International Air Transport Assoc and Alitalia Linea Aerea Italiana Spa - [1985] ATPT 1

CATCHWORDS

Trade Practices Tribunal - review of decision of the Commission refusing application for interim authorization of International Air Transport Association rules, regulations and resolutions zelating to air tariffs - power of the Tribunal to grant interim authorizations - effect of a grant of interim authorization by the Tribunal on the Commission's determination - principles governing a grant of interim authorization by the Tribunal.

Trade Practices Act:

ss. 4, 42, 90, 91, 101 and 102.

Air Navisation Resulations: Reg. 106A.

INTERNATIONAL AIR TRANSPORT ASSOCIATION and ALITALIA LINEA AREA

ITALIANA S.P.A.

NSW 5 & 6 of 1984

Lockhart J. President, Professor M. Brunt, Mr.

14 March 1985

Sydney

COMMONWEALTH OF AUSTRALIA

TRADE PRACTICES ACT 1974

IN THE TRADE PRACTICES	RE	:	INTERNATIONAL AIR
TRIBUNAL	TRANSPORT ASSOCIATION

AND:	AEITALIA LINEA A E E A ITALIANA S.P.A.

Applicants

(File Nos. 5 & 6 of 1984)

An application by International

Air Transport Association and Alitalia Linea Aerea Italiana S.P.A. for a review of a determination made by the Trade Practices Commission dated 31 October 1984 (Commission file

No.

A341 85)

ORDERS

Lockhart J., President, Professor M. Brunt, Mr. L.W. Johnson

14 March 1985

The Tribunal grants interim authorization, pending the making

of a determination by it on its review of the determination by the

L/ Trade Practices Commission dated 31 October 1984 or further order, to

the rules, regulations, agreements, resolutions and arrangements of IATA excepted from the Commission's final authorization granted on 31 October 1984.

COMMONWEALTH OF AUSTRALIA

TRADE PRACTICES ACT 1974

IN THE TRADE PRACTICES	RE	:	INTERNATIONAL AIR
TRIBUNAL	TRANSPORT ASSOCIATION

AND :	ALITALIA LINEA AEREA ITALIANA	- - .
S.P.A.

Applicants

(File Nos. 5 & 6 of 1984)

RE:	An application by International Air Transport Association and Alitalia Linea Aerea Italiana S.P.A. for a review of a determination made by the Trade Practices Commission dated 31 October 1984 (Commission file No. A34/85)

TRADE PRACTICES TRIBUNAL

Lockhart J., President, Professor M. Brunt, Mr. L.W. Johnson

14 March 1985

REASONS FOR DECISION

International Air Transport Association (IATA) seeks interim authorization of certain arrangements for which it unsuccessfully sought authorization from the Trade Practices Commission ("the Commission"). Interim authorization is sought pending the determination of IATA's application to the Tribunal to review the Commission's determination dated 31 October 1984.

The authorization which IATA sought from the Commission

related to certain rules, regulations, agreements and resolutions of

IATA insofar as they apply to the activities of international airlines operating in Australia. The Commission granted interim authorization to the arrangements from 1975 (when IATA's initial application for authorization was lodged) until 31 October 1984. On that day the Commission granted final authorization to some of the arrangements, but not to others which were directed primarily to the enforcement of IATA tariffs. The Commission also declined to continue its interim authorization relating to the tariff arrangements beyond 31 October

1984. The Tribunal shall, for convenience, refer to the rules, regulations, agreements and resolutions of IATA excepted from the Commission's final authorization as "the IATA arrangements". Whilst the scope of the IATA arrangements is not, as will appear, free from ambiguity, they refer to provisions encouraging or enforcing final or minimum fares or to restraints upon advertising actual fares.

On 20 November 1984 IATA lodged an application with the Tribunal to review the Commission's determination not to grant authorization to the IATA arrangements.

When this matter first came before the Tribunal for directions (30 November 1984) IATA sought interim authorization to the IATA arrangements, but the Tribunal refused the application at that stage essentially because of the paucity of any material of probative value.

Subsequently IATA informed the Tribunal that it wished to

renew its application for interim authorization. Directions were

.	given by the Tribunal from time to time thereafter; and the application for interim authorization came before the Tribunal for hearing commencing on Tuesday 5 March 1985 and concluding on Friday 8 March.

IATA and the Commission were represented by counsel before the Tribunal. In addition, leave was given by the Tribunal to four interested bodies to intervene namely, the Australian Federation of Travel Agents Limited, the Australian Federation of Consumer

L d

Organisations, the Australian Consumers Association and Qantas Airways

Limited.

