Australian Competition and Consumer Commission v Qteq Pty Ltd
[2025] FCA 371
•17 April 2025
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Qteq Pty Ltd [2025] FCA 371
File number: NSD 1060 of 2022 Judgment of: BROMWICH J Date of judgment: 17 April 2025 Catchwords: COMPETITION – alleged attempts to enter into contracts, arrangements or understandings with companies in the coal seam gas industry that would be contraventions of s 44ZZRJ/45AJ of the Competition and Consumer Act 2010 (Cth) – alleged attempts to induce entry into the same contracts, arrangements or understandings – cartel provisions to allocate customers, limit bids and prevent, restrict or limit the supply of services in competition with the first respondent – whether subjects of the attempts were or were likely to be in competition with the first respondent at the relevant times – whether conduct unilateral or amounted to an attempt to arrive at an understanding or induce arrival at an understanding – HELD: five of six attempts alleged by the Australian Competition and Consumer Commission established, with respect to both the first and second respondents
STATUTORY INTERPRETATION – s 45AC of the Competition and Consumer Act 2010 (Cth) – scope of deeming provisions – whether broader definition of “party” in s 45AC applied to attempt or attempt to induce cases
Legislation: Competition and Consumer Act 2010 (Cth) ss 4D (repealed), 4F(1)(a), 44ZZRB (now s 45AB), 44ZZRC (now s 45AC), 44ZZRD (now s 45AD), 44ZZRJ (now 45AJ), 44ZZRP (now s 45AP), 45(5), 45AB, 45AC, 45AD, 45AD, 45AD(1), 45AD(3), 45AD(4), 45AJ, 45AP, 45AR, 45AR(1), 45AR(3), 47, 47(2), 47(4), 47(10), 76(1), 84(1), 84(2), 84(3), 84(4), 88, 93, 155(1)(c), Pt IV, Div 1 of Pt IV, Pt VI
Evidence Act 1995 (Cth) ss 44, 60, 136
Cases cited: Australian Competition and Consumer Commission v Air New Zealand Ltd [2014] FCA 1157; 319 ALR 388
Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2017] FCAFC 152; 254 FCR 311
Australian Competition and Consumer Commission v BlueScope Steel Ltd (No 5) [2022] FCA 1475
Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154; 374 ALR 90
Australian Competition and Consumer Commission v Delta Building Automation Pty Ltd [2023] FCA 880
Australian Competition and Consumer Commission v J Hutchinson Pty Ltd [2015] HCA 10
Australian Competition and Consumer Commission v Olex [2017] FCA 222; ATPR 42-540
Australian Competition and Consumer Commission v Pacific National Pty Ltd [2020] FCAFC 77; 277 FCR 49
Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2002] FCA 824; ATPR 41-877
Commissioner of Taxation v Comber [1986] FCA 92; 10 FCR 88
Doney v The Queen [1990] HCA 51; 171 CLR 207
Ellison v Sandini Pty Ltd [2018] FCAFC 44; 263 FCR 460
Heating Centre Pty Ltd v Trade Practices Commission [1986 FCA 72; 9 FCR 153
Holdsworth v Commissioner of Police (NSW) [2020] NSWSC 228
J Hutchinson Pty Ltd v Australian Competition and Consumer Commission [2024] FCAFC 18; 302 FCR 79
Jenks v Dickinson [1997] STC 853 (Ch D)
Jones v Dunkel [1959] HCA 8; 101 CLR 298
Minister for Immigration and Border Protection v Makasa [2021] HCA 1; 270 CLR 430
Muller v Dalgety & Co Ltd [1909] HCA 67; 9 CLR 693
Newcastle Airport Ltd v Chief Commissioner of State Revenue[2014] NSWSC 1501; 99 ATR 748
News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563
Queensland v Congoo [2015] HCA 17; 256 CLR 239
R v Campbell [2008] NSWCCA 214; 73 NSWLR 272
Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481; 25 FLR 169
Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53
South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; 177 ALR 611
South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; 181 ALR 188
Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 545; 7 FCR 534
Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 99; 76 FLR 455; 47 ALR 719
Visy Paper Pty Ltd v Australian Competition and Consumer Commission [2003] HCA 59; 216 CLR 1
Weissensteiner v The Queen [1993] HCA 65; 178 CLR 217
Wellington Capital Ltd v Australian Securities and Investments Commission [2014] HCA 43; 254 CLR 288
Australian Competition and Consumer Commission, ACCC immunity and cooperation policy for cartel conduct (October 2019)
Smith A, An Inquiry into the Nature and Causes of the Wealth of Nations (2012, Wordsworth Editions)
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Economic Regulator, Competition and Access Number of paragraphs: 642 Date of hearing: 11-15, 18, 26-27 March 2024 Counsel for the Applicant: Mr N P De Young KC, Mr J L Clark, Ms S L Andrews and Ms A Poukchanski Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondents: Mr D Roche SC and Ms W Hall Solicitor for the Respondents: Clayton Utz ORDERS
NSD 1060 of 2022 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: QTEQ PTY LTD (ACN 620 051 167)
First Respondent
SIMON JOHN ASHTON
Second Respondent
ORDER MADE BY:
BROMWICH J
DATE OF ORDER:
17 APRIL 2025
THE COURT ORDERS THAT:
1.The parties confer and by 7 May 2025, or such further time as may be allowed, provide by email to the chambers of Justice Bromwich an agreed draft or competing drafts of:
(a)the terms of the declarations of contravention to be made in accordance with the reasons for judgment;
(b)an order extending the commencement of the time within which any appeal proceeding is required to be filed in this proceeding to the end of the next business day after the judgment on relief is delivered; and
(c)procedural orders for the preparation and hearing of the relief phase of this proceeding, including as to evidence, submissions and a joint list of authorities with pinpoint references.
2.The proceeding be listed for any necessary case management hearing at a time to be fixed in consultation with the parties.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
A. INTRODUCTION
[1]
B. THE ALLEGATIONS
[8]
Overview of the ACCC’s case
[8]
Attempt #1 (Pro-Test 2017 Customer Allocation Understanding: 27 June–October 2017)
[14]
Attempt #2 (Pro-Test 2017 QGC Tender Understanding: 27 October–10 November 2017)
[16]
Attempt #3 (Pro-Test 2019 Market Sharing Understanding: 24 June 2019)
[18]
Attempt #4 (Easternwell 2017 Non-Compete Agreement: 6–17 November 2017)
[20]
Attempt #5 (Easternwell 2018-2019 Non-Compete Agreement: 7 December 2018–11 February 2019)
[22]
Attempt #6 (Firetail Understanding: 19–20 September 2017)
[24]
Timeline overview
[25]
The trial evidence
[27]
C. APPLICABLE LEGAL PRINCIPLES
[31]
Case law
[32]
Conduct
[34]
Intention
[38]
Arrangements and understandings
[43]
Cartel provisions
[46]
Purpose condition
[49]
Competition condition
[51]
Defences and exceptions
[55]
D. THE COAL SEAM GAS INDUSTRY
[57]
Key entities and people
[58]
Qteq
[58]
Pro-Test
[61]
Easternwell
[65]
Firetail
[69]
QGC
[70]
GeoPSI
[72]
Welldog
[75]
Farley Riggs
[78]
Key terms
[80]
E. THE PRO-TEST UNDERSTANDINGS (ATTEMPTS #1, #2 AND #3)
[81]
Introduction
[81]
The pleading issue
[87]
Witness testimony
[106]
Mr Ashton and Mr Meldrum
[107]
Mr Dabrowski
[115]
Motivation for reporting Qteq to the ACCC
[116]
Relationship with Mr Ashton and Qteq
[130]
Alleged inconsistencies in Mr Dabrowski’s account
[133]
Business dealings
[139]
Lack of contemporaneous records
[140]
Conclusion on Mr Dabrowski’s credibility
[141]
Mr McDonald
[142]
Attempt #1: The Pro-Test 2017 Customer Allocation Understanding
[143]
Background
[146]
The QGC tender package release – 23 and 24 October 2017
[146]
Relationship between Pro-Test, Santos and Origin
[161]
Conduct
[162]
Discussions between Mr Ashton and Mr Dabrowski – June to October 2017
[162]
Kingsley’s dinner – 26 October 2017
[165]
Respondents’ further submissions on the alleged conduct
[173]
Conclusion on Attempt #1
[186]
Attempt #2: The Pro-Test 2017 QGC Tender Understanding
[193]
Conduct
[199]
Conversations between Mr Ashton and Mr Dabrowski after the release of the QGC tenders
[199]
Meeting at Qteq’s offices – 2 November 2017
[208]
Qteq provides pricing for GeoPSI to Pro-Test – 10 November 2017
[217]
Consideration
[230]
Mr Dabrowski’s evidence
[230]
Corroborating evidence
[231]
The respondents’ arguments
[233]
Conclusion on Attempt #2
[249]
Attempt #3: The Pro-Test 2019 Market Sharing Understanding
[255]
Conduct
[258]
The Fantauzzo Hotel dinner – 24 June 2019
[258]
Conclusion on Attempt #3
[266]
Competition condition as to completions and DST for Attempts #1, #2 and #3
[272]
Must the ACCC prove that Qteq was in competition with Pro-Test in relation to drill stem testing?
[273]
Was Qteq in competition with Pro-Test in relation to DST services?
[281]
Testimony and statements of Mr Meldrum, Mr Ashton and Mr Dabrowski
[284]
Qteq’s DST work in Mongolia
[288]
Consideration
[290]
Must the ACCC prove that Qteq was in competition with Pro-Test in relation to completions?
[294]
Conclusion on the competition condition
[297]
Qteq and Mr Ashton’s liability for the Pro-Test Attempts
[298]
F. THE EASTERNWELL NON-COMPETE AGREEMENTS (ATTEMPTS #4 AND #5)
[305]
Introduction
[305]
Application of s 45AC to the attempts
[315]
Attempt #4: The Easternwell 2017 Non-Compete Agreement
[325]
The second Easternwell allegation is that, during the period from approximately 6 to 17 November 2017, Qteq, through Messrs Ashton and Meldrum, engaged in an attempt to make, or induce, a contract with Eastern Well No 2 containing cartel provisions. Those cartel provisions would have prevented Eastern Well No 2 and its related bodies corporate from, other than in concert with Qteq, pursuing or performing gauge installation services work for QGC or any other CSG operators. The ACCC also alleges that Mr Ashton attempted to induce Eastern Well No 2 to enter into such an agreement.
