which establishes the possibilities of market concentration over time; and it is the threat of the entry of a new firm or a new plant into a market which operates as the ultimate regulator of competitive conduct.
As also explained in QCMA, it follows that the identification of markets must be the essential first step in assessment of present competition and likely competitive effects (at 190). The Tribunal explained:
A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them (if there is no close competition there is of course a monopolistic market). Within the bounds of a market there is substitution - substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm’s product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives.
As discussed further below, while the concept of a market is well understood, the identification of markets may involve a fact-intensive exercise (Air New Zealand Ltd v Australian Competition and Consumer Commission (2017) 262 CLR 207 (Air New Zealand) at [39] per Nettle J) and the boundaries of markets may be blurred and overlap with other markets (Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 (Queensland Wire) at 196 per Deane J; NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at [68] per McHugh ACJ, Gummow, Callinan and Heydon JJ). Recently, in Australian Competition and Consumer Commission v Flight Centre Travel Group Pty Ltd (2016) 261 CLR 203 (Flight Centre), Kiefel and Gageler JJ summarised the necessary factual and conceptual enquiry as follows (at [69], citations omitted):
…Because “the economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted", the identification and definition of a market for particular services will often involve "value judgments about which there is some room for legitimate differences of opinion". Identifying a market and defining its dimensions is "a focusing process", requiring selection of "what emerges as the clearest picture of the relevant competitive process in the light of commercial reality and the purposes of the law". The process is "to be undertaken with a view to assessing whether the substantive criteria for the particular contravention in issue are satisfied, in the commercial context the subject of analysis". "The elaborateness of the exercise should be tailored to the conduct at issue and the statutory terms governing breach". Market definition is in that sense purposive or instrumental or functional.
The prohibition in section 50 uses the conditional (or hypothetical) future tense: the prohibition applies if the acquisition would have the effect or would be likely to have the effect of substantially lessening competition. The test is in relevantly the same form as sections 45 and 47 and, since 6 November 2017, section 46. It is well settled that the test requires a comparison between the nature and extent of competition in any market potentially affected by the acquisition in the future with the acquisition and without the acquisition: see, in the context of s 47, Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238 at 259-260 per Smithers J and Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) ATPR 41-752 (Stirling Harbour (2000) ATPR 41-752) at [113] per French J (approved on appeal at Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) ATPR 41-783 (Stirling Harbour (2000) ATPR 41-783) at [12] per Burchett and Hely JJ), and followed in the context of s 50 in Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317 (AGL No 3) at [352] per French J and Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 282 ALR 464 (Metcash 282 ALR 464) at [130] and [343] per Emmett J (upheld on appeal in Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297 (Metcash 198 FCR 297)).

