Nella v Kingia Pty Ltd

[1989] FCA 142

JUDGMENT No. 1 [email protected]&

COMMONWEALTH OF AUSTRALIA TRADE PRACTICES ACT, 1974

IN THE TRADE PRACTICES TRIBUNAL NSW 5 of 1987

RE: JOHN DEE (EXPORT) PTY.

LIMITED & ORS.

Applicants

RE: Application for a Review

of a Determination made by the Trade Practices Commission dated 1 October 1987

SUMMARY OF REASONS FOR DECISION

This is an application by John Dee (Export) Pty. Limited

and other companies, which	are meat processors in Queensland,
for a review by the Tribunal of a determination of	the Trade

Practices Commission which granted authorlzatlon to the

proposed Constitution and Accredltation Rules (except clause 6) of the Queensland Stock Agents' Association ("QSAA"),, a body in the process of formation, and to the giving effect to exclusionary provisions contained therein.

The Constitution provides for the maklng of

Accreditation Rules which in turn provide for concesslonal trading terms upon which accredited buyers at auctlon sales

of livestock in Queensland conducted by members of	the
Association may pay for thelr purchases.

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The applicants for authorization before the Commission

were the three Pastoral Houses, Edlers, Dalgetys and Primac together with a group of 39 stock and station agents who said

they intended to joln QSAA.	The Pastoral Houses and these
private agents together account for	over 90% of cattle

marketed In Queensland through stock agents. The appllcants for review of the Commlsslon's determinatlon are 21 meat processors who handle over 9 0 % of cattle slaughtered in Queensland abattoirs.

The question before the Tribunal is whether the proposed

Constitution and Accreditation Rules ofQSAA would constitute a contract, arrangement or understanding to the effect that members of QSAA would deal collectlvely for the purpose of accrediting purchasers of livestock at auction for slaughter and thus constitute an excluslonary provision or have the effect of substantially lessening competition in

breach of S. 45 of the Trade Practices Act	1 9 7 4 .
What 1s asserted in support of authorization is that the proposed system of	QSAA:

will not be dominated by the Pastoral Houses;

will be of equal beneflt to the Pastoral Houses and
independent agents alike;

will give rise to a better system of credlt control with bonris and guarantees being provided for the benefit of all members, not just the Pastoral Houses;

will reduce the del credere risk to agents;

will provlde lnformatlon to agents	whlch is not
presently available to Independent agents,	namely,

informatlon as to the financial stablllty of processors

and other purchasers of livestock;

wlll offer greater ablllty to monitor payment patterns

in accordance with concessional trading terms;

wlll not be inimical to competition OK result In

antl-competitive detriment.

In the Tribunal's oplnlon it is hard to imaglne an

industry which shows substantial credit risks than the sale of livestock. less indicatlon of any real or

The

history of the industry over many years proves this.

The Tribunal is not satisfied that the proposed system

of market intelligence would	give rise to such improvements
OK that any real differences would occur in practlce in

warning agents about purchasers or prospective purchasers who

may be credit risks. Any Increase in the avallable credi+ lnformatron would be marglnal. Past experlence In the

Eastern States shows	that recommendations to members as to
the risks Involved in dealing wlth a particular purchaser	or
prospectlve purchaser are of llmlted practical use.

Even vlewing the proposed system on the basis that the Accreditation Rules include the most recently drawn proposed rules, including Rule 6, it is llkely that it would be in practice a compulsory system. It is unreal to think that the system would operate in practice as voluntary. The Trlbunal

1 s satisfied that the system would be one in which all, or

almost all, members would accept recommendations from QSAA as binding them to comply with such recommendations. It is likely that the proposed system would operate in practice, not as a means to reduce credit risk to agents, but to accelerate payment by purchasers.

We are not satisfied that the proposed accreditation system would give rise	to any public benefit. On the
contrary, in our view it is highly likely that it would	give
rise to considerable anti-competitive detriment.

We consider that the proposed system would constitute an exercise of market power without redeeming public benefit to shorten credit terms, shift the risk-bearing function, impose undue credit costs upon processors, achieve privileged access

of security requirements. to financial information and discriminate in the imposition	The system would give rise to an inefficient allocatlon of risk-bearing: agents would not be approprlately motivated in their del credere function; and some potentlal newcomers to meat processing could be inappropriately deterred by bonding requirements.
Whilst, in the short run at least, the attractiveness of the auction system could be increased for producers, this would not be the result of competition on the merlts. The independence of the private agents could be undermined; and the Pastoral Houses encouraged to maintaln a co-operative
stance, one competition in the terms of credit which, in the to another. The system would preclude

Tribunal's

view, is just as valuable as any other form of competition.

The Tribunal refuses to grant the authorization sought
and sets aslde the authorization granted by the Commission.

The authorization granted by the Commission will therefore

not come into force.

TRADE PRACTICES TRIBUNAL

TRADE PRACTICES - Queensland Stock Agents - review of the

Trade Practices Commission authorization of proposed Constitution and Accredltatlon Rules of trade assoclatlon - whether the proposed conduct of such body would have the purpose OK effect of substantially lessening competition - whether public benefit outweighs publlc detrlment from the lessening of competltlon - jurisdiction of Tribunal under

S . 88 - whether power of authorization extends to both the

making and the giving effect to contracts, arrangements and understandlngs - whether S. 88(12) prohibits authorization of future conduct pursuant to contracts, arrangements or understandings which cannot hemselves be authorized.

Trade Practices Act 1974 (Cth): s s . 45(1A), 88, 90(6),
90(8), 101.

JOHN DEE (EXPORT) PTY. LTD. & ORS. RE: APPLICATION FOR A

REVIEW OF A DETERMINATION MADE BY THE	TRADE	PRACTICES
COMMISSION

Lockhart J. (President), Professor Brunt, Hr. Fitzgerald
14 April 1989
Sydney

COMMONWEALTH OF AUSTRALIA TRADE PRACTICES ACT, 1974

IN THE TRADE PRACTICES TRIBUNAL NSW 5 of 1987

RE: JOHN DEE (EXPORT) PTY.

LIMITED & ORS.

Applicants

RE: Application f o r a Review of a Determination made by the

Trade Practices Commission

dated 1 October 1987

MINUTE OF ORDER

TRIBUNAL: Lockhart J. (President), Professor M. Brunt,

Mr. A. Fitzgerald

14 April 1989

THE TRIBUNAL DETERMINES THAT: the determination Of the Trade

Practices Commission dated 1 October 1987 be set aside.

COMMONWEALTH OF AUSTRALIA TRADE PRACTICES ACT, 1974

IN THE TRADE PRACTICES TRIBUNAL NSW 5 Of 1987

RE: JOHN DEE (EXPORT) PTY.

LIMITED & ORS.

Appficants

RE: Application	for a Revlew
of a Determination made by	the

Trade Practices Commission

aated 1 October 1987

- INDEX

Paragraph Heading Page No.

1.	Introductlon	1
.	.
L	The Partles	6
3.	Submlssions of the Pastoral HOUSeS	8
4.	Subrnrsslons of the Meat Processors	11
5.	Witnesses and Exhibits	13
6.	The Constltutlon of QSAA	14
l .	The Accredltation Rules	18
8.	Conduct for Which Authorisatlon
is Sought	25
9.	Previous Appllcations for
Authorlsation	28
10.	The Relevant Law	35
11.	Methods of Marketlng Cattle
in Queensland	47
11.2	Auction sales versus paddock sales	48
11.3	CALM	53

12.         Pastoral Houses and Independent

Agents 57

L .