Background: The QGC gauge and rig tenders
[326]
Conduct
[329]
Discussions between Easternwell and Qteq begin
[329]
The First Qteq NDA
[343]
The First Qteq NDA is rejected by Easternwell
[346]
Mr Ashton contacts Easternwell about the First Qteq NDA
[349]
Epilogue
[358]
Conclusions on conduct
[360]
The purpose condition
[361]
Plain language of cl 8
[364]
Admissions as to purpose by Messrs Ashton, Meldrum and Morgan
[366]
Additional surrounding evidence
[373]
The respondents’ arguments
[374]
Conclusion on purpose condition
[383]
Competition condition
[384]
Evidence of Qteq’s perception of Easternwell as a competitive threat
[385]
Structure of the QGC tenders
[389]
Cartel provision conclusion
[397]
Exclusive dealing exception
[398]
Conclusion on Attempt #4
[415]
Attempt #5: The Easternwell 2018-2019 Non-Compete Agreement
[417]
Background: Easternwell wins the QGC rig tender and Qteq wins the QGC gauge tender
[420]
Conduct
[424]
The Second Qteq NDA
[424]
The revised Second Qteq NDA
[438]
Epilogue
[451]
Conclusion on conduct
[457]
Purpose condition
[459]
Language of cls 4(B) and 4(e)
[462]
Evidence of Qteq’s perception of Easternwell as a competitive threat
[472]
The respondents’ arguments
[475]
Conclusion
[478]
Competition condition
[479]
Cartel provision conclusion
[480]
Exclusive dealing exception
[481]
Conclusion on Attempt #5
[483]
Qteq and Mr Ashton’s liability for the Easternwell Attempts
[484]
G. ATTEMPT #6: THE FIRETAIL UNDERSTANDING
[490]
Overview
[490]
Conduct issue and purpose condition
[498]
Construction of the 19 September 2017 email chain
[507]
Construction of the 20 September 2017 email chain
[527]
Conclusion on conduct and the purpose condition
[550]
The competition condition
[553]
Framing the debate by reference to the statutory test and the parties’ competing cases
[553]
Incorporation and intentions
[560]
QGC gauge tender
[567]
Firetail’s access to equipment
[574]
The gauges
[592]
Discussions with and quote from GeoPSI
[593]
Discussions with Bridgeport
[602]
Conclusion on access to gauges
[604]
Firetail customer communications
[605]
Financial difficulty
[622]
Qteq’s knowledge of Firetail’s activities
[625]
Conclusion on the competition condition
[638]
Joint Venture
[639]
Conclusion on Attempt #6
[640]
H. TENDENCY EVIDENCE
[640]
I. OVERALL CONCLUSION
[641]
REASONS FOR JUDGMENT
BROMWICH J:
A. INTRODUCTION
This is a civil penalty competition cartel case concerning the supply of goods and services to well operators in the coal seam gas (CSG) industry. The Australian Competition and Consumer Commission (ACCC) alleges that, in the two-year period between 27 June 2017 and June 2019, the first respondent, Qteq Pty Ltd, made six attempts either to enter into, or alternatively to induce a competitor or likely competitor to enter into, contracts, arrangements or understandings (CAUs) containing cartel provisions. This is alleged to have been conducted principally via the second respondent, Mr Simon Ashton, Qteq’s Chief Executive Officer (CEO), and later its Executive Chairman. The conduct and intention of Mr Ewan Meldrum, Qteq’s Chief Operating Officer from September 2017 and CEO from January 2019, and Mr Peter Ramsay, Qteq’s technical sales manager, is also relied upon. Mr Ashton is also alleged to have attempted personally to induce each competitor or likely competitor to enter into each alleged CAU.
The ACCC’s case is brought under s 76(1)(b) and (d) of the Competition and Consumer Act 2010 (Cth) (CCA). They provide, among other things, that this Court may order a person to pay a pecuniary penalty if satisfied that the person has attempted to contravene a provision of Pt IV of the CCA, or has induced or attempted to induce a person to contravene such a provision. Part IV deals with restrictive trade practices, with the numbering of its relevant provisions having changed on 6 November 2017, part way through some of the events the subject of this proceeding. Accordingly, reference will be made to both sets of provision numbering, using the present tense and singular for both, where relevant.
Section 44ZZRJ/45AJ provides that a corporation contravenes that section if it makes a contract or arrangement or arrives at an understanding that contains a cartel provision. Section 44ZZRD(1)/45AD(1) provides that a cartel provision is one that satisfies either the purpose/effect condition set out in subsection (2) or the purpose condition set out in subsection (3) and the competition condition set out in subsection (4). The ACCC mostly relies upon the purpose conditions set out in subparagraph (3)(a)(iii), but also those in subparagraphs (3)(b)(i), (3)(c)(ii) or (v), for which the corresponding competition conditions are paragraphs (4)(c), (h) and (j). Those paragraphs of subs (3) and (4) relied upon are identified in more detail below.
All of the alleged cartel conduct took place in relation to the supply of upstream CSG services and related goods. Upstream oil and gas production concerns the discovery and extraction of CSG. This is described in general terms in the following uncontroversial introductory parts of the further amended concise statement, admitted to by the respondents (original emphasis):
The upstream production of oil and gas involves discovering and extracting raw materials from reservoirs beneath the surface of the earth. It is distinct from downstream production, which involves processing and refining the raw materials into usable oil and gas products for distribution to end customers.
Upstream activities include: exploration; drilling wells; well testing (including through a procedure known as drill stem testing); completions of wells after drilling (which involves securing, stabilising and managing the wells); monitoring and measurement or “data acquisition”, and “workover” or maintenance of wells.
Oil and gas producers acquire equipment and services from third party suppliers for the purposes of upstream activities. Relevantly, they acquire permanent downhole gauges and related services (together, gauge works) for data acquisition purposes. Permanent downhole gauges are instruments installed in wells to monitor and measure pressure, temperature, fluid flows and other information. They can be used to control the extraction of water in the production of coal seam gas (CSG).
CSG, also known as coal bed methane, is a form of natural gas extracted from coal seams underground. CSG is described as an unconventional gas because, unlike other natural gases, which flow through the production well to the surface under high pressure, CSG is trapped in the coal seams underground by water pressure. To release the CSG, water must first be pumped out of the coal seam in a controlled fashion using permanent downhole gauges or alternative technologies to monitor water levels and pump rates.
It is not in dispute that at all times relevant to this proceeding, Qteq was a supplier of gauge works to the operators of CSG wells, thereby providing subsurface fluid monitoring services, including by the use of permanent downhole gauges (PDHGs). However, there is a live dispute between the parties as to whether Qteq also had the capacity to supply drill stem testing (DST) of CSG wells to such operators, so as to be a likely competitor in relation to such services.
The substance of the ACCC’s case is that Qteq, as the incumbent supplier of gauge services to a Shell Plc joint venture business, QGC Pty Ltd, was facing a tender process for the replacement contract for that work. An adverse tender outcome to any marked degree therefore had the potential to affect a major source of Qteq’s revenue. The ACCC alleges that on six occasions spread over the period leading up to, during and following that tender process, Qteq mainly via Mr Ashton attempted, or attempted to induce, the entry into CAUs with competitors or likely competitors containing proposed cartel provisions. The ACCC also alleges that Mr Ashton in his personal capacity attempted to induce the entry into those CAUs. The alleged attempts in general terms are characterised by the ACCC as being aimed to reduce or preclude competition by way of allocating customers (two attempts), structuring the tender bids (one attempt), sharing the market (one attempt) and non-compete agreements (two attempts). Three of those attempts involved a company called Pro-Test Pty Ltd, two of those attempts involved a business called Easternwell and specifically a company within it, Eastern Well Service No 2 Pty Ltd (Eastern Well No 2), and one of those attempts involved a company called Firetail Energy Services Pty Ltd.
For the following reasons, I have concluded:
(a)the three attempt contraventions involving Pro-Test are made out, as alleged by the ACCC, with respect to both Mr Ashton and Qteq;
(b)the two attempt contraventions involving Eastern Well No 2, as alleged by the ACCC, are made out with respect to both Mr Ashton and Qteq, and the respondents’ reliance on the exclusive dealing exception fails;
(c)the attempt contravention involving Firetail is not made out, failing with respect to the competition condition.
B. THE ALLEGATIONS
Overview of the ACCC’s case
The ACCC’s case is that Qteq was the incumbent contractor to QGC for gauge works, that work being the subject of one of the four tenders QGC released on 24 October 2017. Qteq was also a leading supplier of gauge works to the CSG industry. This work accounted for the majority of its revenue. It had also secured an exclusive supply of QGC’s preferred gauges from Geo Pressure Systems International Inc (GeoPSI). Gauges are installed in CSG wells to monitor water levels and to adjust pump rates. The tender for gauge works gave rise to a concern on Qteq’s part and on the part of Mr Ashton, to protect its market position. That much is not disputed. However, what is disputed is the next step.
The ACCC alleges, and the respondents deny, that they had adopted a strategy to neutralise competitive threats posed by the tender process and its outcome by attempting to collude with current or prospective competitors for the supply of gauge works to QGC and other CSG customers, giving rise to the six alleged attempts. The attempts were directed towards three businesses, each of which is discussed further below. It is sufficient to note at this stage that each company operated, or sought to operate, in the CSG industry.
As detailed at some length below, the respondents deny aspects of what is alleged to have taken place and characterise other aspects as benign.
The six alleged attempts by Qteq, via and also by Mr Ashton, are said to have taken place as follows, each of which is designated with the definition used by the ACCC and given an attempt number for the purpose of these reasons:
(a)three attempted proscribed arrangements or understandings with Pro-Test:
(i)between about 27 June and October 2017: Pro-Test 2017 Customer Allocation Understanding (Attempt #1);
(ii)between about 27 October and 10 November 2017: Pro-Test 2017 QGC Tender Understanding (Attempt #2);
(iii)on about 24 June 2019: Pro-Test 2019 Market Sharing Understanding (Attempt #3),
also referred to together as the Pro-Test Attempts;
(b)two attempted proscribed contracts with Eastern Well No 2, an entity within the Easternwell business:
(i)between about 6 and 17 November 2017: Easternwell 2017 Non-Compete Agreement (Attempt #4);
(ii)between about 7 December 2018 and 11 February 2019: Easternwell 2018-2019 Non-Compete Agreement (Attempt #5),
also referred to together as the Easternwell Attempts;
(c)an attempted proscribed arrangement or understanding with Firetail between 19 and 20 September 2017: Firetail Understanding (Attempt #6), also referred to as the Firetail Attempt.
The allegation for each of the six attempts, expressed with a degree of abstraction at this stage of these reasons, is set out below. Each is denied by the respondents in every material respect, as to:
(a)the sufficiency of the evidence relied upon to establish each alleged CAU, including proving the alleged attempt to reach it or induce it;
(b)the alleged cartel provision, denying that the competition condition or the purpose conditions have been satisfied; and
(c)in the case of the Firetail Attempt, denying knowledge of facts essential to render any of the foregoing elements, even if otherwise established, unlawful.
Even if those hurdles could be overcome by the ACCC, the respondents contend that the joint venture exception applies to Attempt #6 (by the conclusion of the hearing, they did not press this defence in relation to Attempts #1-#3), and the exclusive dealing exception applies to Attempts #4 and #5, noting that they bear the onus of establishing these exceptions.
Attempt #1 (Pro-Test 2017 Customer Allocation Understanding: 27 June–October 2017)
The alleged cartel provisions for this attempt are that Pro-Test would not compete for the supply of gauge works to QGC, and Qteq would not compete for the supply of goods or services that Pro-Test supplied to one of its customers, Santos Ltd, alleged to have been advanced by Qteq/Mr Ashton as a quid pro quo. The ACCC’s case is that the attempt to arrive at this understanding (also advanced as an attempt to make an arrangement), or alternatively to induce Pro-Test to do so, arose during the course of discussions between Mr Timothy Dabrowski of Pro-Test and Mr Ashton between about 27 June 2017 and October 2017, and in particular during a dinner on 26 October 2017 at Kingsley’s restaurant in Brisbane.
