Australian Consolidated Press Ltd v Davids Holdings Pty Ltd

NOT FOR GENERAL DISTRIEUTION

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES PTSTRICT REGISTRY I

r;_E_NERAL D I V I S I O N

8.EIWEEN :

AUSTRALIAN CONSOLIDATED PFESC:

L I M I T D

? p o l x s n t

DA-VIJIDS HOLDINGS PTY. LIMITED

D-+cmripnt

C W : FOX J

DATE:

?4 OCTOBER 1986

2 3 OCT I986

OJIJRT OF

REASONS FOR ,JUDGMENT

(EX TEMPORE)

T h i s

i s a n

a p p l i c a t i o n

f o r

i n t e r l o c u t n r o

i n l u n c t i o n s .

ehe

p r i n c i p a l

basis

fo r

wh ich

is 3 . 4 6 of the Trade eractire9 A s

1974.

The

Tatter was

heard on

affidavit e n d e n c e .

w i t h s o w

supplementary

w a l ev idence .

311

producecl

m beh?lf

t h e

I p p l l c s n t .

The

respondent

d i d

nct

file

3 f f i d % v C r

?t-

cross-ex lmme

the w i t n e s s e s

rztlled

f o r the a c o l l c m t .

r-.lie?

d e f i c i e n c i e s

w h i c h

i t

claims

a x i c t

i n

’he

l c o l l r s n t ’ :

evidence.

The applicant is a publisher involved in the advertfsino

business.

The

respondent

f “Davids

Holdinus”

)

distributor/wholesaler. with some retail outlets

of it3 own.

The applicant ha3 spent a considerable sum of

monev.

about SA00.000,

and it3 officers have spent much time. over

period of a year or 30. in preparino a scheme for what is called “Cents-Off Couponinu”. This scheme is described bv Mr McGeoroe.

an executive director of the applicant

as follows:

“The svstem	of Cents-Off Couponina involves the	followlna
steps: -

f a )

the publication and distribution of

a brochure of

coupons . . . . Manufacturers

of products L)av the

publisher for the rioht to have their products

featured in the brochure:

(b)

the brochures are distributed to consumers who take the brochures to retail stores and provide to that store a coupon in respect of a particular product

which thev wish t o purchase. The store then

deducts the discount stated on the coupon from the

price of the aoods:

(c)

the used coupons are forwarded to the publisher of the brochure which on behalf of the manufacturer

refunds to the store the face value

of the coupon

plus a handlinu fee:

Id) the publisher is ultimatelv rewarded for this bv

the manufacturer.

trial run

of the scheme

ha3

been prepared for the

Canberra. Oueanbevan and Yass districts of New South

Wales

start bv publication

of brochures on

27 October 1996.

Section 46(1) provides as follows:-

"46.(1) A corporation that has a substantial

dearee

power in a

market shall not take advantacre of that

Dower for the purpose of

( 8 ) eliminatina

substantially

damaaina

competitor of the corporation

or of a bodv

corporate that is related to the corporation

in that or any other market:

(b)

preventina the entrv of a person into that or any other market: or

(c)

deterrinu or preventina a person from enaaaina

in competitive conduct in that

anv other

market.

For the purposes of s.46. the applicant presses its case

in relation to the Canberra wholesale market. There is no doubt that the respondent participates in that market as a wholesaler

of aroceries. The

brochures deal laraelv with uroceries and are

directed at the retail market.

On the evidence. what has happened in the last month

two i s that officers of the respondent have oot in touch with

some manufacturers and at least one retailer and told them that

if thev participate in the scheme. the resnondent wlll not stock

the

manufacturers'

products.

This

has led

one

manufacturer.

Nanda Macaroni Products Ptv. Limited

("Nanda") to repudiate its

aareement or arranaement with the applicant for the insertion in

the brochure of an advertisement.

Inducincr a breach of this

acrreement i s Put as a separate

mound of relief. but I have some

doubt at the moment whether such a case is made

out, even on an

4 .

interlocutory basis,

and in any event

it is not clear that anv

relief can or should be aranted at this staoe.

if there has been

a repudiation.