In that context, the Tribunal had to look at the benefits and the detriments of the exclusionary provisions and these included their competitive benefits and detriments. But the competitive detriments did not need to rise so high as to the likelihood of a substantial lessening of competition. In the context of the Tribunal’s inquiry, it was relevant for it to investigate any competitive detriment including those falling short of a likelihood of a substantial lessening of competition. This Court has recently confirmed the orthodoxy of that view of authorisation proceedings: Australian Competition and Consumer Commission v Australian Competition Tribunal [2017] FCAFC 150 at [11]-[12].
Once that understanding is brought to account, the passage relied upon by the Commission takes on a different complexion. The applicants were submitting that there was no competitive detriment and what the Tribunal was saying was that whilst entry of a new brewer or interstate brewer into the market might be difficult, it was not impossible and hence that the submission that there was no competitive detriment could not be accepted. The statement is not authority for the proposition which the Commission now seeks to advance.
The question of whether a heightening of barriers to entry is likely to result in a substantial lessening of competition falls therefore to be decided on ordinary principles. One examines the acquisition in question and asks whether the heightening of the barriers to entry has the likely effect of substantially lessening competition. If there is no real commercial chance of any new entrant even before the barriers to entry are heightened it will be difficult to see that there can be a realistic commercial chance that competition will be substantially lessened once they are. The disciplining effect to which the Commission refers may, in principle, be accepted as an available informing concept but it is difficult to see it as plausible where the acquisition in question has no impact on the only firm nominated by the Commission as being likely to enter the market. Nor is this to say that the Commission is bound to nominate a particular entrant; rather, it is merely to enforce the procedural reality of the manner in which the Commission elected to run its case.
Consequently, I would conclude that the acquisition was not likely to have the effect of substantially lessening competition in the market of relevant customers. The cross-appeal must be allowed and Pacific National released from is undertaking.
THE UNDERTAKING
That makes it strictly unnecessary to deal with the Commission’s various arguments as to why the trial judge erred in accepting the undertaking in the first place. As they raise matters which may be of importance, however, it is useful to deal with them briefly.
The first issue is a technical one of power. At [1611], the trial judge stated that:
As to the ACCC’s s 50 case, upon my acceptance of the Undertaking which I consider to be part of the future with the ART acquisition, I would reject that case as well.
The trial judge thus took the existence of the undertaking to be part of the factual landscape when considering the competitive effects of the acquisition of the terminal. This led him to the conclusion that the acquisition would not result in contravention of s 50(1). At [1612] his Honour said this:
Now an interesting hypothetical arises as to whether, if I had not accepted the Undertaking, I would have found for the ACCC on its s 50 case. On balance, and not without some hesitation, I would have accepted its case.
The power of the trial judge to accept the undertaking was coterminous with the power of the Court to grant an injunction: Thomson Australian Holdings Pty Ltd v Trade Practices Commission [1981] HCA 48; 148 CLR 150 at 165 (‘Thomson’). The power of the Court to grant an injunction was constrained, in this case, by the terms of s 80(1) so as only to be available where a contravention was apprehended. The consequence of the trial judge regarding as hypothetical the question of whether the acquisition would contravene s 50(1) is that his Honour had no power to grant an injunction under s 80(1) and therefore no power to accept an undertaking either. This leads to an infinite regress of conclusions which endlessly cycle between a finding that s 50(1) was breached and a finding that it was not. The emergence of indeterminacy of that kind is a marker that something has gone awry. Useful comparison may be made with the sentence ‘This sentence is false’ which is similarly indeterminate.
What was the error? It was to include the remedy the Court might grant as part of the factual matrix which determined the logically anterior question of liability. It would, for example, be wrong to reason that because a plaintiff in a negligence suit was to receive an award of damages that it would follow that the plaintiff therefore failed to prove that they had suffered the gist of an action on the case, loss. There are, it is true, some areas of law where the notion of a right is inextricably intertwined with that of the remedy which vindicates it. However, this is not the case with the Act which locates the entire topic of remedies in Pt VI (‘Enforcement and Remedies’) separate from those other parts, such as Pt IV (‘Restrictive Trade Practices’), which erect prohibitions. I would reject Aurizon’s submission in reply that the forward looking nature of the word ‘would’ in s 50 would permit a curial remedy to be taken into account. Whilst it is true the provision is forward looking, it is nevertheless conceptually anterior to the remedy which flows from the assessment it contemplates.
Lest it be thought that it might be possible to construe the trial judge’s reasons more liberally so that he should be taken to have found a contravention of s 50(1), I do not think this so. The formal order his Honour made was to dismiss the Commission’s proceeding. If he had found a contravention and accepted an undertaking in lieu of granting an injunction, the order would have been that the Commission’s proceeding was otherwise dismissed. Moreover, the trial judge’s use of the word ‘hypothetical’ cannot be accommodated with a view that his Honour found s 50(1) had been contravened.
I also do not accept Pacific National’s submission that the trial judge found that the acquisition would have contravened s 50(1) prior to accepting the undertaking because the reasons were delivered on 15 May 2019 and the orders subsequently made on 6 June 2019. The noting of the undertaking and the dismissal of the proceeding happened at the same time on 6 June 2019.