There is a pleading dispute as to whether the ACCC’s case was sufficiently clearly articulated as involving more than one provision, requiring only one side of the quid pro quo pertaining to each provision to be proven, or whether the ACCC was bound as a matter of procedural fairness to establish all aspects of the pleaded cartel provisions, that is, both as to the purpose condition, and, perhaps more importantly, as to the competition condition.
Attempt #2 (Pro-Test 2017 QGC Tender Understanding: 27 October–10 November 2017)
The alleged cartel provisions are that Pro-Test would structure its bid for the QGC gauge works tender so as to win only about 15% of the work, not trying to win the contract outright using either GeoPSI gauges or any other gauge, and that Qteq would not compete for the supply of goods or services to Santos, again alleged to have been advanced by Qteq/Mr Ashton as a quid pro quo. The ACCC’s case is that the attempt to arrive at this understanding (also advanced as an attempt to make an arrangement), or alternatively to induce Pro-Test to do so, arose during the course of discussions between Mr Dabrowski and Mr Ashton, during the course of one or more discussions between Mr Dabrowski and Mr Meldrum, and through the provision of a pricing list by Mr Ramsay to Pro-Test in the period between about 27 October 2017 and 10 November 2017.
As with Attempt #1, there is a pleading dispute as to whether the ACCC’s case was sufficiently clearly articulated as involving more than one provision, permitting only one side of the quid pro quo to be proven.
Attempt #3 (Pro-Test 2019 Market Sharing Understanding: 24 June 2019)
The alleged cartel provisions are that Pro-Test would not supply gauge works and Qteq would not supply DST or completions work, alleged to have been advanced by Qteq/Mr Ashton as a quid pro quo. The ACCC’s case is that the attempt to arrive at this understanding (also advanced as an attempt to make an arrangement) including these cartel provisions, or alternatively to induce Pro-Test to do so, arose during the course of a dinner between Mr Ewan McDonald of Pro-Test and Mr Ashton on 24 June 2019.
As with Attempts #1 and #2, there is a pleading dispute as to whether the ACCC’s case was sufficiently clearly articulated as involving more than one provision, requiring only one side of the quid pro quo to be proven, or whether the ACCC was bound as a matter of procedural fairness to establish both sides of that quid pro quo.
Attempt #4 (Easternwell 2017 Non-Compete Agreement: 6–17 November 2017)
The alleged cartel provisions are that Eastern Well No 2 and its related companies would not, otherwise than in concert with Qteq, supply gauge installation services to QGC or any other CSG operators, alleged to have been advanced by Qteq or by Mr Ashton on behalf of Qteq as two separate but related cartel provisions. The ACCC’s case is that this attempt to make this contract (pleaded as an agreement as well as a contract, but not as an arrangement or understanding), or alternatively to induce Eastern Well No 2 to do so, arose by way of contract negotiations evidenced by email exchanges and related telephone conversations between Mr Ashton and Mr Kyle Koziol of Easternwell, and internal email exchanges between Mr Ashton and Mr Meldrum, in the period between about 6 to 17 November 2017.
There is also a dispute as to whether s 45AC/44ZZRC, which extends the meaning of party for Div 1 of Pt IV, containing s 45AJ/44ZZRJ and other cartel conduct provisions, can be relied upon in an attempt/attempt to induce case brought under s 76 (which is contained in Pt VI).
Attempt #5 (Easternwell 2018-2019 Non-Compete Agreement: 7 December 2018–11 February 2019)
The alleged cartel provision are that Eastern Well No 2 and its related companies would restrict or limit the supply of gauge installation services to QGC and would not supply gauge installation services to any other persons. The ACCC’s case is that this attempt to make this contract, or alternatively to induce Eastern Well No 2 to do so, arose by way of contract negotiations evidenced by email exchanges and related telephone conversations between Mr Meldrum and Mr Koziol, and internal email exchanges between Mr Ashton and Mr Meldrum, in the period between about 7 December 2018 and 11 February 2019.
As for Attempt #4, there is also a dispute as to whether the extended definition of party in s 45AC/44ZZRC can be relied upon in an attempt/attempt to induce case.
Attempt #6 (Firetail Understanding: 19–20 September 2017)
The alleged cartel provision is that Firetail would not supply gauge works in competition with Qteq. The ACCC’s case is that Attempt #6 was an attempt to arrive at this understanding, or alternatively to induce Firetail to do so, and arose during the course of discussions between Mr Mike Wayne of Firetail and Mr Ashton on or about 20 September 2017, as recorded in subsequent email communications in the context of other documentary evidence. Mr Wayne is not a witness for either side.
Timeline overview
A high-level overview of the relevant events is useful in understanding the sequence and context of the attempts:
Date Event 27 June 2017 Qteq was incorporated by Mr Ashton, who was then and at all relevant times its director and CEO. 19 September 2017 Mr Ashton emailed Mr Wayne of Firetail, including the sentence “[w]e need to talk about FireTail and gauge systems & Fibre systems because I want avoid us being in competition.” This is part of the conduct alleged to give rise to Attempt #6. 20 September 2017 Qteq entered into a memorandum of understanding with GeoPSI to work together exclusively on the QGC gauge tender (see entry dated 24 October 2017 below). 20 September 2017 Mr Ashton and Mr Wayne had a 17-minute-long telephone conversation, which is summarised in an email Mr Ashton sent to Mr Meldrum and Mr Morgan of Qteq. The email ends with the note “I support FT confidentially, we boost them to the position of the second gauge installation company, they get 20% of the QGC work, I take them out?”. This telephone conversation is alleged to be part of the conduct giving rise to Attempt #6. June – October 2017 Between June and October 2017, the ACCC alleges that Mr Ashton had conversations with Mr Dabrowski of Pro-Test where Mr Ashton said that Qteq would not target Pro-Test’s clients if Pro-Test did not pursue the upcoming QGC gauge tender. This is part of the conduct said to give rise to Attempt #1. 23 October 2017 26 QGC released an invitation to tender for workover rigs and associated services for its CSG wells in the Surat Basin (the QGC rig tender). 24 October 2017 QGC released four invitations to tender for the supply of components and services for the Artificial Lift System (ALS) used in its CSG wells in the Surat Basin. The tenders were for:
(a) PDHGs for workovers and initial completions (the QGC gauge tender);
(b) progressive cavity pumps (PCPs);
(c) sucker rods; and
(d) automatic diverter valves (ADVs).
26 October 2017 Mr Ashton and Mr Meldrum attended dinner with Mr Dabrowski and Mr McDonald (both of Pro-Test), and Mr Kim Sadler (of Integrated Oilfield Holdings Pty Ltd), at Kingsley’s restaurant on Eagle Street in Brisbane on 26 October 2017. There, the ACCC alleges that Mr Ashton told Mr Dabrowski that if Pro-Test did not target Qteq’s work for QGC in the QGC gauge tender, then he would not target their client, Santos. This is part of the conduct said to give rise to Attempt #1. November 2017 On the evidence of Mr Dabrowski, he had a series of conversations with Mr Ashton wherein Mr Ashton offered or requested that Pro-Test bid only for the excess scope of work under the QGC tender, and said that he would not come after Pro-Test’s work, especially with Santos, if Pro-Test did not go after and impact Qteq’s work for QGC. According to Mr Dabrowski, Mr Ashton also mentioned that Qteq would throttle the pricing on GeoPSI equipment to Pro-Test, in order to limit the scope of Pro-Test’s bid. This is part of the conduct said to give rise to Attempt #2. ~2 November 2017 On the evidence of Mr Dabrowski, he had a conversation with Mr Meldrum on or around this date, wherein Mr Meldrum outlined the way in which the GeoPSI equipment price throttling would work to limit Pro-Test’s bid for the QGC gauge tender. This is part of the conduct said to give rise to Attempt #2. 2 November 2017 Easternwell sent a request for quotation for Qteq (First Easternwell RFQ). This is part of the context for Attempt #4. 6 November 2017 Mr Diete of Easternwell sent a draft two-way confidentiality and non-disclosure deed (First Easternwell NDA) to Mr Meldrum for signing, to allow discussions to occur in relation to the First Easternwell RFQ. This is part of the context for Attempt #4. 6 November 2017 Mr Meldrum of Qteq sent Mr Diete of Easternwell a draft Mutual Non-Disclosure, Non-Circumvention and Non-Compete Agreement (First Qteq NDA). This is alleged to be part of the conduct giving rise to Attempt #4. 7 November 2017 Mr Diete emailed Mr Meldrum and informs him that Easternwell will not be signing the First Qteq NDA, and asked that Qteq execute the First Easternwell NDA instead. This is part of the context for Attempt #4. 10 November 2017 Mr Ramsay of Qteq sent Mr Dabrowski, copied to Mr Meldrum, a pricing list for the provision of GeoPSI equipment for use in the QGC gauge tender, where prices were given for equipment for the first 200 analogue and 10 digital gauges per year, after which point prices increased by 35%. This is alleged to be part of the conduct giving rise to Attempt #2. 16 November 2017 Mr Ashton had a phone conversation with Mr Koziol in which he said that Qteq would be unable to provide competitive pricing “unless we were in a solid alliance under a clear NDA and working agreement.” This is alleged to be part of the conduct giving rise to Attempt #4. 17 November 2017 Mr Ashton sent Mr Diete a follow up email in which he wrote: “we need to get in place a tight contractual agreement between our companies, where we agree that we are going to create a co-operative alliance model and not seek to compete with each other.” This is alleged to be part of the conduct giving rise to Attempt #4. 20 February 2018 Qteq submitted its bid for the QGC gauge tender. 20 August 2018 Qteq signed a contract with QGC for the supply of PDHGs and gauge installation services, as contemplated by the QGC gauge tender. Around the same time, Pro-Test was designated the secondary back-up gauge contractor, and Eastern Well No 2 was one of two companies awarded work under the QGC rig contract. 31 August 2018 Qteq and GeoPSI entered into a distribution agreement. 29 November 2018 Mr Diete of Easternwell sent Mr Meldrum a confidentiality and non-disclosure deed between Eastern Well No 2 and Qteq (the Second Easternwell NDA) and asked that Mr Meldrum review and return it signed. This is part of the context to Attempt #5. 7 December 2018 Mr Meldrum replied to that email with a redlined confidentiality and disclosure deed containing Qteq’s suggested changes (the Second Qteq NDA). At some point, this was rejected by Easternwell. This is alleged to be part of the conduct giving rise to Attempt #5. 18 January 2019 Mr Diete emailed Mr Meldrum an amended version of the Second Easternwell NDA (the revised Second Easternwell NDA), indicating that it had been updated in line with discussions Mr Meldrum had had with Mr Koziol. This is part of the context for Attempt #5. 24 January 2019 Mr Meldrum emailed Mr Diete and Mr Koziol a revised “NDD”, attaching an amended version of the Second Easternwell NDA (the revised Second Qteq NDA). This is alleged to be part of the conduct giving rise to Attempt #5. 11 February 2019 Mr Meldrum emailed Mr Koziol stating that Qteq would be willing to remove the liquidated damages clause, cl 26(B), from the revised Second Qteq NDA and asked if that would otherwise be acceptable to Easternwell (it is suggested that similar overtures were made at a meeting referenced in that email). This is alleged to be part of the conduct giving rise to Attempt #5. 11 April 2019 Easternwell and Qteq executed a Confidentiality and Non- Disclosure Deed at the request of QGC and Easternwell, in the form of the original Second Easternwell NDA. 16 April 2019 Qteq received a Request for Quotation from Easternwell (the Second Easternwell RFQ) which sought a bid to provide spooler equipment and training of rig staff on 11 rigs. Qteq declined to bid in response to the Second Easternwell RFQ. 24 June 2019 Mr McDonald of Pro-Test and Mr Ashton had dinner together at the Fantauzzo Hotel in Brisbane. It is alleged they discussed that Pro-Test should not target the downhole gauge business because Qteq was not going to target Pro-Test’s completions and DST business. This is alleged to be part of the conduct giving rise to Attempt #3. 19 September 2019 Mr Ruff of QGC informed Mr Meldrum that Pro-Test was training Easternwell rig crews to perform gauge installation services. The trial evidence
In addition to admissions in the respondents’ concise statement in response, and agreed facts, the ACCC’s case for all six alleged attempts relies upon a substantial volume of documentary evidence, mostly in its own case, but also in the respondents’ case, to establish the contraventions. The evidentiary case advanced by the ACCC for the attempt involving Firetail and the two attempts involving Easternwell is entirely documentary. The case for three alleged attempts involving Pro-Test, in additional to documentary evidence, also relies upon evidence of conversations with Mr Ashton deposed to by Mr Dabrowski and by Mr McDonald, as well as their evidence about collateral events and about some of the documents.