The evidence before the Tribunal consisted of affidavits, a statutory declaration, extensive documentary material and some oral evidence, in particular from Mr. R.D. Gill, an Assistant Director of IATA.

Certain questions of law fall to be dealt with by the

L/ President pursuant to s. 42 of the Trade Practices Act 1974 ("the

Act").

Counsel for the Commission submitted that the Tribunal had no power to grant interim authorizations.

The Tribunal's jurisdiction to review a determination of the

Commission is conferred by s. 101 of the Trade Practices Act 1974

("the Act") and a review by the Tribunal is a re-hearing of the

matter: sub-s. 101(2). There can be no review by the Tribunal without the determination of the Commission; but the word "review" is somewhat inappropriate because it is not the task of the Tribunal to determine whether the Commission erred or not on the material before it. The Tribunal must consider the matter afresh, make its own conclusions on fact and law and determine for itself whether authorization should be granted: Re Oueensland Co-Operative Millins Association Limited (1976) A.T.P.R. 40-012; Re Herald and Reeklv Times Limited (1978)

A.T.P.R. 40-058; Re Rural Traders Co-Operative (W.A.) Limited (1979) A.T.P.R. 40-110; Re The Master Locksmiths' Association of Australia (1980) A.T.P.R. 40-176; and Re Mortsase Guarantv Insurance

Corporation of Australia Limited (1984)

A.T.P.R. 40-494.

Section 102 of the Act deals with the functions and powers of the Tribunal in these terms, so far as relevant:-

"102(1) Upon a review of a determination of the Commission in relation to an application for an authorization, the Tribunal may make

a determination affirming, setting aside or

varying the determination of the Commission and, for the purposes of the review, may perform all the functions and exercise all the powers of the Commission.

affirming, setting aside or varying a	*( 2 )* A determination by the Tribunal
determination of the Commission in relation to an application for an authorization shall, for the purposes of this Act, other than this Part, be deemed to be a determination by the Commission."

It is necessary therefore to examine the Commission's functions and powers in relation to an application for authorization to determine the nature and extent of the Tribunal's own powers. It is, of course, not uncommon to find the powers of a statutory body conferred in general terms upon it in one part of the relevant statute by reference to the powers of another statutory body conferred upon it in another part of the statute. However, care must be taken in those circumstances because it not infrequently happens that the powers of

t the other body are conferred by sections which cover matters

additional to those intended to be conferred upon the first mentioned body. Tribunals and Courts are required therefore to adopt a sensible and practical approach when determining the content and scope of the powers conferred on the first mentioned body by reference bacd to the powers of the other body.

The functions and powers of the Tribunal upon a review of the

determination of the Commission in relation to an application for an

1 authorization include the powers conferred upon the Commission by

Division 1 of Part VII of the Act, but only in so far as they are appropriate for the Tribunal's task of reviewing that determination of the Commission. The Tribunal has, therefore, power to grant an authorization which may be expressed to be an interim authorization:

It is common practice to speak of such an authorization as an "interim duthorization"; but, convenient though that expression is, it must be remembered that it is not different in kind from other

.	authorizations. Section 91 does not speak of it as an "interim

authorization" as though it is a class or category of authorization different from another. It refers to it as "an authorization granted

in respect of the application ... expressed to be an interim authorization ..." : sub-s. 91(2). It therefore falls squarely within the definition of authorization in s. 4, namely, "an authorization

under Division 1 of Part VII granted by the Commission or by the

Tribunal on a review of a determination of the Commission".

In exercising its powers of review the Tribunal is bound by

the same restrictions as bind the Commission relating to matters of

public interest and referred to in sub-ss. 90(6), (71, (8) and (9).

The application of these restrictions to the Tribunal is the work of sub-s. 101(2). But the absence of an express reference in sub-s. 101(2) to s. 91 does not support the argument that the Tribunal is bereft of the power to grant interim authorizations under s. 91. Sub-s. 101(2) ensures that the restraints upon the exercise of the Commission's power to grant authorizations imposed by sub-ss. 90(6),

( 7 ) , (8) and (9) are imposed also upon the Tribunal. Sub-s. 10112)

does not confer power upon the Tribunal; it imposes a fetter or

qualification upon its exercise.

Section 91 is a source of the Tribunal's power to grant interim authorization pending its final determination or for any reason; but not all of the powers conferred upon the Commission by s. 91 apply to the Tribunal. For example, the Commission has power to grant interim authorization if it considers It appropriate to do so

pending the expiration of the time allowed for the making of an application to the Tribunal for a review of the Commission's determination and, if such an application for review is made, pending the making of a determination by the Tribunal on the review: para. 91(2)(b). The Tribunal could not exercise its power to grant interim authorization in those circumstances because its jurisdiction is not enlivened until application is made to it for a review of the Commission's determination.