13.         Credit for Sale of Cattle by Auction

and Del Credere Risk 62
14.	Selling Centres and Saleyards 65
15.	Meat Processors 69

16.         Identification of the Relevant

Market 7 3

17.         Market Structure and Competitive

Behaviour 79

18.         Assessment of Clalmed Benefit and

Findings on Detriment, Bad Debts

and Credit Control 86

19.         Likely Operatlon of Proposed System

of Accreditation 93
20.	Analysis of Effects 98
21.	Conclusion 108

COMMONWEALTH OF AUSTRALIA TRADE PRACTICES ACT, 1974

IN THE TRADE PRACTICES TRIBUNAL NSW 5 of 1987

RE: JOHN DEE	(EXPORT) PTY.
LIMITED &	O R S .
Applicants

RE: Application for a Review of a Determination made by the Trade Practices Commission dated 1 October 1987

REASONS FOR DECISION

Lockhart J. (President), Professor Brunt and Mr. Fitzgerald

1.       Introduction

1.1 John Dee (Export) Pty. Limited ("John Dee") and other companies, which carry on buslness in Queensland as meat

processors, applied to the Tribunal under S. 101 of the - Trade

Practices Act 1974 ("the Act") for a review of a

determination of the Trade Practices Commission ("the

Commission") made on 1 October 1987 in relation to two

applications (A90450 and A90451) lodged by Elders IXL Limited

( "Elders"), Dalgety Farmers Limited ("Dalgetys") and Primac

Associatlon Llmlted ("Primac") (to which we shall generally refer collectively as "the Pastoral Houses") with the

Commission for authorlzatlon relating to the proposed

Constitution and Accreditation Rules of a new body, the

Queensland Stock Agents' Assoclatlon ("QSAA"). Applicatlon

A90450 was competition and appllcatlon A90451 In respect of an agreement that may affect

In respect of a possible

exclusionary provlslon. QSAA is in process of formatlon	by
Its three foundatlon members, Elders, Dalgetys and Primac, who have together drawn up the proposed Constitution and Accreditation Rules.
1.2	The declslon of the Commission is reported at (1987)
ATPR (Corn) 50-059.	The Commisslon was satisfied that:

there was public benefit in the proposed Constltutlon

and Accreditation Rules of QSAA except in relation to clause

6 of the Accredrtation Rules;

those public benefits outwelghed the detriment caused by any lessening of Competition; and

there was such a benefit to the public in the

excluslonary	provlslons	embodied	in	the	Constitutlon	and
Accreditatlon	Rules	(except	for	clause	6) that	those

provisions should be given effect to: (1987) (Corn) ATPR

50-059 at 57,200.

1.3 On 1 October 1987 Commission the granted

authorization to Accreditation Rules (except for clause QSAA's proposed Constltutlon and

6 of the Accreditation

Rules) in respect of applications A90450 and A90451 and to

the glvlng effect o excluslonary provisions contained

therein. Paragraph 11.3 of the determination provided that,

if no application for review of the determination was made to

the Trlbunal, ~t would come lnto force on 30 October 1987;

and that, if an application for revlew was made to the

Tribunal, the determination would come lnto force (a), if the application was not withdrawn, on the day on whlch the Tribunal made a determination on the review; and (b), if the application for review was withdrawn, on the day on whlch the applicatlon was withdrawn. As the application for review of the determination was made to the Tribunal and has not been withdrawn, the Commission's determination has not come into force. It will do so only if and when the Tribunal makes a determination on the review in favour of authorization.

1.4 A brief statement of the background facts 1 s necessary' to enable the issues which arise in this application for review to be understood.

1.5 QSAA is being formed to operate in Queensland. Membership of the QSAA is open to any Australian licensed livestock agent, but the Association is designed to regulate

the conduct of auctions by members within the State of

Queensland. There are to be two classes of members: the

foundation members and the private agents. The Constitution determines the qualifications for membership of the

Assoclation, the governance of the Association, and the

obligations of members to each other. It also provldes for the making of Accreditation Rules. Broadly speaking, the Accreditatlon Rules provrde for what are termed "concessional trading terms" upon which accredited buyers at auction sales of livestock conducted by members of the Associatlon may pay for thelr purchases. In the absence of accreditatlon the

Accreditatlon Rules provlde for the appllcation of what are

known as the Standard Conditio,l- of Sale.

1.6 It has been the practice in Queensland for the

Standard Conditions of Sale to be exhibited at all saleyards. Conditions 5, 6, 7, 8 and 11 have particular relevance to these applications and provide that the livestock agent or broker sells as a del credere agent; that the full purchase

price is payable by the buyer to and recoverable by the

broker alone; and that, in the absence of special terms, the full purchase price is "payable in cash on the fall of the hamme r " .

1.7 Originally, the Standard Conditions of Sale as a whole formed part of the applications fGr authorizatlon to the Commission. But on 14 July 1987 the Conditions were withdrawn from the appllcatlons, the applrcants having indicated that they were prepared to hold discussions wlth

parties who perceived problems with them. The position is

now that, while the Standard Conditlons of Sale do not form

part of the formal appllcations before us, the particular

conditions listed above were relled on In ald of ldentlficatlon of the conduct for which authorization 1s sought. Accordingly, the conditlons retaln relevance for the applications and issues before us.

1.8	The Accreditation Rules are deslgned to regulate the
credit terms that may be	extended to purchasers at auction of

livestock for slaughter wlthln 30 days. These purchasers would be meat processors and butchers. In short, the Rules make provlsion for procedures whereby ( a ) buyers of livestock at auction may be accredlted to the QSAA; (b) a buyer's departure from standard payment terms (to be established at 12 days) may be monltored; and (c) lnformation generally regarding credit-worthiness and current patterns of payment may be assembled. Accreditation may be granted sub~ect to "Special Condltions" which may include the lodglng of security to guarantee payment for purchases at auctions and a requirement that the applicant not exceed a prescribed level

of total Indebtedness.

1.9 The Pastoral Houses assert that he provislon of guarantees or other securltles from buyers wlll not be a general requirement for all who seek to trade on credlt, but will be required only when there is a discernlble credit risk. It is said that the amount of the guarantee would not exceed the estimated cost of two weeks' purchases of

livestock.
1.10	Provision is made by Rule 6 (a controverslal rule to

whlch we shall refer later) to the effect that, If a member deals for credit with a buyer who 1s not an accredlted person or with an accredlted person in excess of the provlsions of the concessional trading terms, he shall not be entitled to the benefLt of guarantees or other security arrangements furnished or provlded pursuant to the Accredltatlon Rules In

relation to the transaction or transactions the sublect of
the grant of credit.

1.11 The livestock Industry in Queensland includes cattle, sheep and plgs, whether "fats" ready for slaughter, "stores"

or breeders.	The stock sold by auction is mainly fat cattle,
store cattle or store sheep.	So far as auctlon for slaughter

is concerned, the great bulk and value of stock 1s In fat

cattle. The evidence that was placed before us on the functioning of the livestock industry focused, correctly In our view, largely upon the cattle Industry.

1.12 The Queensland cattle industry is an important one. The current cattle populatlon is approximately 9 million head, having fallen from 11 million over the preceding 10

years. There is signiflcant export.

1987 Queensland meat processors slaughtered, on average, 35%
of all cattle slaughtered In Australia, attalnlng 36% in

Over the perlod 1983 to

1987.

2 . Parties The

2.1 applicants Commission were the Pastoral Houses. The for authorization before the

Elders, Dalgetys and

Primac are the only three large Pastoral Houses operating in

Queensland. A group of 39 stock and statlon agents who sald that they intended to join QSAA, the Cattlemens' union and the Unitec' Graziers' Associatlon of Queensland lodged

l .

submissions in support of the application by the Pastoral
Houses, although they were not themselves parties to the

application. The independent agents supporting the

applications amount to roughly half the numbers of prrvate

agents. These private agents and the Pastoral Houses together account for over 90% of cattle marketed rn

Queensland through stock agents (whether by auction or dlrect

sales). The respondents in the current proceedings are Elders, Dalgetys and Primac, who again receive the support, upon a similar basis, of the group of independent agents and of the United Graziers' Association.