The respondents elected not to read either an affidavit affirmed by Mr Ashton or an affidavit affirmed by Mr Meldrum, and accordingly neither did the scheduled cross-examination of either of them take place. The exercise of that forensic right was predictable and even unsurprising. But it is a decision that ended up having adverse consequences.
The case for the respondents relied upon the documentary evidence in the ACCC’s case, additional documentary evidence in their own case, their characterisation of the ACCC’s documentary, affidavit and oral evidence, and the evidence in cross-examination of Mr Dabrowski and Mr McDonald.
Both sides rely upon contextual evidence and arguments in relation to the key direct evidence, framed differently, and upon inferences to be drawn from the direct evidence. The following is a short summary of key aspects of that evidence:
(a)what was said in the course of conversations and other communications in the period from 27 June 2017 to December 2019, including in particular what was said by Mr Ashton to Mr Dabrowski in conversations from June to October 2017 (part of the substance of Attempt #1).
(b)what was said by Mr Ashton to Mr Dabrowski at the dinner at Kingsley’s restaurant in Brisbane on the evening of 26 October 2017, also attended by Mr Meldrum, Mr McDonald and Mr Sadler (part of the substance of Attempt #1);
(c)what was said in the period between about 27 October and 6 November 2017 by Mr Ashton to Mr Dabrowski during the course of discussions (part of the substance of Attempt #3);
(d)what was said by Mr Meldrum at, or at a time around, the meeting at Qteq’s offices on 2 November 2017, also attended by Mr Ramsay, Mr Dabrowski and Mr McDonald (part of the substance of Attempt #2);
(e)what was said by Mr Ashton to Mr McDonald at the dinner the two men attended at the Fantauzzo Hotel in Brisbane on 24 June 2019 (part of the substance of Attempt #3);
(f)the meaning to be attributed to email communications (including attached draft documents) between Mr Ashton to Mr Koziol in the period between about 6 and 17 November 2017, and as recorded in subsequent internal email communications between Mr Ashton and Mr Meldrum (part of the substance of Attempt #4);
(g)the meaning to be attributed to the discussions between Mr Wayne and Mr Ashton on about 20 September 2017 as recorded in an email from Mr Ashton to Mr Wayne that night, in the context of an email exchange between them the previous day, 19 September 2017 (the substance of Attempt #6).
C. APPLICABLE LEGAL PRINCIPLES
It is common ground that the relevant legal principles are derived from case law as to the operation of the above provisions since their inception in 2009, as well as some of the concepts and terms deployed in competition law more generally since the commencement of the Trade Practices Act 1974 (Cth), which became the CCA, and also more recent single judge consideration of the application of those principles.
Case law
It is convenient to list alphabetically by defined name the cases relied upon by the parties on the relevant competition cartel and related principles, to facilitate reference to them immediately below and later in these reasons:
BlueScope (No 5): Australian Competition and Consumer Commission v BlueScope Steel Ltd (No 5) [2022] FCA 1475 (O’Bryan J), noting this decision is the subject of a reserved appeal decision by the Full Court.
Cascade Coal: Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154; 374 ALR 90 (Jagot, Beach and Bromwich JJ).
Delta:Australian Competition and Consumer Commission v Delta Building Automation Pty Ltd [2023] FCA 880 (Bromwich J), noting this decision and the subsequent penalty decision is the subject of a reserved appeal decision.
Egg Corp: Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2017] FCAFC 152; 254 FCR 311 (Besanko, Foster and Yates JJ).
Heating Centre:Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 72; 9 FCR 153 (Lockhart, Wilcox and Pincus JJ).
Hutchinson FCAFC: J Hutchinson Pty Ltd v Australian Competition and Consumer Commission [2024] FCAFC 18; 302 FCR 79 (Wigney, Bromwich and Anderson JJ), upheld on appeal by the High Court.
Hutchinson HCA: Australian Competition and Consumer Commission v J Hutchinson Pty Ltd [2025] HCA 10 (Gageler CJ, Edelman, Steward, Gleeson and Beech-Jones JJ).
News v South Sydney:News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563 (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ).
Olex: Australian Competition and Consumer Commission v Olex [2017] FCA 222; ATPR 42-540 (Beach J).
Pacific National: Australian Competition and Consumer Commission v Pacific National Pty Ltd [2020] FCAFC 77; 277 FCR 49 (Middleton, Perram and O’Bryan JJ).
Parkfield: Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 545; 7 FCR 534 (Bowen CJ, Smithers and Morling JJ).
QCMA: Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481; 25 FLR 169 (Trade Practices Tribunal: Woodward J, Shipton JA and Prof Brunt).
Rural Press: Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53 (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ).
SIP Australia: Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2002] FCA 824; ATPR 41-877 (Goldberg J).
Tubemakers: Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 99; 76 FLR 455; 47 ALR 719 (Toohey J) (both reports are referred to because the subsequent authorities sometimes refer to one of the reports and not the other).
Visy:Visy Paper Pty Ltd v Australian Competition and Consumer Commission [2003] HCA 59; 216 CLR 1 (Gleeson CJ, McHugh, Gummow and Hayne JJ, Kirby J concurring, Callinan J dissenting).
The ACCC has summarised the key relevant principles, without disagreement from the respondents, although they rely upon some additional cases for certain nuances in the application of the principles. The real dispute lies in the application of those principles to the evidence in this case, and ultimately the sufficiency and quality of the evidence having regard to the seriousness of the allegations. The following is drawn from the ACCC’s summary and the cases to which they refer, with some supplementation and adjustment, including by reference to the respondents’ submissions.
Conduct
An attempt to contravene or an attempt to induce a contravention requires proof of both conduct and intention: Egg Corp [92].
The conduct element requires a step towards bringing about the contravention that is immediately connected with the attempted contravention and not merely remotely connected or preparatory to it: Egg Corp [93], citing Tubemakers FLR 472; ALR 737 and Parkfield 538-539. There is no requirement to prove that the conduct had no reasonable purpose other than the commission of the alleged contravention; it is enough that this is found to be the most probable, applying ordinary reasoning in the application of the civil standard of the balance of probabilities: Delta [53]-[64].
To establish an inducement there must be an affirmative or positive act or course of conduct directed to the person who is said to be the object of the inducement: Egg Corp [93] approving SIP Australia [112]. There is no requirement for the inducement to be accompanied by a threat or promise; “mere persuasion” may suffice: Egg Corp [93] approving Heating Centre 164.
The contraventions alleged do not include any actual inducement, but rather an attempt to induce. As O’Bryan J pointed out in BlueScope (No 5) at [144], there may be an attempt to induce even if no commitment was sought, the contrary being potentially too rigid and tending to substitute “commitment” for the legislated word “understanding”. It should be noted that BlueScope (No 5) has been appealed to the Full Court, the appeal has been heard, and the decision has been reserved.
Intention
The intention element requires an intention to bring about the proscribed result, here a CAU containing a cartel provision: Egg Corp [92], approving Tubemakers FLR 472-473, 479; ALR 737, 743. While the ACCC has to prove that the respondents had knowledge of the essential facts that would have rendered the attempted CAU unlawful, it is not necessary to show that they knew it was unlawful: BlueScope (No 5) [99]. The knowledge required to be proven is actual knowledge, but it is not necessary to prove any knowledge that those facts are “capable of characterisation in the language of the statute”: Rural Press [48].
In practice, there is no material difference between the requisite intent attaching to:
(a)the conduct of attempting to contravene described in s 76(1)(b) of the CCA; or
(b)the conduct of inducing, or attempting to induce, a contravention described in s 76(1)(d) of the CCA,
because either way the conduct must be intentionally directed to making the contract or arrangement, or reaching the understanding: BlueScope (No 5) [98].
The intention alleged and proven will suffice even if achieving the proscribed result is not possible: Tubemakers FLR 472; ALR 737. It follows that it is not necessary for the ACCC to prove that the respondents expected or believed that the attempt would be successful, such that a CAU would eventuate: Egg Corp [92] approving Tubemakers FLR 471-472; ALR 736.
The intention of a corporate respondent is to be determined in accordance with common law principles: Tubemakers FLR 476; ALR 740; BlueScope (No 5) [172]. It is sufficient to show that an employee of the corporation having actual or apparent authority to enter into the attempted CAU on the corporation’s behalf held the relevant intention: BlueScope (No 5) [174]. There is no suggestion in this case that Mr Ashton lacked that authority, especially given that he was the CEO or Executive Chairman of Qteq at the relevant times. There is also no suggestion that the intention and conduct of Messrs Meldrum and Ramsay were not attributable to Qteq, acting as its employees in the scope of their actual or apparent authority: s 84(1) and (2), CCA.
For the purposes of both elements of an attempt, it is not necessary for the precise terms of a contemplated arrangement or understanding to have been formulated: Egg Corp [94] citing Parkfield 539. Generally speaking, the more advanced the conduct, the more likely it is that the necessary inference of intention will be drawn: Egg Corp [94]. It is not necessary to establish that the respondents expressly sought a commitment from the relevant counterparty to assume some obligation or to conduct themselves in a particular way: BlueScope (No 5) [144]-[148]; Delta [45], [70], [71].
Arrangements and understandings
The terms “arrangement” and “understanding” are well established in the authorities, with the term “contract” requiring no explanation, especially in this case where the alleged contract in question for each of the Easternwell Attempts was in writing. While the allegations in this case involve attempts, for a contract or arrangement actually to be made, or an understanding actually arrived at, there must be a meeting of minds or consensus between the parties that they will conduct themselves in accordance with the subject matter of the CAU. For a substantive contravention, a mere expectation, as distinct from an assumption of obligation, assurance or undertaking to act in a particular way, is not sufficient: Egg Corp [95]. There must be communication from one to another of a commitment to act, or refrain from acting, in a particular way; at least to that extent, there must be a “meeting of minds” or “consensus”: Hutchinson HCA [20] (Gageler CJ, Gleeson and Beech-Jones JJ); see also Hutchinson FCAFC [49] (Wigney J), [128], [152] (Bromwich and Anderson JJ).