The power to make an interim authorization is essential to the proper and efficient working of the Tribunal. There are many circumstances which may arise, and indeed have arisen, as can be seen by reference to reported decisions of the Tribunal, demonstrating the necessity for this power. The Tribunal will give but one example. The Commission may grant interim authorization for certain conduct pending its examination of the matter and finally refuse authorization, but continue the interim authorization until a specific period so that the applicant may apply to the Tribunal for a review of

the determination refusing authorization.

In the present case, for

example, on 31 October 1984 the Commission could, if it had wished, have both refused authorization to the IATA arrangements and continued the interim authorization until, say, 28 February 1985. As the parties will not be ready to proceed to a final hearing of the matter until about August this year it would be extraordinary if the Tribunal could not grant the interim authorization from 1 March to the making of its determination or some other suitable date.

The Tribunal rejects the submissions of counsel for the Colnmission that the Tribunal has no power to grant an interim authorization. The power is conferred in express terms by the Act, though by reference back to the Commission's powers. The Tribunal need not stay to consider whether this power vests in the Tribunal from some other source, for example, any inherent power of the Tribunal to control its own functions, practice and procedure.

It is necessary to consider the principles upon which this application for interim authorization falls to be determined. It was submitted by counsel for IATA that, to a degree, the principles which govern the grant of interlocutory injunctions apply to applications for interim authorization. There are certain elements in common between the two types of application. If the Tribunal considers it appropriate to grant interim authorization for the purpose of enabling due consideration to be given to the application for the review of the Commission's determination, then notions of a serious question to be

L/ tried (or, as it is sometimes expressed, a prima facie case) and

balance of convenience, which govern the grant of interlocutory injunctions at first glance sit comfortably with applications for interim authorization. But it is important that the analogy be not taken too far because there are distinct differences between the two proceedings. Interlocutory injunctions are generally granted to restrain threatened conduct; they are instruments of the law of chancery; and there is no antecedent finding of a court or tribunal under challenge. Interim authorization protects conduct which

otherwise might be proscribed.

It is the creature of statute, not the

general law. Considerations of public interest are essential to the Commission's and the Tribunal's findings. Applications for interim authorization are part of the Tribunal's function of reviewing the Commission's determination.

Counsel for the Commission submitted that, in some respects,

an application for interim authorization is akin to an order of a

court which stays the operation of an earlier order. There are some

L, similarities between the two procedures; but the analogy must not be taken too far. It must be remembered that it is not the task of the Tribunal to consider whether the Commission is right or wrong; it must make its own findings on the material before it and decide for itself whether authorization should be granted and, if so, on what, if any, conditions.

The grant of an interim authorization by the Tribunal does

not set at naught the Commission's determination not to authorize the

relevant conduct. It is true that the Commission makes its

L 4

determination after careful and exhaustive inquiry and examination of the application before it and holds conferences of interested persons. But an interim authorization of the Tribunal does not overturn the Commission's determination; it simply suspends its operation whilst the Tribunal performs its statutory duty of reviewing it. There is no necessary inconsistency between a determination of the Commission not to grant authorization and the grant by it, even at the same time, of interim authorization. The Commission itself has power to do this and in the past has frequently exercised it, so that the unsuccessful

applicant may apply for review to the Tribunal and not be prejudiced in the meantime. The grant of interim authorization by the Tribunal

is likewise not inconsistent with the Commission's determination.

It would be unwise, if not impossible, to atcempt the task of defining all relevant principles that govern the grant of interim authorization by the Tribunal. Much depends on the facts of the particular case, the urgency of the occasion and the conduct of the

L. application by the parties.

The principles upon which an application for interim authorization falls to be determined have not been discussed very often in previous decisions of the Tribunal; but the starting point for this purpose must be the decision of the then President of the

Tribunal (Woodward J.) in Re The Oueensland Timber Board (1975) 24

F.L.R. 205 where His Honour rejected the proposition that there was no general presumption either for or against the granting of an application for interim authorization. His Honour said (at p. 210):

"In so far as it is appropriate to speak in terms of onus at all, there is an onus on an applicant to see that there is material before the Tribunal on which it could properly grant an interim authorization, but it is unlikely that any application would be determined by reference to any such onus."