2.2 The determination are 21 meat applicants for review of the Commlsslon's

processors who handle over 90% of

cattle slaughtered in Queensland abbatoirs ("the Meat Processors"). Indeed, the only meat processor of any size

not opposing the applications was Beef City, a wholly-owned subsidiary of Elders. During the course of the hearing Elders took over one of those processors, Australia Meat Holdings Pty. Limlted ("AMH"), which thereupon withdrew its support for this application for revlew. Slnce AMH is the

largest meat processor in Queensland, accounting

of abbatoir throughput prior to its contested takeover of for some 30%

Thomas Borthwick and Sons (Australia) Ltd. (see - Trade

Practices Commission v Australia Meat Holdings Pty. Ltd. &

-	Ors. (1988) ATPR 40-876, Trade Practice Commrssion v
Australia Meat Holdings Pty. Ltd. (No.2) (1988) ATPR 40-893,
Australia Meat Holdings Pty. Ltd. Trade v Practlces
Commission, unreported judgment of Full COUKt of the Federal
Court, 3 March 1989), that action was slgnrficant.
3. Submlssions of the Pastoral Houses
3.1 The Pastoral Houses be granted for various reasons which we shall summarise: argued that authorlzation should

agents trading in Queensland accept the del credere risks for livestock sold at auction. There is a speclal problem In extending credit for purchase of stock to be

slaughtered in that the stock, by definition, is	a
perishable commodity which cannot	therefore serve as
security for the debt;

the risk of default relates to the entire value of the transaction; but agents are remunerated by a small percentage commission. Hence, the sum at risk is disproportlonately hlgh in relation to the gross commission received; In fact, 20 or more times the gross commission;

the existing system of credlt control in Queensland is

inadequate;

adequate credit controls will ensure a decrease in the

risk of default either by the processor or the agent and will thus Increase the value of the del credere guarantee to the producer;

a substantlal default by a processor could cause a chain of agents to collapse, and the effects of such a collapse might extend beyond the processor and the agent to the primary producer who might not recelve payment for cattle sold;

it is essential that there is an adequate degree of

information available to agents on the financial

standing of buyers and	their total indebtedness to all
agents in	Queensland as a whole;

the proposed credit control would be fair and accurate;

a centralized system is better placed to	monitor a
processor's credit position contlnuously and	to

admlrilster guarantees and call them up when necessary;

the proposed accredltatlon system 1s cost efficlent,	and
allows economies of scale	and the development of a high

level of expertise in credit appraisal;

smaller agents would be better served by a centralized
credit control system because	of the pooling of credlt

mformatlon and access to economies of scale;

a failure of a processor can produce uneven effects because the Pastoral Houses have the ability to absorb larger losses;

because of thelr relatively small size and lack of

market power, agents other than Pastoral Houses are not in a posltlon to obtain useful credit information about llvestock buyers, nor to obtaln satlsfactory guarantees;

there 1s a need for a strong body to represent all
agents in Queensland;

agents are faced wlth rapid economic, technologlcal and legal changes in which they conduct their businesses together with rislng costs; and they perceive that they will need to upgrade their educational quallficatlons and skills in the future;

the changes are bringing with them challenges that must be met and problems that must be solved on an industry basis. It is clalmed that QSAA wlll be able to play a radical role in assisting agents to adapt to change and Improving their efflclency;

the proposed system allows the extenslon of credit to processors and butchers more cheaply than alternative

sources, such as bank overdraft facillties;
the concentratlon of demand for slaughter cattle lnto	a

relatively small number of hands lustifles the development of a strong representatlve body in response; the proposed system would encourage competition. It

would strengthen the exlsting auction system as a competitive alternative to direct selling. The auctlon system is of particular value to small and medium-slzed producers. It 1s also valuable as a source of market intelligence.

4 .     Submissions of the Meat Processors

4.1 The Meat Processors argued that authorization should not be granted. The grounds on which they rely are, in summary, that:

there is no need for any centralised system of credit control. Agents hear quickly of events that adversely affect the creditworthiness or financial standing of a

particular buyer;

bad debts in this industry are negligible, especially in

the case of meat processors;

the proposed credit control would be neither fair nor

accurate. The proposed centralized credlt control system would not result in credit information of any worth to agents;

accreditation discriminates against meat processors in
favour of other buyers of livestock at auction;
commlssion rates charged by agents for sale by physical
auctlon are already too high. If the proposed credlt
control systems are introduced, and, if the del credere
risk is then reduced, there would not be any passing on
of the benefit of that reduction by agents to producers

in the form of a lower commlsslon rate;

the proposed system 1s not a credit control system designed to reduce bad debts to agents; but 1s a cashflow management system designed to ensure, by collective means, faster payment by buyers to agents and thereby enhance profits of stock agents;

even If the proposed accredltatlon system were voluntary

In form, being expressed In terms that leave an agent

who is a member of QSAA free to deal with a non-accredited buyer or with an accredited buyer who has exceeded the concessional tradlng terms, in practlce the system would work as a compulsory system requiring all

agents who are	members of QSAA to conform with the
traded on concessional tradlng terms. It was submltted recommendations of QSAA as to the buyers who might be	that the scheme holds itself out as a voluntary scheme
In the sense that it provldes members wlth
recommendatlons which are not blnding, but that the
scheme is in fact a compulsory scheme;
the best gulde as to how the proposed system would work
in practice 1 s how the same or substantially the same
scheme works In Victorla and New South Wales at present where lt is In effect mandatory, and, how the prevlous association of the Pastoral Houses In Queensland has operated to impose substantially uniform terms;
in practlce the system would constitute a colluslve mechanlsm which 1 s lntended to and would produce a high degree of uniformity in relation to credit extended to buyers whatever thelr frnancial position may be;
the system could be used to facilitate collusion and to inhibit independent competltlon generally by prlvate agents;
the system could be used as a device for securlng informatlon regardlng lndlvidual meat processors that would give a bargaining O K competitive advantage to those brokers who secure access to it.

5. Witnesses and Exhlblts

5.1 The hearing of this matter occupied 18 days. Statements from 3 4 witnesses were provided by the parties, 23

of whom were called to glve oral evldence. In some cases statements of wltnesses were admitted by consent wlthout the necessity of calling the witnesses themselves. A list of the witnesses and their occupations is annexed to these reasons

as Annexure A. The witnesses were officers of Elders,

Dalgety and Primac, independent agents, officers of meat processors and producers. Other witnesses were the senior officer of CALM and one witness who gave evidence about insurance arrangements. Only one expert economist gave evidence and he was called by the Meat Processors. The evidence tendered was extensive and voluminous.

5.2 We see no purpose in discussing the evidence of each

witness and stating our impression, witness by witness, as to his or her credibilrty or reliabllity. Our findings of fact are based on the assessments which we have formed of the

witnesses and we have vlewed their evidence in the light of

the relevant surrounding circumstances,	contemporaneous
documents and the probabilities.

6 . The Constitutlon of QSAA

6.1 Membership of QSAA is open to any Australian licensed stock and station agent (clause 5(ii)(a)). The foundation

members are Elders, Dalgetys and Primac (clause 5(i) and

Schedule A). Appeal against a refusal of admlssion for

membership lles to a speclal general meeting of members or

the next annual general meeting (clause 5(li)(b)). Each financial member has one vote for each place of business wlth respect to which an annual subscription has been paid, which may be exercised either in person or by proxy; and a quorum of 20 is needed for general meetings of members (clause lO(iv)(a), (d) and (f)).