I would also reject Pacific National’s related submission that the trial judge should be taken to have reached a conclusion about s 50(1) before deciding to accept the undertaking because of the order in which those conclusions sequentially appear in his Honour’s reasons. There are insurmountable objections to considering a judgment to have been assembled in such a sequential fashion. In any event, it is far from clear that the sequence of reasoning is as Pacific National submits.
I do not accept that the limitations inherent in s 80(1) can be outflanked by resort to s 23 of the Federal Court of Australia Act 1976 (Cth) or s 39B(1A) of the Judiciary Act 1903 (Cth). Resort to the former would be contrary to Thomson and the latter is concerned with jurisdiction not power. I do not accept Aurizon’s submission that Thomson in this regard is distinguishable and whilst I accept that s 80 has been amended since Thomson I do not think that those amendments in any way detract from the idea that s 80 is a provision whose focus is on injunctive relief related to contraventions.
I would prefer to express no definitive view on Pacific National’s submission that his Honour could have dismissed the Commission’s application for declaratory relief on condition that Pacific National proffer the undertaking: cf. r 1.33 of the Federal Court of Australia Rules 2011 (Cth) (‘The Court may make an order subject to any conditions the Court considers appropriate.’). Whether Thomson extends to prevent the making of declarations without a contravention and hence whether the Court has a power to accept an undertaking as a condition imposed on an order that a claim for declaratory relief be dismissed is an interesting question. If Pacific National is correct it would appear to follow that the Court has the power to dismiss a proceeding brought by an applicant on condition that the respondent submit to a condition which need not be tied to any legal wrong. Without expressing a concluded view on the matter, that may be a difficult outcome. However, this is not in fact what his Honour did and it cannot be reconciled with the orders his Honour made noting the undertaking and dismissing the proceeding. No amount of interpretative enterprise can transmute the trial judge’s orders into an order dismissing the Commission’s application for declaratory relief on condition that Pacific National proffer the undertaking.
I therefore accept that the trial judge did not have the power to accept the undertaking under s 80(1). Had the issue arisen, this may have been a rather hollow victory for the Commission for if this Court otherwise agreed with his Honour’s substantive conclusions it would have been a straightforward exercise to reason in a way which avoided this pitfall for the substantive reasons proffered by his Honour. For example, this Court could have said that it found that the acquisition would contravene s 50(1) and that it accepted the undertaking in lieu of granting an injunction restraining the acquisition proceeding. Be that as it may, the Commission’s submission that the trial judge did not have power to accept the undertaking is correct and must be accepted.
I do not accept the Commission’s next point that the Court has no power to accept an undertaking because the existence of the Commission’s power to accept an undertaking administratively under s 87 B implicitly excludes it. Here the contention was that any decision by the Commission to reject an undertaking would be judicially reviewable in this Court but the scope of that review would not extend to a consideration of the merits of the decision. It was anomalous that in subsequent litigation brought under s 50(1) the Court would have an unfettered ability to accept or reject the undertaking on its merits. The fact that accepting an undertaking was a function which had been reposed in the Commission under s 87B therefore suggested that the Court did not have such a power. This submission was buttressed by reference to other examples in the Act where the Commission is given the power in the context of access regimes to accept undertakings such as Division 6 Subdivision A of Pt IIIA and Division 5 Subdivision B of Pt XIC.
The problem with this argument is that it must also entail that the Court has no power under s 80(1) to grant an injunction in the same terms as the putative undertaking rejected by the Commission. Any statutory prohibition on the Court accepting an undertaking would be pointless if the Court could grant such an injunction.
In response to that problem, the Commission submitted that the Court was limited in a case under s 50(1) (which could it noted only be brought by the Commission) in the remedies it could grant under s 80(1) to the relief sought by the Commission. Since the Commission had not sought an injunction in the terms of the undertaking it followed that the Court had no power to accept the undertaking.
I do not think that this is a plausible construction of the Act. In particular, if correct it would mean that the sole determinant of a remedy under the Act in litigation brought under s 50(1) would be the Commission and that the Court would be bound, on the finding of a contravention, only to do what the Commission thought should be done. It would need very plain words indeed to bring about such an outcome which I do not think can be found in the language of ss 50, 80 or 87B. The highest it can be put seems to me that by s 80(1A) only the Commission may seek an injunction to restrain a contravention of s 50(1) but this does not rise nearly high enough.
In that circumstance, it is not necessary to address Pacific National’s response that such an operation for s 87B would result in a usurpation of judicial power although my initial impression of the submission is that it may be correct: cf. Chu Kheng Lim v Minister for Immigration [1992] HCA 64; 176 CLR 1 at 27 at 36-37.
I do not accept therefore that the Court’s power to accept an undertaking in lieu of an injunction is constrained by the existence of a power in the Commission to accept an undertaking under s 87B.