His Honour went on to say (at pp. 210-211):

"In the Tribunal's opinion, it is in each case under a duty to consider the evidence and submissions before it in order to determine whether an interim authorization is appropriate or not in the particular case. Each such case must be decided on its own merits but always having in mind certain relevant considerations. We should make it clear that we do not regard the following list of matters to be considered as being in any way final. Future cases may throw up other relevant considerations. It should also be noted that the following list is not set out in any order of importance. The weight to be given to the different matters will vary from case to case."

The Tribunal then proceeded to enumerate the following considerations which it believed to be relevant to cases for interim authorization:-

(a) The policy of the Act is clearly opposed to arrangements in restraint of trade and other anti-competitive practices. An applicant for final authorization has a substantial onus to discharge in satisfying s. 90(5).

(b) A person appealing in good faith against the refusal of authorization by the Commission should not be effectively denied his right of appeal by the refusal of an interim authorization. This would apply, for example, if the arrangement once departed from could not be reinstated in the event of a final decision favourable to the applicant.

(c) Possible harm or prejudice to the applicant

falling short of denial of the right of appeal

will clearly be relevant.

(d) In the same way, possible harm to other

parties must be considered.

(e) The ultimate concern of the Tribunal must always be the benefit of the public, so that any possible detriment or benefit to the public must be given full weight.

(f) In some cases it may be thought preferable not to disturb the existing position pending a final decision. The good or bad effects of the existing situation will usually be clearer than the possible effects of a change in that situation.

(gl The length of time which is likely to elapse between the granting of the interim authorization and the scheduled or anticipated date for hearing, will often be important. However, this consideration can be controlled to some extent by the granting of an interim authorization for a fixed period of time, subject to review at the end of that period, or by the refusal of an authorization while reserving liberty to apply if circumstances change or new material comes to light."

The approach adopted by the Tribunal in The Oueensland Timber Board Case has since been consistently followed, though in fact there have been few applications to the Tribunal for interim authorization. See, for example, Re Australian Paper Manufacturers Limfted (1976) 25 F.L.R. 504 and Re Timber and Buildins Material Merchants' Association

(NSW) (1976) T.P.R.S. 203.11.

The Tribunal will mention some additional considerations

~ .

. ~ ~ ~ - ~ - ~ - ~ ~ ~

i. which, in its opinion, are relevant to cases such as the present and which may have general application to other cases; but it must be emphasised that each case before the Tribunal must be determined upon its own facts and it may call for the application of other principles.

First, the fact that an application is for interim authorization pending the final hearing of the application for authorization points strongly to the conclusion that the Tribunal is not dealing finally with any issues in the matter.

Second, generally it would be inappropriate to examine too closely or precisely questions of law which arise in the matter or to determine questions of credibility of witnesses or to sift through extensive material to determine questions of fact in issue between the parties and which may be finely balanced. It would be unfair to the parties, and a task of supererogation, to come to conclusions on difficult questions involved at an early stage of the process of

L review. But no rigid test can be prescribed to meet all cases.

Sometimes the hearing of an application for interim authorization will reveal that, on any view of the matter, the case for authorization, whether interim or final, is so weak or strong, as the case may be, that firm conclusions may be reached and expressed by the Tribunal at an early stage. Most cases would probably fall somewhere in between these two extremes.

Third, like the Commission, the Tribunal is not bound, upon

the hearing of an application for interim authorization, by the

prohibitions imposed by sub-ss. 90(6), ( 7 1 , (8) and (9) of the Act (sub-s. 91(2A)) though the two bodies are generally otherwise bound by them. This does not mean that questions of benefit or detriment to the public or competition are irrelevant on the hearing of an application for interim authorization. Indeed, they are fundamental to the Tribunal's task and of great importance. It simply means that the prohibitions which would otherwise apply are rendered inapplicable by the Act itself.

14.

The Tribunal, constituted by all three members, turns now to consider briefly the facts involved in the present application for interim authorization.

IATA is an association of 134 international and domestic airlines operating under the flag of approximately 100 countries. The great majority of those airlines are government owned. The evidence presently before the Tribunal is that membership of IATA includes Qantas and five Australian domestic airlines. IATA was incorporated in 1945 under an Act of the Canadian Parliament. Governments and States are not members of IATA. It is essentially a trade association, but governments ultimately determine the grant and regulation of rights to use their national air space and to land on their territory. Since the formation of IATA it has provided to the international aviation community the facilities of a secretariat to co-ordinate the application of resolutions unanimously adopted by its members for the purpose of ensuring that uniform procedures and

b regulations are available in relation to the carriage of passengers

and cargo by air over international routes. There are some 30 international carriers operating from Australia and all but eight of them are members of IATA. Continental Airlines, an American based carrier, limits its participation in IATA to the trade association activities described below and does not participate in its pricing discussions which are effected formally through tariff co-ordination conferences.