6.2 The governing body is the Council of QSAA. Queensland is divlded into zones, each of which elects two members to the Council from members carrylng on business In the zone. At least one member elected fron each zone must be a private agent (that IS, a member of QSAA other than from a Pastoral House) unless no private agent 1s prepared to stand for electlon for that zone (clause 6 ) . There is a mechanism established by clause 7 to ensure that at least 50% of councillors are private agents and that there is an odd number of councillors. The councillors elect from members of the Council the president and two vice presidents, at least two of whom must be private agents (clause 7(v)). Questions arising at meetings of the Council are to be decided by simple majority and each councillor has one vote (clause T(ix)(c))..

6 . 3 The Executlve Committee of the Council conslsts of

the president, the two vice presidents, the Chairman of the
Accreditation Committee and the secretary (clause 8(1)). The

secretary is appointed by the

Council (clause 15(i)). Each

member of the Executive Committee has one vote and a quorum

of three is necessary (clause 8(v) and (vi)). The Council is

the Executive Commlttee except where the Council otherwise directs and except for the making of accredltatlon rules (clause 9(111)). The Executlve Committee may delegate powers, duties and functions to the Accreditation Committee

(clause dlvii) and 8A(ii)).

6.4 The Accreditation Committee consists of seven members, one member being appointed by each foundation member with the remalnlng four members, all of whom must be private agents, to be appointed by the Council (clause 8A(i)). Each

member of the Accreditation Committee has one vote and the

quorum is three. The Accreditation Committee elects its own
Chairman (clause 8A(iii), (iv), (v)) who becomes a member of
the Executive Committee.

6.5 There is an Accreditation Appeals Committee consisting of the Secretary and three councillors appointed by the Council of whom at least two shall be private agents

(clause 8B(i)). No member of the Accreditation Committee is

eligible to be a member of the Accreditation Appeals

Committee (clause 8B(il)). Each member of the Appeals

Committee is to have one vote and there is a quorum of three

(clause 8B(iv) and (v)).

6.6 A member is liable to expulsion by the Council on the happening of certain events set out in clause 12. Clause Association of a member who refuses to accept or obey any 12(ii) provides for the automatic expulsion from the decision or ad]udication of the Council in respect of an

allegation or dispute submltted to it. A ma~orlty of

three-quarters of members of the Council is required for

expulsion except in the case of automatic expulslon pursuant to clause 12(11) (clause 12(iv)). Appeals against expulslon

lie to a qpecial general meeting of annual general meeting, the upholding of the appeal requiring	members OK to the next
a three-quarters malority of members	to be in favour of the

appeal (clause 12(vi)).

6.7 There was sharp conflict between the parties as to whether QSAA will be dominated by the Pastoral Houses.

6.8 The Pastoral Houses pointed to the provisions of the

Constitution of QSAA and argued that on all critical matters the majority power is conferred on private agents, not the Pastoral Houses. They referred to the fact that private agents are assured of at least the bare ma~ority of members

of the Council and that it is the Council which elects

directly all members of the Executive Committee except the Chairman of the Accreditation Committee. Through thei r voting power at Council level the private agents have the malority vote on election of the Accreditation Committee whlch elects its own chairman. Also, the Council elects all

members of the Accreditation Appeals Committee.

6.9 The Meat Processors emphasised that it is how QSAA

works in practice that is the critical consideration, not

merely the formal structures of its Constitutlon and

Committees. The Processors said it was likely that QSAA

would be dominated by Pastoral Houses. They pointed to the

fact that each financial member has one vote for each place

of business with respect to which an annual subscription has

been paid. In the case of the Pastoral Houses, each of whlch has a large number of places of business, they would be

entitled to large numbers of members. Also, if the private agents do not seek as a body to exercise their voting power at Council meetings, the foundation members may secure majority votes at certain meetlngs of the Council, although in that event domlnatron by foundation members is restricted or prevented by reason of minimum representatlon provisions at Council level and majority representatlon provision at the Accreditation Committee level with respect to private agents.

6.10 Although QSAA is structured to ensure that the constitutional majority of power ultlmately rests with private agents, we are not persuaded that in practice the running of the affairs of QSAA including its Accreditation Committee could not be controlled by the Pastoral Houses. We

do not say that the Pastoral Houses would in fact control

QSAA. We'confine ourselves to saylng that, in the light of

experience and market realities, they could exercise actual
control.

l . The Accreditation Rules

7.1

rules (clause 9(ii)) of the Constitution). The Accreditation

The Council of QSAA is required to make accreditation Rules are expressed to apply in respect of the purchase at auction of livestock for slaughter within 30 days of purchase

(definition of purchase in rule 2 and see rule 3 ) .

1 . 2 There are 4 2 accreditatlon rules. We propose to

refer to some of them.

1.3 Certain additional Rules were brought to our attention in the course proposed amendments the to Rules and

of argument and we shall refer to the more lmportant of them

as we proceed.

1.4 Rule 2 contains deflnltions f o r the purposes of the

Accreditation Rules and it defines, so far as presently

relevant:

deemed to have delegated all Its powers and discretlons to

an "accredited person" as meaning a person to whom

accreditation has been granted and whose accreditation

is not suspended;

"accreditation" meaning as accreditation granted

pursuant to the rules for settlement of accounts upon

Concessional Tradlng Terms as defined;

"Accreditation Appeals Committee'' as meaning the

Accreditation Appeals Commlttee appointed by the Councll pursuant to the Constitution of QSAA;

"auction" as meaning the sale of livestock at an auction
conducted in Queensland by	a member of QSAA;

"concessional tradlng terms" as meaning the terms of

payment on credlt set out in Schedule 1 to the

Accreditation Rules;

"purchase" as meaning the purchase of llvestock for

slaughter withln 30 days of such purchase;

"standard condltlons of sale" means the standard	terms
of sale at auction.

1.5 Schedule 1, referred to In the above deflnltlon of "concessional trading terms" states "the concesslonal trading terms applicable to purchasers by accredited persons at

auctron": "All purchases made in Queensland shall be pald

for within ten (10) days from the date of sale". In the
course of the proceedrngs the Pastoral Houses intimated that
they would amend the term to 12 days In accordance wlth the
current practice of each Pastoral House.

7.6 We quote the following rules, which are those contained In the Accreditation Rules under the heading "Terms

of Tradlng at Auctions".

" 3 . Subject to these Rules the Standard

Conditions of Sale ... shall apply to every

purchase at Auction.

4 . Notwithstanding any provision in the Standard Conditions of Sale, a member may apply the

Concessional Trading Terms to any purchase at
Auction by an Accredlted Person.

5. The Concessional Trading Terms shall not apply to any purchase at Auctlon by a person who

is not an Accredited Person."