I therefore do not consider this claim further.

It is submitted

on behalf of the respondent that

it is

not shown that. within the meanino of

s.46(1).

the respondent

"has a substantial deuree of power in

a market".

A	startina point for an inquirv into that matter is

normallp

to determine the extent and nature

the relevant

market. For present purposes. it seems to me tc, be a permissible method of proceedinu to look at the Canberra wholesale market.

this belnu the market	to which	the applicant	has directed
attention.

The question

then is whether

the

respondent

has

substantial deuree of power

that market.

I have ruled

inadmissible

broad

statements.

persons

with

menera1

familiarity of the

scene,

concernino

the

percentaue

the

respondent's market. in Canberra. or over

a wider area.

Its

participation

in.

and

control

over

the

market

does

however

appear. laruelv by

way of inference, from the admitted evidence.

There

are.

for

example,

the

repeated

references

the

respondent's

"warehouse". and the (successful) threat made

Nanda. Nanda is

a substantial pasta manufacturer and claims to

have 50% of the Australian pasta market. There i s also a threat made to Kaleen Foodmaster Supermarket

Kaleen.

a Canberra

suburb. The evidence is that one of

the

respondent's

representatives said to

a loint owner of this store "Davids would

not supplv anv stock from manufacturers who participate in the

couponina proaramme to our store or anv

store and we should not

accept the coupons." There was

a similar threat made

to the

manufacturer

a wide

ranue

cleanina

products:

I n A

representative from Davids

Holdincrs has contacted me and informed

me that if

S.C.

Johnson participate in the coupon proaram,

our

products will be delisted. He said that other participants

the coupon aroaram will be treated

the

same wav." There

further evidence to the same effect.

I	am therefore of the view that there is a soundlv

arauable case that the openinu words of s . 4 6 are satisfied.

The

applicant relies upon para

(b) -

"preventina the entrv

oerson into

that

or anv other market". The prevention relied

upon relates

entrp into another market. This

not the

wholesal- urocerv market.

anv other market for the sale of

moods.

It seems plain that the respondent has

interest in

owposina the applicant's Cents-Off couponina scheme. The market

relied on is the advertisina market to which that scheme relates.

It is

the form

of advertising. that is bv use of the

brochures. to

which

the respondent oblects. That method cuts

across the wholesaler-retailer relationship. and that mav be a reason €or the oblection. but whatever underlvinu reason or reasons there map be. the respondent's campaian has the effect.

and is intended to have the effect. of preventinu the applicant from advertisinu bv means of the brochures. The idea is to

arrest

the

applicant's

scheme.

It mav

that

one

then

lookinu at a sub-market in the advertisinu field. but

I belleve

this is covered by the letter and purpose of parauraph

(b).

The respondent itself. as wholesaler, participates In an

advertisinu prouramme (known as "co-operative advertisinu") related to the uoods it sells. This works differentlv from that

proposed bv the applicant. but relates

a l so to the discountinu

retail

prices.

There is evidence

potential

comoetitlon

between

the

applicant's

Cents-Off

Couponinu

scheme

and

co-operative advertisina. Mr McGeorae states in his affidavit of

15 October 1986 (parauraph

9):-

"9.

The Respondent (and other wholesalers and maior retail chains) are also in the business of prnvidinu

advertisinu

services

manufacturers

drocerv

products.

The Respondent places advertisements in the

media which promote particqtlar products which are

special in a particular week. The Respondent is paid for this service bp the manufacturer. This is known as "co-operative advertising". The Applicant's Cents-Off

couponina competes with the co-operative advertisinu

business

conducted

the

Respondent

and

other

wholesalers and retail chains."

In his oral evidence he savs of a conversation with

David, a

principal of the Respondent:

"Mr David advised me at the	time that in his view iust
about all the manufacturers	in Australia wnuld support,

the coupon concept. but

said fundamentally he and

other maior retailers were suainst

it and he said the

main reasnn

whv

thev were auainst

it was because we

would

be competlna with his companv and other malor

7 .

retailers for co-operati-Je Xdvertislnu

dollars.”