I also do not accept the Commission’s submission that the only injunction that can be granted under s 80(1) is one which directly restrains the contravention, which in this case would be an order restraining the acquisition from proceeding. The language of s 80(1) is that the Court may grant ‘an injunction in such terms as the Court determines to be appropriate’ and this is too broad to sustain such a limitation. This is particularly so where s 80(1) formerly provided that the Court had the power to ‘grant an injunction restraining a person from engaging in conduct that constitutes or would constitute….a contravention of a provision of this Part’ and that it was amended to its current form after the Commission’s present submission about those words was accepted in Thomson.
I reject the Commission’s allied contention that the undertaking accepted by the trial judge involved the Court in the exercise of non-judicial power. Whilst it might be accepted, as the Commission submitted, that the framing of competition policy would involve a consideration of matters alien to the exercise of judicial power, the acceptance by the trial judge of the undertaking involved no such consideration. His Honour undertook a detailed analysis of the undertaking and was satisfied that its terms were appropriately adapted to prevent Pacific National from contravening s 50(1). No question of the formulation of competition policy arose and the premise for the Commission’s constitutional argument is not established. Nor do I accept that the undertaking created new rights and obligations in the sense that expression is used in discourse concerned with the exercise of judicial power. It was the fashioning of relief by the application of a legal norm, s 50(1), to facts found.
I would have accepted the Commission’s final point, however, which was that even if his Honour had the power to accept the undertaking, he should not have accepted it in the exercise of his discretion under s 80(1). The trial judge examined the undertaking in great detail and dealt with each of the Commission’s objections to it. A principal feature of the undertaking was the putting in place of procedures to permit decisions made by Pacific National to be reviewed by independent persons. The trial judge accepted that these provided some assurance that Pacific National would not be able to use the terminal to advance its own interests. Pacific National submitted that the undertaking was readily enforceable because it could be compelled to obey these determinations. However, I think his Honour erred in his treatment of this topic by erroneously overrating the effectiveness of the use of civil contempt proceedings to enforce the undertaking’s terms and in assuming that the undertaking might not be sabotaged by less direct means. Many of the obligations cast upon Pacific National in the undertaking are open textured in nature, such as obligations to use ‘reasonable endeavours’ and ‘best endeavours’ or to do ‘everything reasonably within its power’ and those standards are applied in a milieu in which Pacific National has possession of all of the documents relating to its compliance with the undertaking. I think it most unlikely that a conviction could be achieved for contravention of such obligations when any charge must be proved beyond reasonable doubt. Vaguely worded orders are difficult to enforce by means of civil contempt and it is established that contempt proceedings are inappropriate for the determination of questions such as the construction of an injunction or the aptness of the language in which it is framed: ICI Australia Operations v Trade Practices Commission (1992) 38 FCR 248 at 259 per Lockhart J. I do not accept that any efforts to ensure that Pacific National did not undermine the undertaking could realistically have been secured by an action for contempt. The trial judge erred in thinking otherwise.
In that circumstance, I would have concluded that the trial judge’s exercise of the discretion miscarried within the first limb of House v The King [1936] HCA 40; 55 CLR 499 at 505.
I would add to this some observations about behavioural undertakings. A profit maximising firm has strong incentives to locate and exploit any weaknesses it can discern in the text or practical operation of a behavioural undertaking. The question for the Court in assessing whether to accept such an undertaking will be whether it can be confident that the firm in question will fail to locate these weaknesses, despite its incentives to do so. It is a mistake in approaching that question to think that the only difficulties are those which the Commission has been able to formulate in the course of a hearing. The real problem lies not in those difficulties which are brought to light during the trial but rather in those which have not been foreseen by anyone and which become apparent only much later.
It will be rare indeed for a Court to be confident about this aspect of the problem. For if the detection of such unknowns is difficult for those skilled in commerce, it is much more the so for judicial officers who are not experts in commerce. There is a real difference between grasping precisely what a contract legally requires and how it may operate in practice and it is necessary, therefore, to keep in mind that expertise in the former does not imply expertise in the latter. In my view, undertakings of the present kind need to be approached with the greatest caution and with a weather-eye on the limitations of the legal imagination. I would not go quite so far as to say that such an undertaking must never be accepted for who can confidently foresee the course of all future cases? Nevertheless, the occasions on which such an undertaking might be appropriate will, in my opinion, be exceptional.
Had the question arisen, therefore, I would not have accepted the undertaking and the appropriate order would have been to grant the Commission an injunction restraining the acquisition from proceeding.
RELIEF
The trial judge’s reasoning led him to accept the proffered undertaking, to conclude in light of it that there was no apprehended contravention of s 50(1) and therefore to dismiss the Commission’s proceeding in its entirety. I too would conclude that there was no apprehended contravention of s 50(1) but for different reasons to the trial judge. In that circumstance, and perhaps curiously, his Honour’s order dismissing the Commission’s proceeding should remain in place. The only orders I would make therefore are that the appeal be dismissed, that the cross-appeals be allowed and that Pacific National be released from its undertaking. The parties should bring in short minutes of order giving effect to these conclusions and dealing with the costs of the appeal, the cross-appeals and the trial. If costs cannot be agreed there should be a further hearing on the papers to resolve that issue.