6 . If a Member knowingly grants credlt for

purchase or represents or acts In such a manner that other members have reason to believe that he

has granted credlt or wlll otherwise accept

liability for the purchase at Auction -

-	to any Person who 1s not an Accredlted Person or,
-	to an Accredited Person in excess of the provisions ofthe Concessional Trading Terms, then:
(a) the Member shall be personally

liable for the settlement of accounts wlth other members arising from each transaction in respect of which any such credit 1s granted or other members have been given such reason to believe has been granted or in respect of which other members

have been	given reason to believe
the	Member will otherwise accept

liability;

(b) the Member shall forward forthwith

to the Secretary a current statement of the Member's financial affairs, full partlculars of the credit granted or the liability accepted, and such further lnformation in relation thereto as the Secretary

may reasonably require. "

1.1 Rule 6 is the most important of the Accredltation

Rules for the purposes of these proceedings and was highly

controverslal throughout the proceedings before the Tribunal.
It has assumed different forms during the course of thls

matter: first, before the Commission and later before the

Tribunal. The form which It took before the Commission when it granted authorlzatron to the Accreditation Rules (other	than clause 6), 1s quite different from that which the
Pastoral Houses ultimately told the Tribunal in final address was the form that was to be Its flnal form and that reads as follows:

"6(a) A Member may, notwithstanding any other

prov'sions of these Rules including Rules 3 , 4 and

5 hereof, deal for credit on such terms and

condltions as the M mber in his absolute
discretion thinks flt with:

(i) any Person who 1s not an Accredited

Person; or

(ii) an Accredited Person In excess of the

provlsions of the Concessional Trading
Te rms

PROVIDED HOWEVER THAT if such Member deals wlth such person, he shall not be entitled to the benefit of any guarantee or other securlty arrangement furnished or provided pursuant to these Rules in relation to the transaction or transactions the subject of such grant of

credit .

(b) It is hereby expressly declared that a Member dealing with any Person who is not an Accredited Person or dealing with an Accredited Person in excess of the provisions of the Concessional Trading Terms is not acting in breach of these Accrc?itation Rules."

7 . 8 Rules 7 to 16A provide for the grant of

accreditation. In considering accreditatlon the Executlve

Committee 1s required by	rule 10 to have regard	to	the
following matters:

"(a) the financial standing of the Applicant,

including -

(i)    the availability of liquid funds to the

Appllcant compared to his likely

trading commitments;

(li) the assets and liabilities of the

Applicant (includlng contingent

liabilities) compared to the likely

requirements of hls business;

(rli) the nature and extent of any mortgages,

liens, charges and other claims over

the assets of the Applicant.

(b) The financlal and business hlstory of the Applicant, including any previous bankruptcy or insolvency.

(c) Committee grants an	Whether the Applicant is of good character and reputation."
7.9	If in the exercise of its drscretlon the Executive

application it may subject the appllcant

to the imposition of speclal condltlons (rule 14). The

special condltlons may lnclude a requirement that the applicant lodge with QSAA a security to guarantee payment for purchases at auction in such form and of such value as the Executive Committee considers appropriate having regard to certain specified matters; and a requirement that the applicant undertake to QSAA that he will not at any time exceed such level of total Indebtedness to members as may be prescribed by the Executive Commlttee in its determination

(rule 15). Provision is made In rules 19 to 26 for appeals

against determinations of the Executlve Committee.

7 .l0 The Executive Commlttee 1 s empowered to monitor the compliance by Accredlted Persons with Concessional Trading Terms, and is expressly empowered to request informatlon from Hembers for this purpose (rule 27).

7.11 Rules 28 to 30 provide for the suspension or

amendment of accreditation and Rules 31 and 32 fc- ?ppeals

against suspension or amendment.

7.12 Rule 33 provides for the notification of members of the accreditation status of purchasers; and rule 34 provrdes that if an applicatlon is refused or accreditation suspended, the notification:

"shall be accompanied by a recommendation that

Members should apply the Standard Conditions of

Sale to any purchase at Auctlon by the Person who

1s the sublect of the notlflcation."

7.13 Rules 35 to 37 provide for a rlght of arbitration where a person is dissatisfied with a decision of the

Accreditation Appeals Committee with respect to an appeal

against suspension or amendment of accreditation.

7.14 There 1s also a proposed rule 40A to be read together with the proposed rule 6:

"4OA. At the time of notiflcation of any refusal or suspensron pursuant to Rule 33, members shall be advised that the consequence to a member who grants concessronal tradlng terms or other terms of credit ato non-accredited person, notwithstanding the recommendation communicated by the notification, is that such member shall not be entltled to the benefit of any guarantee or other security arrangement furnished or provided pursuant to the Accreditation Rules in relation to the transaction or transactions the subject of

such grant of credit."

7.15 Rules 3, 4 and 34 refer to the Standard Condltlons of while not part of the applications before us, do retaln Sale. As we said earlier (above para. 1.7) these condltlons,

relevance as an aid to identification of the conduct for which authorization is sought. The Conditions to which the

Pastoral Houses would wish thelr rules to refer are 5, 6,	7,
8 and 11:

5.     The broker by its auctloneer is selllng as a del credere agent and the full purchase pr-lce for the stock hereby sold shall be payable by the buyer to and recoverable by the broker

alone and, except where terms are given by and at the discretlon of the broker, shall be payable In cash on the fall of the hammer.

6 .    Subject to

the provisions of Clause 13 hereof, all stock shall be at the risk and expense of the purchaser upon the fall of the hammer.

l . NO property or right In the said stock shall

pass to the purchaser or to any other person, firm or corporation untll payment in full of the purchase money and until all or any cheques or other negotiable instruments given in connection with the said payment shall have been paid and satisfied and until then the purchaser shall hold any stock dellvered to him as bailee for the vendor.

8.    Sub~ect to any concesslonal tradlng terms granted to the purchaser, at any time prior to payment the vendor or the selling agent in his own name may recover possessron of the stock and for that purpose enter in or upon any lands occupred by the purchase: as often as may be necessary or alternatively or in addltion sue for the recovery of possession of the stock.

11.  In the event of default or farlure by the

purchaser to pay the purchase money or any part thereof at the time and in the manner hereinbefore provlded, such unpaid purchase money shall bear interest at the current rate charged by the vendor's agent on overdue accounts, during such perlod of default, but

other rights of the vendor in the event of this clause shall be without prejudice to any such default or failure."

8.       Conduct for whlch Authorlzatlon 1s Sought

8.1 The questlon before proposed Constitution and Accredltatlon Rules of Q S R A the Tribunal is whether the

would,

upon adoption and implementation, constitute a contract, arrangement or understanding to the	effect that members of
QSAA would deal collectively for the purpose of	accrediting

purchasers of livestock at auctlon for slaughter and thus constitute an exclusionary provision or have the effect of substantially lessening competition In breach of S. 4 5 of the Act (sub-S. 88(1)).

0 . 2	The particular clauses	of	the Constitution and
Accreditation Rules of	QSAA which	may arguably	be said to

contain stipulations for an agreement of the kind	mentioned
are as follows:-

(i)	The	Constitution
Clause 5(ii)(a) which opens elrgibility for
membership	to all Australian licensed stock	and station
agents;

Clause 9(ii) which authorizes the Councll to make

accreditatlon rules;

Clause 12(i)(b) which relates to expulsion of a

member for breach of the rules or by-laws of the Assocation;

(ii) The Accreditation Rules

Rules 3 , 4 and 5 which relate to the terms of

trading;

Rule 6 which relates to the sanctlons for breach of recommended trading terms;

Rules 7 to 16 whlch relate to the grant or refusal of

accreditatlon;

Rule 27 which relates to the requesting of credit information from members;

Rules 28 to 30 which relate to suspenslon or

amendment of accredltation;

Rules 33 and 34 which relate to notifications to members of the accreditation status of purchasers and consequential recommendations as to trading terms.

8.3 A question arlses as to the status of the proposed

new rules, in particular of rule 6 and the related rule 40A.

It was said that the proposed new rule 6 represented a

fundamental alteratron to the nature of the arrangement for

which authorization was sought and that the Trlbunal has no

power to grant authorization to the new rule or, if it does,

it should not do so. Rule 6 in this new form was never submitted to the Commission and was not advanced before the Tribunal until flnal address by counsel for the Pastoral

Houses. It was submitted that, if it was	withln the
Tribunal's power to	grant authorization rn relation to an
arrangement embodying the proposed new rule 6 , it would be	a

breach of the rules of natural lustice to grant such an authorization and would in all the circumstances be a breach of the scheme of the Act.

