Australian Competition and Consumer Commission v Simsmetal Ltd

[1998] FCA 1435

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	AG 14 of 1998

BETWEEN:

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
APPLICANT

AND:

SIMSMETAL LIMITED
FIRST RESPONDENT

PETER JAKSA
SECOND RESPONDENT

JOHN PHILIP BABISTER
THIRD RESPONDENT

JUDGE:	HEEREY J
DATE:	5 NOVEMBER 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

The applicant seeks leave to deliver a new statement of claim, the respondents having earlier issued a notice of motion seeking to strike out the original statement of claim.  The application today has proceeded in substance as an attack made by counsel for the first and third respondents against parts of the proposed statement of claim. 

The paragraphs attacked have fallen into two groups, first, par 37 which picks up pars 11, 15 and 21, and par 38 which picks up pars 11, 15 and 23, and secondly, par 39 which picks up pars 24, 25, 26 and 28 and par 40 which picks up pars 29, 30, 34 and 36.

Speaking very broadly at the moment, it seems that the paragraphs in the first group allege threats by Simsmetal to another competitor, one Buck, to agree to in effect a market-sharing arrangement in which Simsmetal and Buck would not deal with each other’s existing customers, coupled with a threat that if Buck did not agree, Simsmetal would, “make it very hard for Buck to continue buying steel scrap.” 

The second group of paragraphs allege effectively the putting into effect of that threat by Simsmetal paying more than the market price for scrap from firms which had previously supplied Buck. 

Under s 46 of the Trade Practices Act (Cth) 1974 a corporation that has a substantial degree of the power in a market shall not take advantage of that power for the purpose of, amongst other things, deterring or preventing a person from engaging in competitive conduct in that or any other market.

It is accepted that there has been a sufficient allegation that Simsmetal did have a substantial degree of power in two markets, namely the South Australian scrap market and the South Australian foundry market (as defined).  It also does not seem to be in dispute that there is pleaded the proscribed purpose referred to in s 46(1)(c), namely, deterring or preventing Buck from engaging in competitive conduct in those markets.

The argument turned on whether there has been a sufficient pleading of the necessary element of taking advantage of market power.  It is accepted that there must be a causal connection between the use of market power and the proscribed purpose, see Natwest Australia Bank Ltd v Boral Gerrard Strapping Systems Pty Ltd (1992) 111 ALR 631 at 637.

I am satisfied that the pleading does sufficiently make out the allegation. 

In the way explained by counsel for the applicant, it seems clear that the allegation is not merely that Simsmetal was a substantial firm which could afford to pay a higher than market price to get an advantage in the market, but rather, because it was already in the market and, having the necessary capital equipment, it could act in a way that allegedly amounted to taking advantage of its power in the market.

I therefore uphold the contentions of the applicant.  It will follow that there should be leave to file and serve a statement of claim in the form of the annexure RAA7 to the affidavit of Robert Alan Antich, affirmed 29 September 1998.

There will also be leave to file and serve the amended application, annexure RAA8 to Mr Antich's affidavit.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey

Associate:

Dated:             5 November 1998

Counsel for the Applicant:	Mr C M Scerri QC with Mr P Santamaria
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the first and third Respondents:	Mr J D Elliott
Solicitors for the first and third Respondents	Minter Ellison
Counsel for the second Respondents:	Ms M Lawrence
Solicitors for the second Respondent:	Blake Dawson Waldron
Date of Hearing:	5 November 1998
Date of Judgment:	5 November 1998