I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.
Associate:
Dated: 6 May 2020

SCHEDULE OF PARTIES

VID 695 of 2019

Respondents

Second Respondent:

HV RAIL PTY LTD (ABN 26 615 302 111)

Third Respondent:

QUEENSLAND LH CO PTY LTD (ACN 620 979 768)

Fourth Respondent:

QUEENSLAND PUD CO PTY LTD (ACN 620 981 606)

Fifth Respondent:

AURIZON HOLDINGS LIMITED (ACN 146 335 622)

Sixth Respondent:

AURIZON OPERATIONS LTD (ACN 124 649 967)

Seventh Respondent:

AURIZON TERMINAL PTY LTD (ACN 145 991 555)

Eighth Respondent:

AURIZON PROPERTY PTY LTD (ACN 145 991 724)

Cross-Appellants

Second Cross-Appellant:

HV RAIL PTY LTD (ABN 26 615 302 111)

Third Cross-Appellant:

QUEENSLAND LH CO PTY LTD (ACN 620 979 768)

Fourth Cross-Appellant:

QUEENSLAND PUD CO PTY LTD (ACN 620 981 606)

Fifth Cross-Appellant:

AURIZON HOLDINGS LIMITED (ACN 146 335 622)

Sixth Cross-Appellant:

AURIZON OPERATIONS LTD (ACN 124 649 967)

Seventh Cross-Appellant:

AURIZON TERMINAL PTY LTD (ACN 145 991 555)

Eighth Cross-Appellant:

AURIZON PROPERTY PTY LTD (ACN 145 991 724)