However, with an attempt that point is not reached and therefore there is no requirement that such a meeting of minds or consensus is reached. Accordingly, the dispute tends to turn on how granular the identification of the proposed arrangement or understanding must be to constitute an attempt: Delta [65], [69]-[71], and adopting the statement of principle at [71]:
The relevant test for the conduct element is whether a sufficient step was taken in all the circumstances to take it beyond being merely preparatory. An attempt does not require that the substantive contravention has almost taken place.
The existence of an actual arrangement or understanding can be inferred from circumstantial evidence, including the course of dealings between the parties: BlueScope (No 5) [102(f)], [145]-[146]. Necessarily, such inferential reasoning is also available to prove that sufficient progress beyond the merely preparatory has taken place to constitute an attempt or an attempt to induce.
Cartel provisions
Section 44ZZRD(1)/45AD(1) provides that a cartel provision is one that satisfies either the purpose/effect condition set out in subsection (2) or the purpose condition set out in subsection (3) and the competition condition set out in subsection (4). The ACCC mostly relies upon the purpose conditions set out in subparagraph (3)(a)(iii), but also those in subparagraphs (3)(c)(ii) or (v), to which the corresponding competition conditions are paragraphs (4)(c), (h) and (j).
In Visy [7], a majority of the High Court (Gleeson CJ, McHugh, Gummow and Hayne JJ) considered that the word “provision” was used in Pt IV in a comprehensive sense, rather than any technical sense as the word is used in contract law, inviting:
attention to the content of what has been, or is to be, agreed, arranged or understood, rather than any particular form of expression of that content adopted, or to be adopted, by the parties.
That approach is especially needed for understandings, for which terms will ordinarily not be set out in any formal way in writing, let alone with the precision of a contract. Section 4(1) provides that, in relation to understandings, provision means “any matter forming part of the understanding.”
Purpose condition
The purpose condition relied upon does not need to be the only purpose of the alleged proposed cartel provision, provided it was a substantial purpose: s 4F(1)(a), CCA. Although s 44ZZRD(2)/45AD(2) refers to the purpose of the provision, the relevant purpose is that of the alleged contravener in seeking such a provision: BlueScope (No 5) [110]. Identifying the purpose of a cartel provision requires consideration of the subjective purpose of the parties to the (proposed) understanding, being the end sought to be accomplished, rather than the reason or motive for seeking that end: News v South Sydney [18] (Gleeson CJ); endorsed in Rural Press [66] (Gummow, Hayne and Heydon JJ). The subjective purpose of a provision may be inferred from its manifest effect and other objective considerations: News v South Sydney [18] (Gleeson CJ) and [44] (McHugh J). Where the conduct is part of a wider strategy, the purpose of that strategy can be relevant to determining the purpose of the conduct: Olex [494].
In this case, regard may be had to the evidence supporting the existence of a broader strategy alleged by the ACCC as relevant context when considering the subjective purpose of the provision: Olex [494]; BlueScope (No 5) [111]. That said, this aspect of the inquiry remains focused on the subjective purpose, such that the objective purpose should not be given undue significance, though it may nevertheless inform the subjective assessment required: Olex [494].
Competition condition
In relation to the competition condition, as O’Bryan J pointed out in BlueScope (No 5) at [124], the meaning of the word “competition” is well-established, if difficult to state in short form. His Honour noted that its meaning has not materially altered since the very first decision of the Trade Practices Tribunal, now the Competition Tribunal, in QCMA. It was expressed by the Tribunal using connotation and example to give a measure of content to the description of this dynamic process, rather than any exhaustive definition: see QCMA 511-512. With that conceptual understanding in mind, the competition condition is expressed as being satisfied if the parties are, or are likely to be, or but for the contract, arrangement or understanding, would be or would be likely to be, in competition with each other in relation to, relevantly the supply, or likely supply, of goods or services the subject of the proposed cartel provision: s 44ZZRD(4)/45AD(4) (a), (b), (c), (h), (j).
The essence of actual competition is rivalrous behaviour: Cascade Coal [147]. To be in actual competition, parties must ordinarily be rivals or engage in rivalrous behaviour, or otherwise constrain each other, in respect of the supply or potential supply of the relevant goods or services. While this ultimately occurs in the sphere of a market, no market needs to be identified or delineated to establish actual competition between parties: Olex [489].
With particular relevance to the second limb of the competition condition, the likelihood of parties being in competition with each other is a question of fact. “Likely” does not mean “probable” in this context: Pacific National [243]-[246]. In relation to the supply of goods and services referred to in s 44ZZRD(4)(c)/45AD(4)(c), this includes a possibility that is not remote: s 44ZZRB/45AB. Even if that definition of “likely” only applies, as relevant here, to the actual supply of services or the capacity to supply them, a consistent meaning should be given for the likelihood of competition: BlueScope (No 5) [129]-[130]. Likely competition may be established by showing “a real chance” of competition that is “commercially relevant or meaningful”: Cascade Coal [148]. Put another way, to help avoid “likely” being applied in a way that sets too high or too low a threshold, it can be understood in its legislative and historical context as referring to a “real commercial likelihood”: Pacific National [246].
It is important not to confuse the assessment of actual competition with the assessment of the related concept of likely competition, as the former may be more confined to an assessment of what is already in place, whereas the latter more readily and additionally encompasses predicting the future, including events that may give rise to, for example, the capacity to compete later rather than immediately. The distinction between existing and likely competition, however, does not necessarily involve bright lines, but often questions of timing and degree.
Defences and exceptions
In the Easternwell Attempts, the respondents relied upon the exclusive dealing exception contained in s 45AR(1) of the CCA. The principles applicable to that exception are discussed in relation to both of those attempts below.
For the Firetail Attempt, the respondents relied on the joint venture defence under s 44ZZRP (now s 45AP) of the CCA. That did not arise for consideration because of the findings made that the attempt was not established by reason of the competition condition not being proven.
D. THE COAL SEAM GAS INDUSTRY
By the statement of agreed facts, the parties agreed to the following key background facts about the CSG industry:
Upstream vs downstream production
[8]In the context of the description of Australia’s oil and gas industry in this SOAF:
[8.1]‘Upstream’ activities include exploration drilling and extraction out of oil and gas wells from underground into a processing facility.
[8.2]‘Downstream’ activities refer to the refining and processing of oil and gas into a finished product.
Conventional and unconventional wells
[9]In Australia, there are two types of oil or gas wells: ‘conventional’ wells and ‘unconventional’ wells (such as coal seam gas (CSG) wells).
[10]A ‘conventional’ well is a well with oil or gas that exists underground as, respectively, liquid or gas in reservoirs, where wellbores are drilled into the reservoir to extract the oil or gas.
[11]In CSG wells, the gas is bound within the coal seam and does not exist in gaseous form in a subsurface reservoir.
[12]In CSG wells, the extraction of CSG is preceded by a period in which water is pumped out of the coal seam in a monitored and controlled manner. Pumping out the water causes the coal seams to depressurise and release gas that can then be extracted from the well in gaseous form.
[13]The pumping of water from the coal seam must be performed in a controlled manner. Under-pumping or over-pumping can disrupt production in a CSG well.
[14]Controlled pumping of water in a CSG well is achieved by accurate monitoring of the subsurface water level and the rate at which the pumping of that water occurs at the base of the well, which is typically hundreds of metres underground.
Services provided to CSG well operators
[15]The services provided to CSG well operators include the following upstream activities:
[15.1] exploration;
[15.2] drilling wells;
[15.3]testing of wells (well testing), including through a procedure known as drill stem testing (DST) (see paragraphs 16 to 17 below);
[15.4]securing, stabilising and managing wells (completions) (see paragraph 18 below);
[15.5]subsurface fluid monitoring (see paragraphs 19 to 25 below) which includes the supply of permanent downhole gauges (PDHGs); and related installation and maintenance services for PDHGs; (together, gauge works); and
[15.6]rig workover services or maintenance of wells (see paragraph 26 below).
Drill stem testing
[16]DST is a procedure to determine the productive capacity, pressure, permeability or extent (or a combination of these) of a hydrocarbon reservoir.
[17]DST equipment is used during the first stages of well development and is used to test wells in immature or “greenfield” CSG sites.
Well completions services
[18]Well completions is the process of making a drilled well ready for commercial production of oil or gas. Typically, this involves casing and packing the wellbore and the insertion of tubing through which the gas flows to the surface.
Subsurface fluid monitoring
[19]Downhole fluid levels, or subsurface water levels, are monitored using a downhole monitoring system. At all relevant times, a component of a downhole monitoring system is a downhole pressure sensor, commonly referred to as a PDHG, which is used for subsurface data acquisition.
[20]Subsurface data acquisition involves monitoring and measuring pressure, temperature, fluid flows and other information.
[21] PDHGs are installed in wells to monitor water levels and to adjust pump rates.
[22]PDHGs measure downhole fluid levels by first measuring the water head pressure either just above or just below the PCP pump, then calculating the liquid head above the gauge and extrapolating that figure to a fluid level.
[23] PDHGs may be wired or wireless. Wired PDHGs may be:
[23.1]free-hanging, in that they are attached to a cable that is used to lower the gauge into the well and submerge it below the expected water level so that it can measure the water pressure; or
[23.2] affixed to the tubing or casing of a well.
[24]Wired PDHGs are connected to monitoring instruments on the surface that are used to record measurements obtained by the PDHG.
[25]In addition, the equipment used to pump water out of the CSG production wells includes:
[25.1]progressive cavity pumps (PCPs), which pump water from the base of the well to the surface;
[25.2]sucker rods (with a pump rotor and often a paddle rotor), which are conveyed in the well to sit inside the PCP stator. The rods connect all the way to the surface and are connected to a PCP drivehead, which is used to spin the rods and produce fluids up the tubing from the PCP; and
[25.3]automatic diverter valves (ADVs), which open when the well is shut to divert fine material and prevent its accumulation.
[26]The components of a fluid level monitoring system, including PDHGs, are usually installed and tested when a CSG well is initially completed or subsequently when rig workover services are being supplied. During the lifetime of a CSG well, the well operator may also require the PDHGs to be retrieved and replaced.
Rig workover services
[27]Rig workover services involve the supply of rigs and crews to workover existing wells by pulling and replacing the completion equipment in the wells to either displace solids (clean out the well) or replace a damaged PCP pump or rods. Workover rigs comprise large capital plant and equipment weighing several hundred tonnes, which are positioned over the well. The rigs also include accommodation and catering for the crew.
(Original emphasis.)
Key entities and people
Qteq
The following description of Qteq is drawn from the statement of agreed facts:
On 27 June 2017, Qteq was incorporated by Mr Ashton.
At all relevant times, the eQnomics Group Pty Ltd (TEG) was the majority shareholder and non-trading holding company of Qteq. Mr Ashton controlled TEG.