From the mid 1940's to the mid 1970's the international air transport industry was concerned primarily with matters such as traffic rights. It was an era of relative price stability. In the mid 1970's the carriers found themselves in a position where consumers were demanding a greater choice with respect to price and service. In 1979 IATA restructured its activities into two categories:- (a) trade association activities concerned with technical, legal, ticketing, clearing house and safety aspects; and (b) tariff matters. Carriers may elect to participate in both activities or the trade association activities only.

IATA works through committees, conferences and working groups, each dealing with a particular subject. The activities of IATA include:-

(a) client services covering documentation, baggage handling, carriage of goods, ticketing and the like;

(b)

account clearing procedures between carriers;

(c) agency matters covering accreditation of agents together with account clearing procedures for both passenger and cargo agents;

(d) tariff co-ordination covering matters such as fares and

rates, methods of combining and calculating fares and the definition

of what are called fare types.

The legal framework for Australia's air links with other countries is based primarily on bilateral air service treaties with 25 countries including the United Kingdom, the U.S.A., New Zealand, Western European and Asian countries.

Governments have traditionally left it to their designated airlines to agree on appropriate tariffs. Hence most of Australia's bilateral air service agreements provide that airlines will discuss tariffs and agree on recommendations to be submitted to their respective governments. In many instances the agreements provide that airlines will agree on tariffs through the co-ordinating machinery of IATA, if practicable. Tariffs recommended by airlines, whether

u	through IATA or otherwise, generally must be formally approved by governments; and, if the airlines cannot reach agreement on tariffs, it falls to the governments to do so. The Australian Government has discussed and agreed tariffs direct with other governments on a number of occasions.

In 23 air service agreements to which Australia is a party it

is provided:

"Tariffs wherever possible be fixed by the designated airlines with the assistance of the rate fixing machinery of IATA - if this is not possible the airlines themselves agree upon the tariffs in respect of each of the specified routes.

In any event the tariffs are subject to the approval of aeronautical authorities of both Contracting Parties.

If the designated airlines concerned cannot agree on the tariffs, or if the aeronautical authorities of either contracting party do not approve of the tariffs submitted to them in accordance with the above provisions the aeronautical authorities of the Contracting Parties should endeavour to reach agreement on tariffs and -

no new or amended tariffs should come into effect unless approved by the aeronautical authorities of both Contracting Parties, or determined by a tribunal, or in accordance with arbitration provisions prescribed in the relevant agreements."

In the case of the treaty with the United States of America there is no requirement for tariffs to be fixed wherever possible by the designated airlines through IATA machinery. In the case of South Africa tariffs are those agreed upon by IATA and approved by the

w aeronautical authorities of the parties.

Powers to regulate international air passenger and cargo operations rest with governments, not with IATA. IATA resolutions have effect only to the extent that individual governments so decide in accordance with their respective domestic laws and the provisions of their bilateral aviation agreements with the governments of other countries.

While individual governments have sovereign powers unilaterally to regulate the conduct of air services within their own territories, international aviation can proceed only on the basis of agreements reached between two or more countries.

The IATA tariff co-ordination machinery is simply one mechanism through which governments may choose to fulfil obligations they have under their bilateral agreements to approve tariffs. Given the existence of treaties requiring tariff approval, the obligations would remain even if IATA did not exist or if its tariff co-ordination machinery was no longer used by a country's airlines.

Australia has relied upon Air Navigation Requlation 106A (A.N.R. 106A) to give effect in Australian domestic law to its treaty obligations.

Power to approve tariffs for carriage on international air

services to and from Australia is vested in the Secretary to the

Department of Aviation through the Air Navigation Regulations.

Ld Regulation 106A requires that an international airline which is licensed to operate to and from Australian territory shall submit to the Secretary the tariff of charges that that airline wishes to apply on its services to and from Australia.

In the middle of 1981 the Australian Government announced that international airlines serving Australia, including Qantas, would be left as free as possible to set fares in accordance with their commercial judgment and to meet market demands. In the case of the Sydney - London route for example, after consultation with the

airlines directly concerned (Qantas and British Airways) the Department of Aviation issued a direction under Air Navigation Regulation 106A specifying the minimum fares that may legally be charged for different classes of travel over a particular route. Generally speaking airlines performing carriage between the end points of the route in question may legally set their fares at any level at or above the specified minimum levels for the various classes of travel. Airlines can and do offer fares in accordance with their individual commercial judgments, but subject to the requirement that their prices are not less than the specified base level.