Appeal from:	Australian Competition and Consumer Commission v Pacific National Pty Limited (No 2) [2019] FCA 669 Australian Competition and Consumer Commission v Pacific National Pty Ltd (No 3) [2019] FCA 866
File number(s):	VID 695 of 2019
Judge(s):	MIDDLETON, PERRAM AND O'BRYAN JJ
Date of judgment:	6 May 2020
Catchwords:	COMPETITION – proposed acquisition of the Acacia Ridge Terminal in Brisbane – alleged contravention of s 50 of the Competition and Consumer Act 2010 (Cth) – market definition – economic tests for defining a price discrimination market – whether conduct likely to have the effect of substantially lessening competition in a market – meaning of “likely” – standard of proof to be applied to predictions about future facts and circumstances – vertical merger – ability and incentive to engage in price discrimination – whether raising barriers to entry sufficient to establish a substantial lessening of competition – likelihood of new entry – new entry a mere possibility UNDERTAKING – whether undertaking to the Court proffered by acquirer should be accepted – whether Court has power to accept the undertaking – whether power arises under the Federal Court of Australia Act 1976 (Cth) or only under s 80 of the Competition and Consumer Act 2010 (Cth) – whether acceptance of the undertaking would infringe Chapter III of the Constitution by attempting to confer a non-judicial power on the Federal Court – where undertaking is outside of the relief sought by the Australian Competition and Consumer Commission – whether undertaking is sufficiently certain as to be enforceable – whether primary judge erred in fact or principle in accepting undertaking
Legislation:	Competition and Consumer Act 2010 (Cth) ss 2, 4E, 4G, 45AD, 45D, 45DA, 45DB, 46, 47, 50, 50A, 52, 80, 87B, 90, 163A Competition and Consumer Amendment (Misuse of Market Power) Act2017 (Cth) Corporations Act 2001 (Cth) Evidence Act 1995 (Cth) Federal Court of Australia Act 1976 (Cth) Judiciary Act 1903 (Cth) Statute Law (Miscellaneous Provisions) Act (No 1) 1983 (Cth) Trade Practices Amendment Act 1977 (Cth) Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth) Federal Court Rules2011
Cases cited:	Air New Zealand Ltd v Australian Competition and Consumer Commission (2017) 262 CLR 207 Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301 Arnotts v Trade Practices Commission (1990) 24 FCR 313 Assistant Minister for Immigration and Board Protection v Splendido [2019] FCAFC 132 Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited (2015) 236 FCR 78 Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154 Australian Competition and Consumer Commission v Cement Australia Pty Ltd (2013) 310 ALR 165 Australian Competition and Consumer Commission v Flight Centre Travel Group Pty Ltd (2016) 261 CLR 203 Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2006] ATPR 42-123 Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297 Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 282 ALR 464 Australian Competition and Consumer Commission v Pacific National Pty Ltd [2018] FCA 1221 Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 Australian Competition and Consumer Commission v Z-Tek Computer (1997) 78 FCR 197 Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 Australian Gas Light Company v Australian Competition and Consumer Commission (No 2) [2003] FCA 1229 Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317 Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 14 SASR 303 BMW Australia Ltd v Brewster (2019) 94 ALJR 51 Boral Besser Masonry Ltd v Australian Competition & Consumer Commission (2003) 215 CLR 374 Boughey v The Queen (1986) 161 CLR 10 Branir v Owston Nominees (No 2) (2001) 117 FCR 424 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238 Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 385 Fisher v Fisher (1986) 161 CLR 438 Foster v ACCC (2006) 149 FCR 135 Fox v Percy (2003) 214 CLR 118 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 House v The King (1936) 55 CLR 499 Iberian Trust Ltd v Founders Trust and Investment Ltd [1932] 2 KB 87 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 In re Tooth & Co Ltd; In re Tooheys Ltd (1979) 39 FLR 1 Jackson v Sterling Industries Ltd (1987) 162 CLR 612 James Hardie Industries NV v Australian Securities and Investments Commission (2010) 274 ALR 85 Jungarrayi v Olney (1992) 34 FCR 496 Kirkpatrick v Kotis (2004) 62 NSWLR 567 Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 Masson v Parsons (2019) 93 ALJR 848 Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council [No 2] (2001) 50 NSWLR 665 Momcilovic v The Queen (2011) 245 CLR 1 Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 Outboard Marine Australia Pty Ltd v Hecar Investments No 6 Pty Ltd (1982) 66 FLR 120 Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379 Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 R v Kirby; Ex parte Boilermakers’ Society of Australia (1956) 94 CLR 254 Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 Rural Press Ltd v ACCC (2003) 216 CLR 53 Sellars v Adelaide Petroleum (1994) 179 CLR 332 Seven Network Limited v News Ltd (2009) 182 FCR 160 State Rail Authority of NSW v Earthline Constructions Pty Ltd (1999) 73 ALJR 306 Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) ATPR 41-752 Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) ATPR 41-783 Tabcorp Holdings Ltd v Victoria (2016) 90 ALJR 376 Thomas v Mowbray (2007) 233 CLR 307 Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 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 Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529 White v Director of Military Prosecutions (2007) 231 CLR 570 Witham v Holloway (1995) 183 CLR 525 WorkPac Pty Ltd v Skene (2018) 264 FCR 536
Date of hearing:	17-20 February 2020
Registry:	Victoria
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Economic Regulator, Competition and Access
Category:	Catchwords
Number of paragraphs:	440
Counsel for the Appellant:	Mr J Gleeson SC with Mr A McClelland QC, Mr C Lenehan SC, Ms C Van Proctor, Mr C Tran and Ms A Muhlebach
Solicitor for the Appellant:	DLA Piper
Counsel for the First to fourth Respondents:	Mr N Hutley SC with Ms R Higgins SC, Mr A Barraclough and Mr B Lim
Solicitor for the First to Fourth Respondents:	Clayton Utz
Counsel for the Fifth to Eighth Respondents:	Mr C Moore SC with Mr D Roche, Mr A d’Arville and Ms D Forrester
Solicitor for the Fifth to Eighth Respondents:	Ashurst