On 27 July 2017, Qteq entered into a business sales agreement to purchase the business and assets of Welldog from its receiver.
At all relevant times, Qteq supplied gauge works to operators of CSG wells in Australia.
As part of the acquisition by Qteq of Welldog’s assets [see below], Qteq acquired DST equipment. Qteq employed an engineer who was technically trained to perform DST services.
(Original emphasis.)
It is also agreed that Qteq was the incumbent supplier of gauge works to QGC at the time of the QGC gauge tender’s release (24 October 2017).
The following descriptions of key Qteq figures are drawn from a statement of agreed facts and an agreed dramatis personae:
(a)Simon Ashton:
•was a Director of Qteq from 27 June 2017;
•was Qteq’s Chief Executive Officer from 27 June 2017 to January 2019; and
•was Qteq’s Executive Chairman from January 2019.
(b)Ewan Meldrum:
•worked at Welldog as Regional Manager Asia-Pacific until January 2017;
•was the Chief Operating Officer of Qteq from September 2017 until January 2019 reporting to Mr Ashton; and
•was the Chief Executive Officer of Qteq from January 2019.
(c)Quentin Morgan:
was appointed Chief Innovation Officer of Qteq on 1 August 2017, reporting to Mr Ashton until January 2019 where he reported to Mr Meldrum. Sometime in 2019, that role was renamed to Chief Technology Officer.
(d)Peter Ramsay:
was, at all relevant times, Qteq’s Technical Sales Manager.
(e)Gareth Ashton:
was, at all relevant times, Qteq’s General Counsel.
(f)Stuart McCulloch:
was, from February 2018 to 1 April 2020, Qteq’s Chief Business Development Officer.
Pro-Test
Pro-Test Pty Ltd was the subject of two of the alleged attempts by Qteq and Mr Ashton. The following description of the company is agreed between the parties:
Pro-Test was founded in 2009 and is a Queensland-based company that provides products and services to support companies operating in Australia's upstream oil and gas industry.
Pro-Test’s business consists of the following business units:
•well completions services;
•gauge works;
•well testing, including DST and other types of well testing. Pro-Test specialises in open hole well testing; and
•production technology, which Pro-Test started developing in around 2018. Production technology technically forms part of completions services but focuses on jet pumps.
The following descriptions of key individuals at Pro-Test is drawn from a statement of agreed facts and an agreed dramatis personae:
(a)Ewan McDonald:
•co-founded Pro-Test in 2009 with Jason Noud; and
•at all relevant times was, and presently is, an Executive Director of Pro-Test.
(b)Timothy Dabrowski:
•worked as a Business Unit Manager at Welldog between 2012 and 2014;
•was hired by Pro-Test as an Engineering Manager in 2014;
•was promoted to General Manager of Pro-Test, which was a senior manager role in around 2016;
•was an Executive Director of Pro-Test from 2017; and
•was an Alternate Director from 1 February 2018.
(c)Toby Cook:
was, during the relevant period, the Stakeholder Engagement Manager at Pro-Test.
Messrs McDonald and Dabrowski gave evidence in relation to the Pro-Test Attempts. I discuss Mr Dabrowski’s testimony at [115]ff below and Mr McDonald’s at [142]ff below.
In addition to the key individuals listed above, two persons from Integrated Oilfield Holdings Pty Ltd (IOH), a significant shareholder in Pro-Test, bear noting (with the following descriptions agreed by the parties):
(a)Kim Sadler:
was a director of IOH since 14 July 2017.
(b)Daryl Stilwell:
•was the Chairman of IOH from March 2020; and
•a director of IOH from 5 February 2020 to 18 May 2021.
Easternwell
Easternwell was a business, which included a company (Eastern Well No 2) that was the subject of two alleged attempts by Qteq and Mr Ashton. The following description of the business is agreed between the parties:
At all relevant times, Easternwell included:
•Eastern Well Service No 2 Pty Ltd, which was, at all relevant times, a procurement entity for the formerly-named Easternwell business; and
•Eastern Well Group Operations Pty Ltd, which provided drilling and rig workover services to oil and gas well operators.
During the period from at least 1 July 2017 to at least 30 June 2020, Eastern Well Service No 2 Pty Ltd and Eastern Well Group Operations Pty Ltd were related bodies corporate within the meaning of s 4A(5)(c) of the CCA.
In October 2017, Easternwell was the main well drilling contractor and supplier of rig workover services to QGC.
The following descriptions of key Easternwell figures are drawn from a statement of agreed facts and an agreed dramatis personae:
(a)Kyle Koziol:
•was the General Manager of the Easternwell Energy business division between 2017 and 2020; and
•was the General Manager of the Easternwell Minerals business division from the end of 2020.
(b)David Diete:
was the Purchasing Team Leader for Easternwell at all relevant times.
Neither Mr Koziol nor Mr Diete were called to give evidence in the proceedings.
In response to a s 155 notice issued by the ACCC, Eastern Well No 2 also identified Brad McCotter, Easternwell’s Supply Chain Manager, and Simon McPaul, Easternwell’s Rig Operations Support – QGC, as persons who had interactions involving Qteq during the relevant period.
Firetail
Firetail Energy Services Pty Ltd was the subject of one of the alleged attempts by Qteq and Mr Ashton. It is an agreed fact that Firetail was incorporated in November 2016 by Mr Mike Wayne. Mr Wayne was its managing director at all relevant times. He did not give evidence at trial for either side.
QGC
QGC Pty Ltd was a joint venture business operated by Shell Plc. Its release of five invitations to tender for the supply of various components and services for its CSG wells in the Surat Basin is the central context in which the attempts are alleged to have taken place. Those tenders are discussed further at [146]ff below. QGC is not the subject of any of the alleged attempts. At certain points in the evidence QGC is apparently referred to as just Shell.
A dramatis personae agreed between the parties names several key figures at QGC in the relevant period:
(a)Alan Ruff (Wells Operations Manager);
(b)Martin Gallagher (Contracts and Procurement Manager);
(c)Siew Weng Lee (Contracts and Procurement Representative);
(d)Lucy McKee (General Manager, Wells Operations);
(e)Joanna Groves; and
(f)Mike Ward.
GeoPSI
It is agreed between the parties that Geo Pressure Systems International Inc (GeoPSI) is a Canadian-based technology company that manufactures and supplies PDHGs (GeoPSI gauges). Their gauges are particularly relevant to the Pro-Test Attempts.
The parties agree on the following descriptions of GeoPSI’s key figures:
(a)Cedric Doerksen, GeoPSI’s CEO and President; and.
(b)Nick Nazarovs, a sales representative for GeoPSI at all relevant times.
GeoPSI gauges were the dominant gauge in Australian CSG wells at the time of the Pro-Test attempts, and were the gauge that QGC used at the time it released its tender packages. On 20 September 2017, Qteq entered into a memorandum of understanding with GeoPSI that allowed Qteq to be the exclusive distributor of GeoPSI gauges for the QGC gauge tender. On 31 August 2018, Qteq and GeoPSI entered into an additional agreement under which Qteq became the exclusive Australian supplier of GeoPSI gauges.
Welldog
The following description is agreed between the parties:
Until about mid-2017, Welldog Pty Ltd was a company that, amongst other things, supplied gauge works to CSG operators in Australia including QGC (which is a joint venture business operated by Shell Plc), Santos and Origin. Mr Ashton was an investor in Welldog via his shareholding in and directorship of ProX Pty Ltd.
On 20 March 2017, Welldog’s directors appointed external administrators and shortly thereafter ProX appointed receivers and managers to Welldog.
(Original emphasis.)
It is agreed that, on 27 July 2017, Qteq entered into a business sales agreement with Welldog to purchase its business and assets from its receivers, including its DST equipment.
Welldog had provided gauge works services to QGC before it entered into external administration. That contract was novated to Qteq.
Farley Riggs
The parties agree that The Supply Group Pty Ltd (trading as Farley Riggs) is an oilfield equipment supplier, and that Edward Riggs was its Managing Director in the relevant period.
After Firetail’s incorporation, its managing director, Mr Wayne, had told others that Firetail had taken over the existing Farley Riggs equipment and contracts.
Key terms
It is convenient also to reproduce the following alphabetical list of key terms furnished by the ACCC and agreed to by the respondents, containing the abbreviations that will be used in these reasons.
Term Description ADV
(automatic diverter valve)Automatic diverter valves (ADV) which open when a well is shut to divert fine material away from a pump to prevent its accumulation. CSG wells
(coal seam gas wells)In CSG wells, the gas is bound within the coal seam and does not exist in gaseous form in a subsurface reservoir Completions / well completions Completions (or well completions) is the process of making a drilled well ready for commercial production of oil or gas.
Typically, this involves casing and packing the wellbore and the insertion of tubing through which the gas flows to the surface.
Specific completions equipment includes:
valves;
metal lining;
different ways to seal off different areas of the well; and
pipework, etc.Conventional well A ‘conventional’ well is a well with oil or gas that exists underground as, respectively, liquid or gas in reservoirs, where wellbores are drilled into the reservoir to extract the oil or gas. Downhole monitoring system in CSG wells A system which monitors downhole fluid levels or subsurface water levels. One of the components of this system is the gauge that monitors and measures pressure, temperature, fluid flows and other information. Data acquisition services / subsurface data acquisition / subsurface fluid monitoring Data acquisition involves monitoring and measuring pressure, temperature, fluid flows and other information. Tools like gauges are used to take measurements. To provide data acquisition services, companies supply permanent downhole gauges (PDHGs) and related installation and maintenance services for PDHGs (together, gauge works). DAS gauge The DAS gauge was a type of downhole pressure gauge that was developed as an alternative to the GeoPSI cabled 4-20 IECEX pressure gauge but has similar functionality. Downstream activities ‘Downstream’ activities refer to the refining and processing of oil and gas into a finished product. Drill stem testing (DST) Drill stem testing is a subset of well testing and is a complex procedure to determine the productive capacity, pressure, permeability or extent (or a combination of these) of a hydrocarbon reservoir. Drill stem testing equipment Drill stem testing equipment is used during the first stages of well development and is used to test wells in immature or “greenfield” CSG sites.
An example of DST equipment are the World Oil Tools.Extraction of gas from CSG wells In coal seam gas (CSG) wells:
The extraction of CSG is preceded by a period in which water is pumped out of the coal seam in a monitored and controlled manner. Pumping out the water causes the coal seams to depressurise and release gas that can then be extracted from the well in gaseous form.
The pumping of water from the coal seam must be performed in a controlled manner. Under-pumping or over- pumping can disrupt production in a CSG well.
Controlled pumping of water in a CSG well is achieved by accurate monitoring of the subsurface water level and the rate at which the pumping of that water occurs at the base of the well, which is typically hundreds of metres underground.Gauge / downhole gauges / downhole pressure gauges / permanent downhole gauge (PDHG) / analogue gauge Generally, gauges (aka PDHGs):
are installed in CSG wells to monitor water levels and to adjust pump rates;
measure downhole fluid levels by first measuring the water head pressure either just above or just below the PCP pump, then calculating the liquid head above the gauge and extrapolating that figure to a fluid level.