Mr. R.D. Gill of Switzerland (who, we have said, is an Assistant Director of IATA) gave evidence by affidavit and was cross-examined before us. We will confine ourselves to mentioning certain of the more significant features of his evidence; but the fact that we do not mention other evidence which he gave or, indeed, other evidence in the case, does not mean that we have not considered it. As the application is urgent we have given particular attention to the

L documents or parts of documents to which counsel specifically referred

us.

Mr. Gill said that IATA has developed an extremely sophisticated system of procedures and rating techniques for what is known as "interlining". Interlining is the carriage of passengers on the services of different carriers on one ticket. Interlining may occur in various ways, one of which is where a carrier issues to a passenger a multiple segment ticket involving transportation partly on its own services and partly on the services of another carrier.

i. Interlining makes it possible for passengers to make reservations and arrange a single ticket with one airline or agent for any number of flights and connections, for the passenger to pay for the ticket in a single currency and for the passenger to be able to interline with another carrier in the course of the journey without the issue of a new ticket. It seems to be difficult to measure with any precision the extent to which interlining occurs in practice, but it appears to represent a substantial percentage of all international ticket sales.

Mr. Gill expressed the view that it would be impossible for interlining to be successfully achieved on a multi-lateral basis in the absence of agreed fares and commission rates. He said that the debilitation of interlining "effected by a wholesale disapproval of agreed tariffs and commission rates would destroy the ability of airline passengers to travel from one airport to any other airport on one ticket paid for in their own currency and would greatly complicate any journey, other than a simple direct journey between airports, served by the issuing carrier".

Mr. Gill gave evidence that the true effect of the Commission's determination the subject of review goes beyond disapproval of the rate enforcement mechanism of IATA only. He said that, if the determination has the effect (so far as Australian domestic competition law is concerned) that IATA members are not permitted to meet and agree that any aspect of international aviation relating to prices, rates, commissions or conditions shall be the subject of a uniform approach, this is a "fundamental assault upon the

viability of IATA to perform any of the functions for which it was established and which it has performed for the international community since 1945". He said that "upon either view of the effect of the Trade Practices Commission decision, if the members of IATA were required, as a result of the Tribunal not granting interim authorization, to rescind the resolutions and dismantle the procedures attacked by the Trade Practices Commission determination, it would probably prove impossible to reinstate the position in the event that authorization were granteU on the final hearing".

Certain aspects of Mr. Gill's evidence were challenged by counsel for the Commission. We think it undesirable at this stage of the review to form any concluded views on these contentious matters. In view of the complexity of the facts and the necessity to analyse the large body of documents involved, a task which would require assistance from witnesses and the representatives of the parties, it is not possible confidently to reach conclusions with respect to these

id matters until the final hearing.

We briefly summarise the principal submissions made by counsel for IATA before us, as we understand them, in support of the grant of interim authorization as follows:-

1. The application is bona fide, in the sense that there are serious arguments in favour of the grant of authorization;

2. Unless interim authorization is granted, the subject matter

i /

of IATA's application for review to the Tribunal may be effectively

destroyed;

3. The Commission's determination has the effect of constituting an extensive and unilateral interference by Australia with the worldwide organisation of international civil aviation, contrary to the treaties to which Australia is a party and by which it is bound;

22.

4. The Commission's determination could result in breach of

Australia'a treaty obligations, or at the very least, it would disrupt

Australia's established relations with friendly nations;

The determination is

inconsistent with Australian government

policy and Australia's bilateral treaties, and destroys a useful

mechanism for their implementation;

L 6.

The interests of the travelling public dictate that interim authorization be granted:

for example, the IATA arrangements

constitute the basis for the practice of interlining; and

7. The terms of the denial of authorization are so general as to

give rise to problems of compliance and to consequences not foreseen

by the Commission.

Mr. Hall, on behalf of the Australian Federation of Travel Agents Limited, in substance supported the submissions made on behalf

ii of IATA.

