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Melway Publishing Pty Ltd v Robert Hicks Pty Ltd

Melway Publishing Pty Ltd v Robert Hicks Pty Ltd

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Case Copied 15 March 2001 81 min read

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HIGH COURT OF AUSTRALIA
GLEESON CJ,
GUMMOW, KIRBY, HAYNE AND CALLINAN JJ
MELWAY PUBLISHING PTY LTD   APPELLANT
AND
ROBERT HICKS PTY LTD (TRADING AS
AUTO FASHIONS AUSTRALIA)      RESPONDENT
Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13
15 March 2001
M1/2000
ORDER
1.        Appeal allowed with costs.
2.Set aside the orders of the Full Court of the Federal Court of Australia made on 20 May 1999.
3.In place thereof, order that the appeal to the Full Court of the Federal Court of Australia be allowed, the orders made by Merkel J on 30 October 1998 be set aside and the respondent's application be dismissed.
4.Respondent to pay the appellant's costs at first instance and in the Full Court of the Federal Court of Australia.

On appeal from the Federal Court of Australia
Representation:
D K Catterns QC with C D Golvan for the appellant (instructed by Marshalls & Dent)
G A A Nettle QC with S L Hinchey and P Zappia for the respondent (instructed by Freehills)
Intervener:
J W K Burnside QC with M J Crennan intervening on behalf of the Australian Competition and Consumer Commission (instructed by Australian Government Solicitor)
Notice: This copy of the Court's Reasons for Judgment is
subject to formal revision prior to publication in the
Commonwealth Law Reports.

GLEESON CJ, GUMMOW, HAYNE AND CALLINAN JJ. The appellant ("Melway") is the publisher of a street directory for Melbourne and its metropolitan area. The respondent, a wholesaler of motor vehicle parts and accessories, sought unsuccessfully to obtain supplies of directories from Melway. The respondent alleged that Melway's conduct was in contravention of s 46 of the Trade Practices Act 1974 (Cth) ("the Act") in that, having a substantial degree of power in a market, it took advantage of that power for the purpose of preventing the respondent from engaging in competitive conduct in that market.
The respondent commenced proceedings against the appellant in the Federal Court of Australia. The proceedings were successful before Merkel J at first instance[1]. By majority, an appeal to the Full Court of the Federal Court was dismissed[2].
[1]Robert Hicks Pty Ltd v Melway Publishing Pty Ltd (1998) 42 IPR 627.
[2]Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (1999) 90 FCR 128 (Sundberg and Finkelstein JJ; Heerey J dissenting).
In this Court, it was not in dispute that Merkel J correctly identified the relevant functional market as the wholesale and retail market for street directories in Melbourne[3]. He found that wholesale and retail activities in that market were closely linked. Merkel J's conclusion that the appellant had a substantial degree of power in that market was not challenged[4]. The question was whether what was treated as a refusal to supply involved taking advantage of that power for the proscribed purpose of preventing the respondent from engaging in competitive conduct in the market for Melbourne street directories, and thus a contravention of s 46(1)(c) of the Act. That question was answered in the affirmative.
[3]

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2001] HCA 13
Decision Date: 15 March 2001

CaseChat Overview and Summary

The case of *Melway Publishing Pty Ltd v Robert Hicks Pty Ltd* involved an appeal to the High Court of Australia concerning allegations of misuse of market power under the Trade Practices Act 1974 (Cth). The appellant, Melway Publishing Pty Ltd, a manufacturer and distributor of street directories, had appointed an exclusive distributor for a sector of the retail market and refused to supply another potential distributor, Robert Hicks Pty Ltd. The respondent alleged that Melway had taken advantage of its substantial market power for the purpose of deterring or preventing Robert Hicks from engaging in competitive conduct.