VID 695 of 2019
BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Appellant
AND:	PACIFIC NATIONAL PTY LIMITED (ACN 098 060 550) (and others named in the Schedule) First Respondent
AND BETWEEN:	PACIFIC NATIONAL PTY LIMITED (ACN 098 060 550) (and others named in the Schedule) First Cross-Appellant
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Cross Respondent

JUDGES:	MIDDLETON, PERRAM AND O'BRYAN JJ
DATE OF ORDER:	6 MAY 2020

VID 695 of 2019
Respondents
Second Respondent:	HV RAIL PTY LTD (ABN 26 615 302 111)
Third Respondent:	QUEENSLAND LH CO PTY LTD (ACN 620 979 768)
Fourth Respondent:	QUEENSLAND PUD CO PTY LTD (ACN 620 981 606)
Fifth Respondent:	AURIZON HOLDINGS LIMITED (ACN 146 335 622)
Sixth Respondent:	AURIZON OPERATIONS LTD (ACN 124 649 967)
Seventh Respondent:	AURIZON TERMINAL PTY LTD (ACN 145 991 555)
Eighth Respondent:	AURIZON PROPERTY PTY LTD (ACN 145 991 724)
Cross-Appellants
Second Cross-Appellant:	HV RAIL PTY LTD (ABN 26 615 302 111)
Third Cross-Appellant:	QUEENSLAND LH CO PTY LTD (ACN 620 979 768)
Fourth Cross-Appellant:	QUEENSLAND PUD CO PTY LTD (ACN 620 981 606)
Fifth Cross-Appellant:	AURIZON HOLDINGS LIMITED (ACN 146 335 622)
Sixth Cross-Appellant:	AURIZON OPERATIONS LTD (ACN 124 649 967)
Seventh Cross-Appellant:	AURIZON TERMINAL PTY LTD (ACN 145 991 555)
Eighth Cross-Appellant:	AURIZON PROPERTY PTY LTD (ACN 145 991 724)