8.4 This argument was developed in some depth before us

but we see no necessity to declde the question. The course which we propose to take is to assume that the sublect of the application for review before the Tribunal includes the Accredltation Rules In the form that they took when authorization was granted by the Commission and when application for revlew was made to the Tribunal. As we understand it, there had been no change to the form of the Accreditation Rules during that period. However, as the Tribunal has power to impose conditions upon the grant of authorization, it will bear in mind that one condition which could be imposed is that amendments to the Accreditation

Rules be made, including an amendment to rule 6 in the form

OK along the lines suggested by the Pastoral Houses which we

have reclted above. We adopt a similar approach to the other proposed alterations to the rules including the proposed new rule 40A.

9.       Previous Applicatlons for Authorizatlon

9.1 Previous appllcations have been made by or on behalf of bodies representlng stock and station agents in Victoria, New South Wales and Queensland. Brief reference to them IS deslrable.

9.2 Victoria. Applications were lodged on 7 September 1982 by Elders on behalf of the Victorian Stock Agents'

Association ("VSAA") . VSAA was formed in 1954 from "The

Associated Stock and Station Agents of Melbourne", an

organisation which represented the interests and vlews of stock agents in Victoria. VSAA had 99 principal members, the largest of whom were pastoral companies with branches throughout Victoria; but the majority of members were smaller organisations and individuals. The members comprised about 98% of the livestock agents practising in Victoria. It was

said that 92% of all fat stock in Victoria was sold through

the auction system. Authorization was sought from the

Commission in substance for the Constitution of VSAA and
proposed amendments including membership rules, the proposed
Accreditation Rules, and the proposed conduct of members of
VSAA giving effect to the Constitution, Accreditation Rules

and Schedules.

9.3 The final determination of the Commission was made on 20 May 1983 and is reported in [l9831 ATPR (Corn) 50-059. The Commission found that the requirements of sub-s. 90(7) and para. 90(8)(b) of the Act were satisfied and it granted	authorization to VSAA's Constitution and proposed amendments	thereto, the proposed Accreditation Rules and Schedules and
the proposed conduct of members of VSAA in giving effect to those documents.
9.4 The Constitution and Accreditation Rules of VSAA substantially similar to those are

proposed for QSAA leaving

aside the proposed Rule 6 and the related amendments.

9.5 New South Wales. An appllcation was lodged on 29

November 1983 by the Stock and Statlon Agents Association of New South Wales ( " S S A A " ) seeking authorization In substance for changes to the Constitution of SSAA which were deslgned to merge the organisation and functions of SSAA with those of the NSW Llvestock Agents' Bureau and for the Accreditation

Rules of SSAA.	The Bureau was operated exclusively for the
Pastoral Houses.	The Commission's flnal determination was

made on 11 September 1984 and is reported in [l9841 ATPR (Com) 50-078. The Commission noted that the proposed New

South Wales system was

"broadly the same as the VSAA system, in both a

structural sense, and in the basic objectives of

the systems and the methods employed to achieve them. In both cases, the ob~ective (which in the

Vicforian case the Commission accepted as a

benefit to the public) is to estatlish an

effective and consistent system of credit control that is fair to all partles" (para. 2 at p.

55,453).

9.6 The Constitution and Accredltatlon Rules of SSAA and VSAA were substantially the same. The Commission granted

authorization to the arrangements provided for in the changes

to the Constitution of SSAA and In the Accreditation Rules.

9.1 Queensland. Two applications, In substantially

similar terms to each other and to the Victorian and N.S.W.

applications, have been made in Queensland. Both were

granted interim authorization in similar terms In January

1975, and final authorizatlon In similar terms on 5 June

1981, subject to the deletion of certain credit control provisions referred to as "Schedule G" (rules 5 and 6). One applicatlon was made by Dalgetys on behalf of Itself and other members of 22 country llvestock assoclations: see

Queensland Country Livestock Assoclations (1981) ATPR	(Com.)
50-008. Membership of these associations	almost entlrely
comprised the branches of the five Pastoral	Houses in

existence at this time; however rn each of Dalby and the
Warwlck distrlcts there were in addition four private agents.
The second application was made by the Australian Mercantile
Land and Finance Co. Ltd. on behalf of Itself and the other
four Pastoral House members of The Queensland Llvestock,

Property and Produce Brokers' Association ("QLPPBA"): see

Queensland Livestock, Association (1981) ATPR (Corn) 50-009. Property and Produce Brokers

9.8 These authorizations were understood by witnesses for the Pastoral Houses to be still in force and to govern, In

particular, the conduct of QLPPBA. It is apparent that there has been in recent years some rationalisation in trade association organisation in this field of activity In

Queensland, with the QLPPBA currently belng the only

significant body.

9.9 QLPPBA has borne its present name (The Queensland Livestock Property and Produce Brokers Associatlon) since 1 July 1970. It was originally the Stock and Station Agents

and Auctioneers Association, dating back to the 1890's.

Although qualification for membershlp of QLPPBA is not

limited to pastoral houses, throughout its history pastoral

houses have played a very signlflcant role in Its affairs.

QLPPBA established a credit bureau to control credit

facilities and it contained rules designed to ensure that

what was referred to as "Schedule G" was adhered to by

members. The members of QLPPBA are currently the three

Pastoral Houses.

9.10 Schedule G is broadly akin to certain of the

Accreditation Rules including Rule 6. Rule 2 stipulated 12

days as the period allowed for settlement under Concessional Trading Terms subject to certaln qualifications. Rule 4 required participants in Schedule G to report the names of

all buyers who had not paid for their purchases on the due

date. Rule reports pursuant to rule 5 provided that buyers who were the subject of

4 would be notified that they were

purchasing was received by the selling agent concerned; and for the
notification to participants in Schedule G of the identity of at country sales conducted by

debarred from selling agents who operated under Schedule

G until payment

defaulting buyers. Rule	6 obliged participants in Schedule G
not to sell llvestock to any buyers whose payments were
overdue on their own books,	or to a buyer whose name had been

reported to them as havlng overdue outstanding payments.

9.11 The Commisslon found that there was a publlc beneflt

in QLPPBA's	Constitution, Rules and Regulations insofar as
they provide the necessary machinery	for the administration

and implementation of condltions for saleyard activities,

facilitating the efflcrent operation of lrvestock sales and thereby achievlng cost savings for sellers operating In the market. However, In refusing authorlzatlon of the credit control provlsrons embodred in rules 5 and 6 of Schedule G the Commlsslon said:

"6.8 The provisions preventing buyers who have

overdue debts outstanding from buying at further auctions and preventlng members and other selling agents from selling to such buyers may have anti-competltive detrlments. The associations In their submission state that the credit control provisions are necessary for members to continue to act as del credere agents. The Commission

recognises that there is a need for strlct credit

controls to ensure accounts are paid, when agents
guarantee payment to sellers particularly where
perhaps large amounts are involved. And there can
be no objection to a credit lnformation bureau
which purely disseminates credit information to
members, including information concerning buyers
on the credit list who have not pald their
accounts by the due date. However, agents should
then be free to decide unilaterally whether or not
they wlll sell to such buyers at future auctions,
elther for cash or on further credit. A
collective agreement by agents not to sell to such

buyers, and to bar them from further auctions

until their debt is paid, amounts	to collectlve
boycott, and is antl-competitlve."