The central legal issue before the High Court was whether Melway's conduct constituted a misuse of market power under section 46 of the Trade Practices Act. Specifically, the court had to determine if Melway had taken advantage of its "substantial degree of market power" in the market for street directories in Melbourne, and if so, whether its purpose in doing so was to prevent or hinder Robert Hicks from engaging in competitive conduct in that market. This required an examination of the meaning of "take advantage of" in the context of section 46 and its application to the facts of the case, particularly in light of previous High Court authority in *Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd*.

The High Court, in a majority decision, allowed the appeal. The reasoning focused on the interpretation of "take advantage of" within section 46. The majority held that to "take advantage of" market power, the conduct must be engaged in because of, and by reason of, the possession of that power. It was not sufficient that the power was merely used in the course of the conduct. The court found that Melway's refusal to supply was not predicated on its market power but rather on its contractual arrangements and business strategy. The court emphasised that the purpose of section 46 was to prevent the misuse of market power to harm competition, not to penalise a business for acting in its own commercial interests, even if it possessed significant market power.

Consequently, the High Court allowed the appeal, set aside the orders of the Full Court of the Federal Court of Australia, and ordered that the respondent's application be dismissed. The respondent was ordered to pay the appellant's costs at first instance and in the Full Court.

Orders

Orders of the court

1. Appeal allowed with costs.

2. Set aside the orders of the Full Court of the Federal Court of Australia made on 20 May 1999.

3. In place thereof, order that the appeal to the Full Court of the Federal Court of Australia be allowed, the orders made by Merkel J on 30 October 1998 be set aside and the respondent's application be dismissed.

4. Respondent to pay the appellant's costs at first instance and in the Full Court of the Federal Court of Australia.

Background

Background to the litigation

To give reasons for my minority opinion, it is necessary to record some additional facts; to examine the purposes of the applicable provisions of the Act; to recall what this Court held in Queensland Wire concerning the phrase "take advantage of"; to consider analogous authorities in other jurisdictions; and then to draw these materials together to explain my conclusion.The facts, legislative provisions and issue Most of the facts relevant to my reasons are contained in the joint reasons[48]. However, it is appropriate to mention a number of additional facts, upon which there were findings or about which there was undisputed evidence. Such facts lend colour to the monopolistic conduct of Melway Publishing Pty Ltd ("the appellant"). They help to explain why Robert Hicks Pty Ltd ("the respondent") succeeded at trial, and on appeal. Such findings should not be overturned lightly. As Lord Hoffmann said, with the concurrence of the other participating members of the House of Lords, in Biogen Inc v Medeva plc[49]: "The need for appellate caution in reversing the judge's evalution of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la vérité est dans une nuance), of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation."[48]Joint reasons at [9]-[23].[49][1997] RPC 1 at 45 (original emphasis). The primary judge accepted that consumers treated the name of the appellant's Melbourne street directory as a generic description of street directories for that city[50]. Several witnesses gave evidence that it was an "icon" of the city[51]. A director of the appellant referred to it as "a Melbourne institution"[52]. So popular was the directory that 60% of the national sales of street directories by the large retail chain K-Mart comprised sales of the appellant's Melbourne directory. It was probable that, alone, it constituted at least 50% of the market for street directories in Australia[53]. Despite some aggressive marketing and promotion of their products by its competitors, UBD and Gregorys, the appellant's Melbourne directory continued to maintain its dominant share of the wholesale and retail market for street directories in Melbourne[54]. In the result, without access to the appellant's Melbourne directory, it would, as a practical matter, be impossible for a would-be wholesaling competitor to enter that market and service consumer needs at a competitive price.[50]Reasons of Merkel J (1998) 42 IPR 627 at 630.[51]Reasons of Merkel J (1998) 42 IPR 627 at 630.[52]Full Court reasons (1999) 90 FCR 128 at 142.[53]Reasons of Merkel J (1998) 42 IPR 627 at 631.[54]Reasons of Merkel J (1998) 42 IPR 627 at 630.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GLEESON CJ, GUMMOW, HAYNE AND CALLINAN JJ (dissent) KIRBY J (dissent)