It 1 s common mound that covsidcr:?lon

?f	the h s l s r r s

rnnvenience distinctlv favours the

Xoplicmt. I will -i.:e ’:? ??.e

aarties an owportunitv to conslder

+he form of

r e l i e f . ~ v t

the

mtter L?

stood over lmtil next Mondav.

3t 9.30 3.m.

fr)r that

mat te r to be dealt with.

. .

REASONS FCIF

JUDGMENT

( E X TEMPQFE)

1 9 a n

a p p l i c a t i o n

f n r

i n t e r l o c u t o r o

m i u n c t l c n s ,

basis €or which

is 9 . 4 6 of

the T.rrade ? r a r l t i r ~ p

I c t

evidence.

The applicant is a publisher involved in

the advertisinu

business.

The

respondent

( “Davids

Holdinus“

) is a

distributor/wholesaler, with some retail outlets

of its own.

The	applicant has spent a considerable sum of monev.

about $800.000.

and its

officers have spent much time. over

Period of a pear or so.

in preparina a scheme for what

is called

“Cents-Off Couponina”. This scheme

is described bv Mr McGeorue.

an executive director of the applicant as follcws:

“The svstem of Cents-Off CouDonina involves the followlnu

the publication and distribution of

a brochure of

coupons

. . . .

Manufacturers

products

Dav

the

publisher for the riuht to have their products

featured in the brochure:

the brochures are distributed to consumers who take

%he brochures to retail stores and provide

to that

store a coupon in respect of

a particular product

which the? wish to

Durchase. The store

then

deducts the discount stated on the coupon from the

price of the aoods:

the used coupons are forwarded

to the publisher of

the brochure which

on behalf of

the manufacturer

refunds to

the store the face value of the couDon

plus a handlinu fee:

the publisher

is ultimatelv rewarded for this bv

the manufacturer

I‘

trial run

Of the

scheme has

been preDared for the

Canberra.

Oueanbevm and Yass districts of New South

Wales to

start bv publication of brochures on 2 7 October 1986.

. .

3 .

Section 46(1) provides as follows:-

"46.(1)

corporation

that

has a substantial

deuree

power in a

market shall not take advantaue

of that

power for the purpose of

fa) eliminatinu QK substantially

damaainu

competitor nf the corporation or of a body corporate that is related to the cnrporatlon in that or any other market:

rb) preventina the entry of

a person into that or

any other market:

a person from enaaaina

competitive conduct in

that or

anv other

market.

For the purposes of s.46. the applicant presses its case

in relatlon to the Canberra wholesale market. There is no doubt that the resoondent participates in that market as a wholesaler of aroceries. The brochures deal laruelv with arocerips and are directed at the retail market.

nn the evidence. what has happened in the last month

two is that officers of the respondent have uot

in touch with

some manufacturers and at least one retailer and told them that

if thev participate in the Tcheme. the

resmndent vi11 n @ t stmk

the

manufacturers'

products.

This has led

one

manufacturer.

Nanda Macaroni Products Ptv. Limited ( "Nanda") to repudiate its sareement or arranaement with %he applicant for the insertim in the brochure of an advertisement. Induclna a breach Qf this aareement I s out as a separate around of relief, but I have some doubt at the moment whether such a case is made gut, even on an

interlocutory basis. and in any event

it is not clear that anv

relief can or should be

wanted at this staue. if there has been

a repudiation.

I therefore do not consider this claim further.

It is

submitted on behalf of the respondent that it is

not shown that

within the meaninu of s.46(1). the respondent

"has a substantial deuree

of power in a market".

Startina point

for an inquiry into that matter

normallv

to determine the extent and nature

the relevant

market.

For Present purposes. it seems to me to be a permlssible

method of

proceedinu to look

at the Canberra wholesale market.

this beina the market	to	which	the applicant	has	directed
3ttcntion.

The question

then is whether

the

respondent

has

substantial dearee

of power in that market.

I have ruled

inadmissible

broad

statements.

persons

with

ffeneral

familiarity of

the

scene.

concerninu the

percentaue

the

respondent's market.

Canberra, or

over a wider area.