(Queensland Country Livestock Associations, para. 6.8 at p. 55, 265; Queensland Livestock, Property and Produce Brokers'

Association, para. 6.8 at p. 55,270)
9.12	The slgnlficance of rules 5 and 6 of Schedule G needs

recounted. denied concessional tradlng terms In essence, a buyer who defaulted was

to be

until he put his accounts

into order and had to pay	cash for purchases In the meantlme.
The cash payment procedure at auctlon, whllst	not Impossible,

in practice, makes it very difflcult for a buyer to trade.

The decislon to deny concesslonal trading terms was that of

QLPPBA and it was in fact binding on all members. It

constituted a collective boycott on the granting of credit to offendlng purchasers. It is not clear what sanctions, lf any, were imposed upon members who failed to abide by decisions of QLPPBA. It should be noted that during the subsistence of Schedule G a major meat processor, namely,

Andersons, failed financially. It also should be recognised, as noted above, that the participants in Schedule G were in the main the Pastoral Houses.

9.13 It was submitted on behalf of the Pastoral Houses that the operation of rules 5 and 6 of Schedule G was in substance discontinued after June 1981. Whilst QLPPBA has

operated a credit bureau, collecting information on purchases

and payments of meat processors and butchers, it was said

that, members themselves as free to of QLPPBA have since Cune 1981 regarded

declde unilaterally whether or not to

sell to defaulting buyers at auctions either for cash or	on
concessional trading terms.
9.14 It was submitted by the Meat Processors that Schedule

G, including Rules 5 and 6, have in fact continued to operate in Queensland as between members of QLPPBA notwithstanding that the Commission's authorization of June 1981 excluded the mandatory credit control procedures of rules 5 and 6. It was argued that members of QLPPBA have, since June 1981, as well as before that time, made decisions to require bonds and securities from particular buyers and have on occasions made

arrangements as to how partlcular buyers are to be treated by

all members. The ordinary modus operandi of QLPPBA was sald to be that members inform each other as to their lntentlons

in relation to how a partlcular buyer is to be traded and

reach a common view on that question. QLPPBA has operated in

relation to these respects substantially the same after June 1981 as it did
before then. There is correspondence and other documentation
in existence to support the conclusion that the decision, matters, so it was submitted, in all

since June 1981, as	to how a particular buyer was to be
traded, was a matter for each individual member of QLPPBA	to
decide for himself; but the Meat	Processors submitted that
this material was merely window dressing to mask the	reality
that Schedule G had continued in operation.

9.15 It 1 s not necessary that we reach a conclusion on

this question. The Tribunal prefers to express no concluded

view on it except to say that on	the material before us we
are not persuaded that the operation and application of	Rules
5 and 6, which are the critical rules of Schedule G, have	In
is a member of QLPPBA.

fact been discontinued by the Pastoral Houses each of which

10. The Relevant Law 10.1 The applicatrons to the Commlsslon were made under S.

88 of the Act for authorizatlon of a proposed contract,

arrangeneat or understanding that would be, or might be, an

exclusionary provision or would have the purpose, or would have or might have the effect, of substantially lessening

competltlon within the meaning of sectlon 45. The relevant

tests for authorization are contained In sub-s. 90(6) and

90(8) of the Act.

10.2 Sub-section 90(6) requlres that the Tribunal be

satisfied in all the circumstances that the provlsion of the
proposed contract, arrangement or understanding would result,
or be likely to result, in a benefit to the public and that
that benefit would outweigh the detriment to the public
constltuted by any lessening of competltion that would
result, or be likely to result.

10.3 Whilst sub-s. 90(8) exhibits some variation in language, lt 1s and has been the Trlbunal's view that the

practical application of thrs language gives rise to a test

that is essentially the same JS that requlred by sub-s.

90(6), necessitating the establishment of likely benefit to

the public, and a welghing against that benefit of any likely

detriment to the public from lessening of competition:	-	Re
Media Council of
48,419	Australia (No. 2 ) (1987) ATPR 40-774 at p
10.4	The principles governlng the appllcation of	this

authorization test have been extenslvely dlscussed in previous determlnations of the Tribunal: Re Queensland Co-operative Milling Association Ltd. and Defiance Holdings

-	Ltd. (1976) ATPR 40-012; Re G. and M. Stephens Cartage
Contractors Pty. Ltd. (1977) ATPR 40-042, In Re Tooth and Co. Ltd; In Re Tooheys Ltd. (1979) ATPR 40-113.
10.5 We are content to state the guiding princlples In
summary form:

First, it is	for the parties seeklng authorization to
satisfy the Tribunal that benefit to	the public is
likely and that there will be sufficient public	benefit
to outwelgh any	likely anti-competitive detriment;
Second, since the likely benefits and detriments	to be

considered are those that would result from the proposed conduct, the Tribunal is required to consider the likely shape of the future both with and without the conduct In question; and

Third, that task will generally entail an understanding of the functioning of relevant markets wlth and without the conduct for which authorization is sought.

10.6 Various arguments were put to the Tribunal, some

going to its ]urisdiction and others to matters of

discretion, based upon the proper constructlon of S. 88 of

the Act. The relevant parts of S. 08 provide:

"88(1) Subject to this Part, the Commission may,

upon application by or on behalf of a corporation,

grant an authorization to the corporatlon -

(a) to make a contract or arrangement, or

arrive at an u derstanding, where a

provlslon of the proposed contract, arrangement or understanding would be, or mlght be, an exclusionary provision or would have the purpose, or would have or mlght have the effect, of substantlally lessenlng competition wlthln the meanlng of

section 4 5 ; or

(b) to glve effect to a provision of a

contract, arrangement or understanding where the provision is, or may be, an excluslonary provision or has the purpose,

or has or may have the effect, of

substantlally lessening competitlon	within
the meaning of section 4 5 ,

and while such an authorization remains in force -

(c) in the case of an authorization to make a

contract or arrangement or to arrive at an understanding - sub-section 4 5 ( 2 ) does not prevent the corporation from making the contract or arrangement or arriving at the understanding in accordance with the

authorization and giving effect In

accordance with the authorizatlon to any provision of the contract or arrangement so made or of the understanding so arrived at;

(d)	in the case of an authorrzation to glve effect to a provision of a contract -
(i) the provision is not unenforceable

by reason of sub-section 4 5 ( 1 ) ; and

(ii)    sub-section 4 5 ( 2 ) does not prevent the corporatlon from giving effect to the provision in accordance with the authorlzation; or

(e)	In the case of an authorizatlon to give effect to a provislon of an arrangement or understanding - sub-section 4 5 ( 2 ) doe= prevent the corporation from givrng effect Pqt	to the provision in accordance wlth	the
authorization.

t 2 ) Subject to sub-sections ( 3 ) and ( 4 ) ,

sub-section (1) does not permit the grantlng of an

authorization in relation to -

(a) the making of a contract or arrangement, or the arriving at an understandlng, that would contain a provision having the purpose, or having or being likely to have the effect, of flxlng, controlling or maintaining, or providing for the fixing, controlllng or maintainlng of, the price

JY.

for, or a discount, allowance, rebate or

credit in relation to, goods supplied or acqurred or to be supplled or acqulred by the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate

that are related to any of them, in

competition with each other, to or from

other persons V * I J are nelther proposed

parties to the proposed contract, arrangement or understanding nor bodies corporate related to such proposed partles; or

(b) the giving effect to such a provision of a

contract, arrangement or understanding.

(2A) The reference in pragraph (2)(a) to the

supply or acquisition of goods by persons In competition with each other includes a reference

to the supply or	acquisition of goods by	persons
who, but for a provision of	any	contract,
arrangement or	understanding or of any	proposed

contract, arrangement or understanding,	would be,
or would be likely to be,	in competition with each

other in relation to the supply or acquisition of

the goods.