Gauges (aka PDHGs) can be wired or wireless. The gauges (aka PDHGs) the subject of this proceeding are wired. Wired PDHGs may be:
free-hanging, in that they are attached to a cable that is used to lower the gauge into the well and submerge it below the expected water level so that it can measure the water pressure; or
affixed to the tubing or casing of a well.
Wired PDHGs are connected to monitoring instruments on the surface that are used to record measurements obtained by the PDHG.
The GeoPSI gauge is a cabled 4-20 IECEX pressure gauge that has been the standard type of gauge and has been used in most gauge installation work in CSG wells.
There are other types of gauges on the market, including wireless gauges, as well as more high-end and specialised gauges, such as digital gauges, fibre optic gauges, quartz gauges etc.Gauge installation services The components of a fluid level monitoring system, including PDHGs, are usually installed and tested when a CSG well is initially completed or subsequently when rig workover services are being supplied. Gauge maintenance services / gauge retrieval services During the lifetime of a CSG well, the well operator may also require the PDHGs to be retrieved and replaced. Gauge works in CSG wells Gauge works comprises:
supply of permanent downhole gauges; and
related installation and maintenance services for PDHGs.GeoPSI gauges GeoPSI supplies equipment to service providers who use them to provide data acquisition services. The GeoPSI equipment includes:
a cabled 4-20 IECEX pressure gauge that has been the standard type of gauge and has been used in most gauge installation work in CSG wells;
cabled digital pressure and temperature gauge - this takes more accurate readings of pressure and also reads temperature; and
wireless digital pressure and temperature gauge.Jet pumps Jet pumps are a technology that Pro-Test are developing to clean out wells. Production technology Production technology relates to using any form of technology in wells that provide data to optimise production. Progressive cavity pump (PCP) Progressive cavity pumps (PCPs) pump water from the base of the well to the surface. Sucker rod Sucker rods (with a pump rotor and often a paddle rotor) are conveyed in the well to sit inside the progressive cavity pump stator (a tubular housing). The rods connect all the way to the surface and are connected to a PCP drivehead, which is used to spin the rods and produce fluids up the tubing from the PCP. Unconventional well CSG wells are also known as unconventional wells because they use an "unconventional" method of gas extraction, because once the water is extracted from the seam (over many months or even years), the gas is desorbed from the coal seam and can be extracted from the well in gaseous form. Upstream activities ‘Upstream’ activities include exploration drilling and extraction out of oil and gas wells from underground into a processing facility. Well testing Well-testing is a broad term used in the industry and includes a service provider going to a site when a new area is drilled, and using equipment to test the permeability of a well, which refers to how effectively fluid flows underground.
There are different variations of well testing, including:
surface testing with above-ground pipe (surface well testing);
open-hole well testing (which can be referred to as ‘in-flow testing’).
DST is a subset of well testing.Workover rigs Workover rigs comprise large capital plant and equipment weighing several hundred tonnes, which are positioned over the well. The rigs also include accommodation and catering for the crew. Workover rig services / Rig workover services Rig workover services involve the supply of workover rigs and crews to workover existing wells by pulling and replacing the completion equipment in the wells to either displace solids (clean out the well) or replace a damaged PCP pump or rods. Wireless gauge This is a type of gauge that can provide digital pressure and temperature readings. GeoPSI supplied wireless gauges.
Wireless gauges are a recent technology. As at 2017, Qteq considered that technology to be unproven.World Oil Tools World Oil Tools are a type of tool used for DST.
E. THE PRO-TEST UNDERSTANDINGS (ATTEMPTS #1, #2 AND #3)
Introduction
The ACCC alleges that Qteq (primarily through Mr Ashton) made three attempts to arrive at understandings, or enter into arrangements with Pro-Test, containing cartel provisions, and is therefore liable under s 76(1)(b) of the CCA for attempting to contravene s 45AJ. In the alternative, it alleges two corresponding attempts to induce Pro-Test to arrive at those understandings, rendering it liable to for civil penalties under s 76(1)(d) of the CCA. The ACCC also alleges the Mr Ashton, in his own capacity, attempted to induce Pro-Test to arrive at these understandings or enter into these arrangements.
The three sets of contraventions – attempt or attempt to induce – are alleged to have occurred:
(a)during the period from around 27 June to 26 October 2017 (Pro-Test 2017 Customer Allocation Understanding or Attempt #1);
(b)during the period from around 27 October to 10 November 2017 (Pro-Test 2017 QGC Tender Understanding or Attempt #2); and
(c)during 24 June 2019 (Pro-Test 2019 Market Sharing Understanding or Attempt #3),
which are collectively referred to in these reasons as the Pro-Test Attempts.
Pro-Test was a competitor to Qteq in the supply of gauge works in the CSG industry, though its business focused on DST and completions work. The central context for Attempts #1 and #2 was the release of the QGC gauge tender, which was a priority for Qteq to win.
Attempt #1 is alleged to have occurred through a series of conversations between Mr Ashton and Mr Timothy Dabrowksi, an Executive Director of Pro-Test. The substance of the ACCC’s case is that, in those conversations, Mr Ashton proposed for Pro-Test to not bid for the QGC gauge tender at all.
Alleged Attempt #2 immediately followed on from Attempt #1, with Mr Ashton and Qteq appearing to change tactics. The substance of the ACCC’s case is that Mr Ashton had made proposals to Mr Dabrowski that, rather than not bid at all, Pro-Test bid for only about 15% of the scope of work under the QGC gauge tender. This attempt involved a proposal that Qteq provide a tiered pricing for GeoPSI equipment, where a higher price would kick in for products going beyond that limited scope. The conduct and intentions of Mr Meldrum and Mr Ramsay are also relied upon for this attempt.
Attempt #3 is distinct, in time and substance, from Attempts #1 and #2. The substance of the allegation is that Mr Ashton made a proposal to Mr McDonald, the founder and an Executive Director of Pro-Test, that Pro-Test not compete for gauge work, and that Qteq would not compete for DST or completions work.
The pleading issue
Overall, I accept that the evidence establishes that among the gauges that Firetail was able to access through Mr Wayne, to the limited extent that such access was able to be obtained, it was likely to have included gauges suitable for CSG gauge work. However, this conclusion is qualified by the real doubts about any such supply being likely to be obtained in any realistic sense. Overall, the evidence on this aspect does not materially advance the ACCC’s case.
Firetail customer communications
There is then the body evidence as to how Firetail held itself out to potential customers.
On 15 January 2017, Mr Wayne emailed data books on PDHG systems to another Firetail staff member, saying he wanted to be very careful about the message they send to “them”, which I infer to mean customers. Mr Wayne indicated that he would like for conversations to stay high level regarding suppliers, saying they have a number of suppliers, but that he would like to chat to “them” to find out what their requirements are as there is a lot to getting it right with those systems and he wants to give them confidence that Firetail knows what it is doing.
By late January 2017, Firetail had started to reach out to large oil and gas companies to advertise its services and specifically to represent that it had the capabilities to supply gauge works.
On 25 January 2017, Mr Wayne emailed a number of Santos staff and referred to a catch-up with them on the previous day. Mr Wayne said he would wait to hear on the direction Santos would like to go regarding a contract, but in the meantime, Firetail would prepare and send through a proposed contract and amendments, as well as product line brochures to recap their core capabilities. Those core capabilities were:
- Well Testing
- Frac Flow Back, including Frac Trees
- Well Integrity and Wellhead Servicing
- Permanent Downhole Gauges
- Drill Stem Testing
Santos is a large CSG operator in Australia. Mr Wayne had also contacted Santos in mid-July 2017 for the purpose of offering Santos some of Firetail’s product lines. In those communications, Mr Wayne stated that Firetail has a huge range of equipment and expertise and is beginning to supply more services in the CSG industry, including with innovative products specifically for that industry. It is difficult to read those assertions as being anything more than marketing, rather than concrete or reliable evidence as to the true state of affairs.
Mr Wayne also approached Mr Andrew Vigor of Schlumberger NV (SLB). On 14 February 2017, Mr Vigor forwarded to Mr Ashton an email he had received from Mr Wayne informing SLB that he had started Firetail, and attaching a product catalogue. The email from Mr Wayne states that Firetail combined the capability of Farley Riggs and Production Solutions and has been providing equipment rentals to companies like SLB. It also states that Firetail could help out with PDHG Systems. Mr Vigor asks Mr Ashton “just checking that you are aware of this and no funny business is going on?” I interpret that comment as raising questions about what is being communicated by Mr Wayne.
On 21 February 2017, Mr Wayne emailed out a weekly shareholder report. The attachment to that email includes summaries about Firetail, including its customers and staff. Under “Corporate Image” and the subheading “What is our strategy?”, the report states “SWT & DST as normal” as well as “Well Integrity, Flowback & PDHG market share”. PDHGs are also listed under “Product lines” and “Downhole Gauges” appear to be listed as one of Mr Wayne’s primary technical skills in the document.
As already noted above, by March 2017 Mr Wayne was communicating with Bridgeport about Firetail and its asserted capabilities.
On 21 June 2017, Mr Wayne and Mr Pereira of Beach Energy emailed each other about upcoming DST work. Mr Wayne mentioned that Firetail had expanded into PDHG work as well. That seems to overstate what had been achieved by that time – Firetail undoubtedly wanted to expand into PDHG work, but the evidence falls short of establishing that this had been achieved at that time, or indeed at any time subsequently. Mr Wayne attached Firetail’s product catalogue which stated that Firetail had a range of downhole DST tools, experience in CSG, as well as advanced permanent monitoring technology. Again, this needs to be read with caution as the evidence suggests that Firetail’s capabilities and inventory did not necessarily extend to the gauges that were needed to perform this work.
In June 2017, Firetail also contacted Westside Corporation to let them know about their services, which included PDHGs. In response, Westside Corporation told Mr Wayne they would at least put Firetail on their tender list. This evidence requires the same level of caution due to the risk of overstating the actual position.
On 17 July 2017, Mr Wayne emailed Firetail’s product brochure to Mr Reid of Senex Energy and asked to meet, saying that Firetail is “making a push into CSG” and has been providing services all over Australia including Queensland. Once again, this is consistent with the aspirations that Mr Wayne had for Firetail.
On 17 July 2017, Mr Wayne emailed a Mr Mato of BG Group, attaching Firetail’s product catalogue, holding out Firetail’s services as including PDHG systems and permanent downhole fibre optic systems, and stating that Firetail is making a push into CSG. The caution to be taken with this sort of evidence needs to be repeated.
On 15 August 2017, Firetail provided a quote for data acquisition services to Westside Corporation in relation to the provision of downhole gauges, specifically 0-3000 psi downhole memory gauges. Again, caution needs to be taken with this sort of evidence.
On 15 November 2017, Mr Wayne submitted a response to a request for a proposal from Origin Energy in relation to service line capability and wellsite services. Again, this document is high on aspiration, but the evidence standing behind it as to actual capability is sparse for the reasons already identified.
In this period, Firetail had also prepared presentations about its capabilities to Strike Energy and Empire Oil and Gas. This again is aspirational evidence.
In December 2017, Firetail provided its product catalogue to Cal Energy. Mr Wayne lists Firetail’s operations as including the supply of downhole gauges and other downhole equipment. The above cautionary observations apply.
Overall, I conclude that Firetail’s customer communications do little to advance the ACCC’s case on the competition condition.