Counsel for the Commission submitted that interim authorization should be refused for'reasons which we briefly summarise as follows:-

1. The detriment to the Australian public which would result from the grant of an interim authorization outweighs the benefit, if any, to the Australian public in permitting IATA to resume enforcement of its tariffs;

2. IATA has not for many years, and at least since the late 19701s, attempted to compel compliance with its resolutions which the Commission has declined to authorize or to compel adherence to its tariffs. Hence a grant of interim authorization woulL not operate to preserve the status quo. Further, if interim authorization is granted, it may lead to a change in the status quo in that IATA may commence to compel compliance with the resolutions to which interim authorization is granted;

3. No question of the destruction of the subject matter of the application or disruption or dismantling of any established system arises. In particular, new bilateral procedures could be established for interlining;

4. The Commission's determination is entirely consistent both

with Australia's international obligations including its bilateral

aviation.treaties, and Australia's domestic legislation;

5. No conflict exists between the Commission's determination and Australian government policy in this area.	In any case the Commission
is an arm of the Australian Government;

6. Other Australian governmental bodies, such as the Department

of Aviation, regard the determination as consistent with their

particular policies; and

7. Even if the effect of the determination is contrary to Australian government policy or to Australia's international obligations, rectification of that matter is a matter for the Australian Government and for it alone.

The submissions of

counsel for the Commission were supported

in substance by Mr. Homes on behalf of the Australian Federation of

Consumer Organisations and the Australian Consumers Association.

Although granted leave to intervene, Qantas took no part in the hearing of this application for interim authorization.

We have carefully considered all the submissions put to us, and have reached the conclusion that the application by IATA for interim authorization should be granted. We will state briefly our reasons for this conclusion:-

1. The first matter with which we must deal concerns the identification of the IATA arrangements which the Commission declined to authorize. This would usually give rise to no difficulty, but regrettably it does in this case. The form of the Commission's authorization of 31 October 1984 appears in paragraph 171 of its Determination as follows:

"171. The Commission grants authorization to the IATA arrangements represented by Documents 1 to 55, except as listed in The Schedule hereto and except to the extent that Documents 1 to 55:

(1) require carriers and travel agents to

adhere to fixed or minimum fares;

( 2 ) require carriers and travel agents to

adhere to fixed or maximum agents'

commissions;

( 3 ) require carriers and travel agents tc

refrain in whole or in part from price

competition or discounting;

(4) require carriers and travel agents to refrain from advertisinq the actual fares they charge or propose to charge; or

(5) provide for, or encourage, the

enforcing of

- fixed or minimum fares, or

- restraints on advertising actual

fares.

Collaboration can thus continue between carriers through IATA as to trade association activities such as technical, legal, ticketing, clearing house and safety matters. Collaboration can also continue as to tariff coordination activities in the formulation of IATA tariffs, which are not to be enforced by IATA or any of its members acting together but are to be subject to free price competition in Australia and competitive advertisinq of actual fares." .

L.	The schedule of resolutions not authorized is appended to the Determination and contains various resolutions of IATA members passed from time to time. The reference in paragraph 171 to documents 1 to 55 is to the Commission's Public Register (A34851 (see paragraph 9 of the Determination).

It is apparent from a perusal of paragraph 171 of the Determination that to identify the IATA arrangements it is necessary to examine documents 1 to 55 themselves, then excise from those

.	, documents the arrangements listed in the Schedule to the

Determination. One then has the first category of the IATA arrangements. But the task of identification does not cease there. It is then necessary to go to the documents 1 to 55 and determine which arrangements appearing in those documents answer the description of the five exceptions mentioned in paragraph 171. This is not an easy task and is a judgmental exercise. The Commission doubtless adopted the formula appearing in pragraph 171 because of the large

ii number and diverse character of IATA rules, regulations, agreements

and resolutions extending over a long time and the consequential

difficulty of specifying the arrangements to be excluded from the

authorization in a precise and self-contained form. Whatever the

reason, the fact is that there is a real problem of identifying, with

any degree of precision or particularity the arrangements excepted

from the Commission's authorization (the IATA arrangements). Letters

and telexes have passed between the solicitors for IATA and the

solicitors for the Commission for the purpose of identifying the IATA

arrangements. This exchange culminated in a letter from IATA's

i. solicitors to the Australian Government Solicitor which summarised the former's understanding of the IATA arrangements in these terms:-

"(A) Resolutions and "arrangements" (vide

Determination para 171) which

1. require carriers and travel agents to adhere to fixed or minimum fares;

2. require carriers and travel agents to adhere to fixed or maximum agents' commissions;

3. require carriers and travel agents to refrain

in whole or in part from price competition or

discounting;

4. require carriers and travel agents to refrain

from advertising the actual fares they charge or

propose to charge; or

5. provide for, or encourage, the enforcing of

- fixed or minimum fares, or

- restraints on advertising actual fares.

(B) Any resolution relating to fares, commissions

or conditions which is expressed in 'a mandatory form, usually specifying a fare or rate of commission which 'shall be' an identified amount or 'shall be' not less than or not more than a specified range of amounts' (vide telex of 10 January 1985 Australian Government Solicitor to Sly

& Russell).