Its

participation in. and

control

over

the

market

does

however

appear. laraelv bv

wav of inference. from the admitted evidence.

There are.

for

example.

the

repeated

references

to the

respondent's

"warehouse". and the

(successful) threat made to

Nanda. Nanda is

a substantial pasta manufacturer and claims

have 50% of the Australian pasta market. There I s 4 1 5 0 a threat made to Kaleen Foodmaster Supermarket

. .

in Kaleen. a Cmberrl

suburb.

The evidence I s that one of the

respondent's

representatives said to

a ioint owner of this store "Davlds would

not supplv anv stock from manufacturers

who participate

in the

couponina proaramrne

to our store or anv store and we should not

accept the coupons." There was

a similar threat made

to the

manufacturer

a wide

ranue

cleanina

products:

representative from Davids Holdinas

has contacted me and informed

me that If

S.C. Johnson participate in the coupon proaram,

~ u r

DKOdUCtS will be delisted.

He said that other Participants in

the coupon oroaram will

treated the same

vav.

There is

further evidence to the same effect.

T: am therefore of the

view that there

is a soundlv

armable case that the ooenina words of 5 . 4 6 are satisfled.

The

applicant relies upon para

(b) -

"preventing the entrv

Derson into that

anv other market".

The

prevention relied

upon relates

entry into another market.

This is

not the

wholesa'n grocery market.

9r anv gther market for

the

sale of

qoods .

It seems plain that the respondent has

interest in

ooposina the applicant's Cents-Off couponina scheme.

The market

relied on is the advertisina market

to which that scheme relates.

It is the form of advertisina. that

is by u s e of the

brochures. to

which the respondent obiects.

That method cuts

across the wholesaler-retailer KelatiOnShiD. and that may

be a

reason for the gbiection. but whatever underlving reason or

reasons there mav be. the respondent's campaign has the effect.

m d is

intended to have the effect. of preventina the applicant

from

advertisina bp means of the brochures. The idea is

arrest

the

applicant's

scheme.

It mav

that

one

then

lookinu at a sub-market in the advertisina field. but I believe

this is covered by the letter and purpose of parauraph

(b).

The respondent itself.

as wholesaler. participates in an

advertisinu

prouramme

(known

as "co-operative

advertisinu")

related to the uoods it sells.

This works differentlv from that

proposed by the applicant. but relates

also to the discountinu

retail

prices.

There

,evidence of potential

competition

between

the

applicant's

:Cents-Off

Couponinu

scheme

and

co-operative advertisina. Mr McGeorae states in his affidavit	of
15 October 1986 (DaraUraph 9):-

"9.

The Respondent

(and other wholesalers and maior retail

chains)

are

also

the

business

of providina

advertisina

services

to manufacturers of urocerv

products. The Respondent places advertisements in the

media which promote partirl-lar products which are

swecial in a particular week.

The Respondent is paid

for this service by

tne manufacturer. This

is known E I S

"co-operative advertisinu".

The

Applicant's Cents-Off

couponina

cometes

with the co-operative advertisina

business

conducted

the

Respondent

and

other

wholesalers and retail chains."

In his oral evidence he says of

d conversation with Mr

David. a principal

of the Reswondent:

"Mr David

advised me st the time that

in his view just

about all the manufacturers in

Australia would S U D W K ~

the coupon concewt. but

said fundamentallv he and

Qther malor retailers were aaainst

it and he said the

- main reasdh whv thev were auainst

it was

becauze we

would be comwetina with his company and other

maior

a m of

the view

. f o r

r e a s o n s alrearlv

stated. tha t

oarauraah

( c ) i s

also a p p l i c a b l e .

I n

s a v i n q

t h i s

1 do

n o t rrlex?

evnress 3

c o n c l u d e d

m i n i o n

o n

the meanina

" c a m o e t l t l v e

~?cr?duct"

i n ths t Daraaraph.

There has been

3raumenr. cn the

m a t t e r , ,and

I have

been arepared t o 3sslme that i t

P X ~ T P ~ ~

" r o r n p e t i t i v e "

v i t h

the

responrlent .

[1986] FCA 470

24 Oct 1986