Financial difficulty
In a Firetail shareholder update provided to Mr Riggs of Farley Riggs and Mr Loades of Firetail on 12 June 2017, Mr Wayne says that “cash is getting tight again with some operations moving further out and some customers on 60 day accounts” and that Firetail needs bigger jobs again to keep in front, and is hoping for an overdraft account shortly. It states that “a number of ongoing rentals are almost keep us above water (sic)” and once some separators go out “we will have a good baseline income stream that will cover most overheads”. Attached to that shareholder update email is a management update slide deck, which attaches a further document, referred to in the management update as a “P&L” (which contains some profit and loss information). That document lists “Qld CSG Market” under the “Market Awareness” heading. The ACCC argues that at most, these documents demonstrate some “cashflow tightness” but they do not establish that Firetail’s financial position would deny it a real chance of providing gauge installation works. The respondents argue that this document shows that Firetail was “on life support financially”.
There is little doubt that Firetail was experiencing serious financial difficulties a little over six months after its incorporation. On its own, the ACCC submission could be accepted. However, it is not evidence to be read on its own or in isolation. It provides context and meaning to the remaining evidence, in particular, the evidence and conclusions reached above about Firetail’s access to equipment. Those conclusions are reinforced by Firetail’s financial position as a matter of objective assessment on the likelihood of Firetail competing with Qteq.
Firetail later went into external administration, and Mr Wayne was eventually hired by Pro-Test. Not much turns on this, except that it provides some basis for comfort as to the assessment of Firetail’s precarious position as reflected in the June 2017 documents referred to above.
Qteq’s knowledge of Firetail’s activities
The respondents’ knowledge of Firetail being a likely competitor is relevant to intention and also to the fact of likely competition, as the views of market participants on whether a company was a likely competitor can be relevant to that fact. The ACCC submits that the respondents had knowledge of the essential facts that would have rendered the Firetail Understanding cartel conduct, being that Firetail was likely to be in competition with Qteq in relation to the supply of gauge works, and Mr Ashton’s statement that he did not want Firetail competing with Qteq on gauge works meant that the respondents knew that the proposed Firetail Understanding contained a provision that had the purpose of preventing Firetail from supplying gauge works. The ACCC submits that Mr Ashton and Qteq viewed Firetail as a likely competitor for the supply of gauge works. The evidence they refer to in support of this position is as follows.
Mr Wayne provided Mr Ashton with a business case for Firetail on 21 November 2016 (pre-Qteq’s incorporation in June 2017), indicating that he wanted to start an oilfield services company which provided services including downhole gauge systems. The four attachments to that email related to Firetail’s financial forecast and an oilfield service company opportunity. Mr Wayne said that things were coming together on the “FR deal” and sought to have a chat with Mr Ashton to get business pointers, gauge his interest in providing capital, as well as to outline the plan to introduce other technologies.
One attachment to that email stated that Mr Wayne wanted to start an oilfield services company providing various services, apparently a reference to Firetail. The document refers to an offer from Farley Riggs to lease all well test, DST and well integrity equipment, under an arrangement where Firetail would lease the equipment but no loans, employee benefits or debts would transfer over. The document also referred to an offer from “Production Solutions” to lease some other equipment, though does not go into comprehensive detail about what that equipment is. The two company development options put forward are to continue offering a similar suite of services as Farley Riggs, or to additionally expand into other areas, including downhole gauge work, potentially internationally.
Mr Ashton was also aware of Mr Wayne’s new business from other industry participants, as on 14 February 2017 Mr Vigor of SLB forwarded Mr Ashton an email he had received from Mr Wayne informing Mr Vigor of the creation of Firetail, referred to above at [610]. That email from Mr Wayne listed PDHG systems among Firetail’s offerings.
On 27 July 2017, Mr Fitz-Henry, then at Welldog, emailed Mr Meldrum to let him know that Mr Wayne had told him that a Mr Ryan Phillips had informed him that “‘the Americans’ from Welldog had been into QGC to try and sell them gauges”. Mr Fitz-Henry added that this is what Welldog had suspected but was not sure it had been confirmed, and that Mr Wayne had been speaking to Mr Phillips about flowback testing, frac trees and possibly fibre optic gauges.
Mr Meldrum then forwarded this email to Mr Ashton stating, “we need to get the GE gauge removed from GSTC’s (Welldog) reach” and “need to discuss with [Mr Wayne] on non compete”. The ACCC submits that this last statement from Mr Meldrum to Mr Ashton should be interpreted as communicating a need to talk to Firetail about not competing on gauge works, noting that this occurred less than two months prior to the Firetail Understanding.
Later that same day, Mr Wayne emailed Mr Ashton that there had been “lots of action for Firetail on the integrated Flowback services and Fibre Optic side of things” and that “a few customers have asked me to provide them with quotes for Permanent Downhole Gauge Systems”. Mr Ashton replied to Mr Wayne stating that they needed to talk about the “fibre issue” as it seemed like an area of potential conflict for the companies and they should find areas of common ground.
Mr Meldrum replied to the email from Mr Ashton to Messrs Meldrum and Morgan on 20 September 2017, which is the relevant conduct, stating “I like your thinking on the last point”. The “last point” refers to Mr Ashton supporting Firetail confidentially, boosting them to the position of the second gauge installation company and enabling them to get 20% of the QGC work, after which Mr Ashton would “take them out”. Mr Morgan replied to Mr Meldrum’s email on 21 September 2017 stating, “what’s the risk that QGC then simply award [Firetail] work elsewhere – they seem determined to want 2 separate gauge service providers.” Each of these emails are reproduced earlier in these reasons at [531] and [506(b)].
On 24 July 2017, Mr Wayne emailed Mr Ashton with the subject line “Fietail Slides” (sic). That email attached a “Capability Presentation” for Strike Energy, with Mr Wayne telling Mr Ashton that the slides would be of interest to him and that he could “slide” in for Qteq. Mr Wayne also told Mr Ashton in this email that he had been keeping in touch with the drilling team and gave them a presentation recently as they were interested in Firetail’s services. The Firetail slide deck attached to that email includes information about the company on a slide titled “who is Firetail?”. The slide deck states that Firetail supplies permanent monitoring systems to the O&G industry. It also states that Mr Wayne has 12 years of experience, and that his areas of expertise include “well testing, permanent downhole gauge systems, frac tree, downhole completions”. Of the four other employees listed on this slide, none of them have “permanent downhole gauge systems” listed as an area of expertise. Another Firetail slide deck lists Mr Wayne’s “roles & responsibilities” as including “Primary technical – Downhole Gauges” and “Well Testing”. As Mr Ashton received this slide deck, he was likely aware that Mr Wayne intended and aspired for Firetail to provide PDHG services.
On 27 July 2017, Mr Wayne emailed Mr Ashton again. This email was referred to above but is repeated for convenience. He stated that there had been “lots of action for Firetail on the integrated Flowback services and Fibre Optic side of things” and that “a few customers have asked me to provide them with quotes for Permanent Downhole Gauge Systems”. Mr Ashton replied “obviously we need to talk about the fibre issue as it seems that is an area of potential conflict for the companies. Let’s find areas of common ground”.
The evidence from Mr Ashton’s s 155 examination establishes that he did not regard Mr Wayne as a scientist, but still saw him as a “very capable” operator who had “good knowledge of downhole gauges” and who might have aspirations to provide gauge services.
Regarding the knowledge of competition, the ACCC also relies upon the emails between Messrs Ashton, Meldrum and Morgan on 20 and 21 September 2017 to show that Mr Ashton was aware that Firetail had sought quotes for the purpose of bidding for the Origin gauge tender after Origin requested Firetail to make a proposal. The ACCC submits that this goes to Mr Ashton’s state of mind regarding the competitive threat of Firetail at that time, evidenced by his email to Messrs Morgan and Meldrum on 21 September 2017 where he states that they should cultivate Firetail and reduce their competitive exposure.
The burden of this evidence supports the conclusion that Mr Ashton was concerned that Firetail might pose a competitive risk to Qteq and was prepared to take steps to reduce the risk of that ever eventuating. Such a precautionary approach falls short of supporting the competition condition.
Conclusion on the competition condition
There is no doubt that Mr Wayne wanted to elevate Firetail into the position of being able to supply gauge services. Nor is there any real doubt that Mr Ashton saw this as being a risk that needed to be addressed. But Mr Ashton’s own words in his 20 September 2017 email end up reflecting the limits of the capacity of the evidence to establish that the point of being a viable competitor had been reached: “I support FT confidentially, we boost them to the position of the second gauge installation company, they get 20% of the QGC work, I take them out?”. Properly considered, the evidence does not rise to the level of establishing that, on the balance of probabilities in relation to the competition condition, Firetail had yet reached the position of being able to be the second gauge installation company. This, coupled with the adverse or insufficient intermediate conclusions set out above, leads to the conclusion that I am unable to be satisfied that that the competition condition has been established.
Joint Venture
As the ACCC has not proven the competition condition, the respondents’ reliance on the joint venture defence under s 44ZZRP (now s 45AP) does not arise for consideration.
Conclusion on Attempt #6
While the conduct element, including as to intention, and the purpose condition, have been established, the competition condition has not. It follows that the ACCC has failed to prove the Firetail Understanding, being Attempt #6.
H. TENDENCY EVIDENCE
For completeness, I should record that the ACCC sought to adduce tendency evidence to the effect that Mr Ashton had a tendency to seek to persuade those that he perceived to be, or likely to be, competitors of Qteq to not compete with Qteq in relation to its supply of downhole gauges and related services. This was advanced as being probative of the allegations in respect of Firetail and Pro-Test. In substance it was an application for the use of evidence already adduced in that way. The application was opposed. I have not found it necessary to determine the application because the Pro-Test Attempts were plainly established without the need to rely upon such reasoning, and the Firetail Attempt failed only on the competition condition.
I. OVERALL CONCLUSION
For the reasons above, I have concluded:
(a)the three attempt contraventions involving Pro-Test (Attempts #1, #2 and #3), as alleged by the ACCC, have been proven with respect to both Mr Ashton and Qteq;
(b)the two attempt contraventions involving Eastern Well No 2 (Attempts #4 and #5), as alleged by the ACCC, have been proven with respect to both Mr Ashton and Qteq, and the respondents’ reliance on the exclusive dealing exception has failed;
(c)the attempt contravention involving Firetail (Attempt #6) has not been proven, because the competition condition has not been established.
Rather than defer making declarations of contravention so that the relief phase can be heard and determined before any time limit for an appeal against liability runs, I propose to make such declarations, but to extend the start time for commencing any appeal proceeding to the end of the next business day after the relief judgment is delivered. The parties are therefore to confer and by 7 May 2025, or such further time as may be allowed, provide by email to my chambers an agreed draft, or competing drafts, of:
(a)the terms of the declarations of contravention to be made in accordance with the reasons for judgment;
(b)an order extending the commencement of the time within which any appeal proceeding is required to be filed in this proceeding to the end of the next business day after a judgment on relief is delivered; and
(c)procedural orders for the preparation and hearing of the relief phase of this proceeding, including as to evidence, submissions and a joint list of authorities with pinpoint references.
I certify that the preceding six hundred and forty-two (642) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromwich. Associate:
Dated: 17 April 2025
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