Given all of the foregoing facts, the last-mentioned conclusion was clearly open on the evidence. In my view, the evidence virtually compelled such a conclusion. The judges who reached that view correctly applied the principles established by this Court in Queensland Wire. Now, without overruling the approach to s 46 of the Act mandated by that decision, but with dark hints of factual errors in it[70] and seemingly grudging acceptance of its holding, a result is reached that effectively, but not explicitly, in my opinion, overturns Queensland Wire. Because I do not agree with this, either as a matter of legal authority or of legal policy, I am bound to explain my contrary opinion.[70]Joint reasons at [45]-[53].The purpose and policy of the Act support the decision I start with some basic points about the Act. They affect the approach which this Court should take to any ambiguities in the phrase "take advantage of" in s 46 of the Act. The object of the Act is "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection"[71]. The Act incorporates a number of important departures from the previous law. It should be approached as a "fundamental piece of remedial and protectionist legislation [that is to] be construed broadly"[72]. This approach to the meaning and purpose of the Act is not only to be taken to Pt V, which concerns consumer protection, but also to Pt IV, designed to outlaw "Restrictive trade practices"[73]. This approach is warranted, indeed necessary, because of the important policy objectives that the legislation evidences, the large economic purposes it sets out to attain and the atypical mode of drafting that was adopted to express the Parliament's objectives[74].[71]The Act, s 2.[72]Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 41.[73]The heading of Pt IV of the Act. See Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503 per Lockhart and Gummow JJ, approved and applied in Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 41; Qantas Airways Ltd v Aravco Ltd (1996) 185 CLR 43 at 60.[74]Australia, Senate, Parliamentary Debates (Hansard), 30 July 1974 at 542 (Senator Murphy). It is highly desirable that the Act's provisions with respect to restrictive trade practices should be "sufficiently certain ... to enable persons affected by it to understand its operations and effect"[75]. That objective was included in the terms of reference given to the Swanson Committee by the Minister, the Hon J W Howard, in 1976[76]. But certainty is best promoted by the consistent application by courts of legal principles embodied in the Act as expounded by this Court. If those principles are considered mistaken or undesirable, the Act can be amended. There must be no misunderstanding of the deliberate policy of the Parliament with respect to the Act. It departed from the previous Restrictive Trade Practices Act 1971 (Cth) to follow both the mode of drafting, and some policy objectives, of the Sherman Act of the United States of America[77] (including in respect to s 46 of the Act[78]). In the Second Reading Speech for the original Bill of 1974, the Attorney-General (Sen the Hon L K Murphy) observed[79]: "[O]ther provisions, particularly those describing the prohibited restrictive trade practices, have been drafted along general lines using, wherever possible, well understood expressions. ... [I]t is questionable whether detailed drafting leads to more certainty. Often it does no more than obscure the broad purpose of a provision. Chief Justice Hughes of the United States Supreme Court made this very point in an opinion he delivered in 1933 in the case of Appalachian Coals Inc v United States[80] when he said of the Sherman Act: 'It does not go into detailed definitions which might either work injury to legitimate enterprise or through particularization defeat its purposes by providing loopholes for escape.'"[75]Mr Howard (Minister for Business and Consumer Affairs), Terms of Reference, Trade Practices Act Review Committee ("the Swanson Committee"), 1 April 1976.[76]See Pengilley, "Misuse of Market Power: The Unbearable Uncertainties Facing Australian Management", (2000) 8 Trade Practices Law Journal 56 at 78.[77]26 Stat 209 (1890) codified as amended 15 USC §§1-7 ("Sherman Act").[78]The analogous provision of which is Sherman Act, §2.[79]Australia, Senate, Parliamentary Debates (Hansard), 30 July 1974 at 542-543 (footnote added).[80]288 US 344 at 360 (1933). Hughes CJ, for the Court, went on: "The restrictions the Act imposes ... call for vigilance in the detection and frustration of all efforts unduly to restrain the free course of interstate commerce ... and to promote competition upon a sound basis."

Ratio Decidendi

Legal Principle Established

Established by:

Full text does not contain this section.