(C) Any resolution with the heading 'compliance',

'tariff integrity' or 'market reform' (idem).

(D) Any resolution or arrangement inconsistent

with free price competition. (idem).

(E) The resolutions set forth in the schedule to

the TPC determination.

(I?)

The resolutions set forth in the schedule to

the letter of

20 December 1984 from the Australian

Government Solicitor to Sly & Russell.

(G) Resolutions which 'are identical to or

substantially the same as (or) are in substance the application in specific instances of general provisions listed in the schedule' (vide letter of Australian Government Solicitor of 20 December 1985 to Sly & Russell).

(H) Other resolutions or 'arrangements' which though on their face do not appear to relate to restrictions on price competition may nevertheless be intended now or in the future to relate to restrictions on price competition and are capable of relating to it."

2 8 .

Counsel for the Commission made no submissions challenging the correctness of this summary. Accordingly, the application for interim authorization proceeded on the basis that this summary of the IATA arrangements accurately records those arrangements and thus constitutes the subject matcer of the application for review.

The very uncertainty that surrounds the scope of the IATA

arrangements which the Commission refused to authorize is itself a

cogent reason for granting interim authorization. IATA members will

be in breach of Australian law if they implement any of the IATA arrangements. In our view it is undesirable that people should be unnecessarily exposed to possible breaches (and they would be serious breaches) of the law with consequent penalties. Interim authorization will shield them from those consequences.

2. The rules, regulations, agreements and resolutions of IATA have been in operation, as varied from time to time, since 1945 when IATA came into existence. They represent a complex and comprehensive

L/ structure relating to manifold aspects of international adiation which

concern Australia, its national carrier (Qantas), Australians travelling to and from Australia and nationals of other countries using Australian air routes or services. On the evidence before us it is reasonably arguable that, if the authorization sought by IATA is not granted, many of the IATA activities such as air traffic co-ordination, may become inoperative. There is evidence that this result could be produced merely by Qantas giving notice under the relevant provisions of the IATA rules and procedures that it elects no,

I	longer to be bound by those provisions (because to continue to be
I
I
bound by them may involve it in breach of the Act in view of the
I	absence of authorization of the IATA arrangements). All other IATA
1
~	members may then be free to elect if they will continue to be bound by those arrangements. In the result, the binding effect upon the other members of IATA would be removed. It is not possible to determine at this stage what effect any unravelling of the complex IATA structures would have upon IATA, its members or the travelling public. If final authorization is granted by the Tribunal and IATA and its members then

L	reinstate the arrangements dismantled in the meantime, assuming it is possible to do so, this may involve significant waste of resources.
On the other hand, of course, there may be force in the Commission's argument that, to remove the IATA arrangements would be to render the relevant market more competitive, enabling carriers to
be free to negotiate rates, tariffs and other matters . with each other
and with travel agents and others engaged in the aviation industry with consequential benefit to the public. We are not in a position to express any fir& views on these matters at this stage.
However, the uncertainties and the possibility of damaging consequences which may flow from the absence of authorization point in favour of the grant of interim authorization. Not to take these considerations into account would be to prejudge the issues before us. The case in favour of interim authorization is even stronger when it is remembered that the IATA arrangements were protected by interim authorization of the Commission granted in 1975 which subsisted until they were terminated on 31 October 1984.

1 It is common ground between the parties that no adverse inferences should be drawn against the success of IATA's application by reason only of the lapse of time from 31 October 1984 to the present time. IATA's application for review was lodged within the prescribed time and it has not been dilatory in prosecuting its claim for interim authorization.

I	3. It is agreed by all parties that they will be ready to
i L
proceed to a final hearing for authorization in about August this
I	year. This is only some five months hence; not a long time in the
I	passage of ten years which has elapsed since the initial grant by the Commission of interim authorization.
4. The issues involved in this matter raise questions of fact and law of considerable complexity. It is inappropriate for them to be considered definitively by the Tribunal at this stage of the

, 't matter. They give rise to reasonably arguable questions, the

'3	resolution of which must await the final hearing.
The Tribunal grants interim authorization, pending the making of a determination by it on its review of the determination by the Trade Practices Commission dated 31 October 1984 or further order, to the rules, regulations, agreements, resolutions and arrangements of IATA excepted from the Commission's final authorization granted on 31 October 1984.

I certify that this and the 29 preceding pages are a

true copy of the Reasons for Decision herein of the

Trade Practices Tribunal. / //

Date?: 14 March 1985

Associate