.	..
(12) The Commission does not have power to grant
an authorizatlon to a corporation to make	a

contract or arrangement, arrive o at an

understanding or to require the givlng of, or to give, a covenant ~f the contract JC arrangement has been made, the understanding has been arrived at or the covenant has been given before the Commission makes a determlnatlon In respect of the application."

10.7 The Meat Processors argued that the Trlbunal did not have jurisdiction to hear the application for review. It was

said that the subject matter of the revlew 1s the determination of the Commission which In essence authorized the Pastoral Houses to make the arrangements embodled In the proposed Constltutlon and Accreditation Rules (except clause

6 of the Accreditation Rules). Those documents contained

allaegedly exclusionary provisions which would or might have the purpose or the effect of substantially lessenlng

4u.

competition within the meaning of S. 4 5 of the Act. It was

submitted that the proposed arrangements are in substance the same as those which have been In force for many years in Queensland and that those arrangements necessarily involve giving effect to the Schedule G restricticns. It was argued that one must look at the substance, not the form, of the application for authorization to the Commission and of review to the Tribunal, and that, when looked at this way, the substance of the prevlous and present conduct of the Pastoral Houses in Queensland is the same as the substance of the conduct the subject of appllcation for authorlzation and review. That conduct In Queensland was already the result,

so it was submitted, of an arrangement or understanding

between the Pastoral Houses. It was then argued that sub-s.

88(12) of the Act operated to deprive the Trlbunal of power to grant the requislte authorization because the relevant

contract, arrangement or understanding had been made or

arrived at before the Commission made its determlnation and before the Tribunal would make its determlnation of the review.

10.8 In the alternatlve, it was argued on behalf of the

Meat Processors that, ~f the Tribunal concluded that the

relevant contract or arrangement had been made, O K the

understanding arrived at, before the Tribunal made Its determlnation s.88(12) may operate to prohibit the authroisation. Such a conclusion It is argued would mean that the Tribunal would not be able to treat the applicatlon for reviqr as one for authorization to the giving effect to exclusionary provislons, or those provisions which may have the effect of substantially lessening competitlon, because the sub-s. 88(12) prohibltion extends to the giving effect to such provislons in addition to the making of the relevant

contract, arrangement or understanding.

10.9 It was argued on behalf of the Meat Processors, again in the alternative, that the Trlbunal has no power to

authorize the giving effect to such provisions on the ground
that the subject matter of the application for authorizatlon
to the Commissron, and hence of this application for revlew
by the Tribunal, was the maklnq of the relevant contract or
arrangement or the arrlvlng at the relevant understanding,
not the giving effect to the relevant provisions. Hence, for

the Tribunal to purport to authorize the glving effect to

those provisions would be beyond the Tribunal’s power.

10.10 An argument was put on behalf of the Meat Processors that the Trlbunal was prohbiited pursuant to s.88(2) from granting the authorization sought, whether in relation to the making of a contract or arrangement or the arriving at an

was argued to apply because the relevant provlsion of the understanding or the giving effect thereto. Section 88(2)	contract, arrangement or understanding was one which had the
purpose, or would be likely to have the effect, of fixing, controlling, malntalnlng or provlding for the fixing, controlling or maintainlng of an allowance or credlt in relation to goods supplied or acqurred, or to be supplled or
acquired, by the proposed partles to the proposed contract,
arrangement or understanding or the glving effect to such a provision of a contract, arrangement or understanding within the meaning of sub-s. 88(2) whlch in terms forbids the grant of authorization in those clrcumstances.
10.11 The conclusions of law that follow are those of the
President: see S. 42 of the Act which entrusts to the
President decisions on questions of law arising on a revlew.
In so far as some conclusions are stated which are not solely on questions of law they are the conclusions of all three members of the Tribunal
10.12 The power of the Commission, and hence that of the Tribunal, to grant authorizations whlch is conferred by S. 88
is with respect to two separate matters: first, the power to grant authorization to the making of a contract, arrangement
or the arriving at an understanding where a provision thereof
would or might be an exclusionary provision or would have the purpose or would have or might have the effect of substantially lessening competition withln the meanlng of S.
45; and, second, the power to grant authorization to the
giving effect to such a provision. This is plain as a matter
of the language and syntax of the varlous sub-sections of S. 88: see, for example, sub-s. (1) in all five of Its
paragraphs and sub-s. (2). Also, it is obvious that, lf the Commlsslon and the Trlbunal are to have effectlve powers over
the range of contracts, arrangements and understandlngs whlch
contain exclusionary provlslons or which would have the purpose or effect of substantially lessenlng competitlon, the rlght of corporations to seek authorization and the power of
the Commission and the Tribunal to grant it would ratlonally
not be confined to the mere making of contracts or arrangements or arrlvlng at understandlngs, but extend to glving effect to those provlsions whether before or after the
contracts, arrangements or understandings have been made or
arrived at.
10.13 Sub-section 88(1) is cast in language whlch empowers the Commission (and therefore the Tribunal on review of a decislon of the Commisslon) to grant authorizatlons to corporations to make contracts or arrangements or arrive at understandings or to give effect to relevant provisions upon application by or on behalf of corporations. It is not expressed in terms whlch define the amblt of applications of corporations for authorizatlon. Thls point is of some importance because it supports the concluslon that, even if a corporatlon has applied to the Commisslon for the grant of
authorlzatlon to make a contract or arrangement or arrive at
an understanding and has not lncluded wlthm the frame of the application a request for authorlzation to give effect to a provision of a contract, arrangement or understandlnq, there is no bar to the Commlsslon's grant of an authorization
elther to make the contract, arrangement or arrlve at the understandlng or to glve effect to the provislon or both, as the case may be, lf the circumstances of the case warrant thls in the opinlon of the Commlsslon. Indeed, the contrary conclusion would impede the proper working of the Act and act
against the interests of the commercial communlty and the
public generally. Plalnly it is the intent of the
leglslature, as discerned from Division 1 of Part VI1 of the Act, to deal with the substance of commercial conduct that might otherwlse contravene the Act.
10.14 The language of other relevant provisions of the Act, including S. 89 , which deals with procedures for applicatlons
for authorizatlon and S. 90, which relates to the
Commisslon's determination of applications for authorlzatlon, also supports this conclusion. Hence, even lf in the present case the application to the Commission and later by way of revlew to the Tribunal sought authorlzation f o r the Pastoral Houses to make the relevant contract or arrangement or arrive at the relevant understanding and did not lnclude in terms an application to give effect to the relevant provislon, the Commission (hence the Trlbunal) would nevertheless be
authorized by the Act to grant authorization either to the
making of the relevant contract, arrangelent O K arrlving at
the relevant understanding or giving effect to the relevent
provision or both, as the Commisslon or Tribunal deems appropriate in all the circumstances.
10.15 The applications for authorization which were lodged
with the Commission by the Pastoral Houses (nos. A90450 and A904511 have been perused by the Tribunal. Those
applications seek in terms authorizatlon for making the
relevant contract or arrangement or arrivlng at the relevant understanding or for grving effect thereto. That thls was the Commission's perception of the applications is plain from

._.

paragraph 11.2 of its determlnatlon, (1987) ATPR 50-059 at

57,200, which reads:

"11.2 In respect of appllcatlon numbers A90450

and A90451 the Commission therefore grants

authorlzation to Association's he proposed

Constitution and Accredltation Rulas (except for

cl. 6 of the Accreditation Rules) and to the

glving effect of exclusionary provislons contained

therein."

The re	is no substance in the argument of the Meat Processors
on thl	S polnt.

10.16	In turning to the	construction and effect of sub-s.
88(12)	of the Act, the f irst point to	notice is that the

language of the provision is confined to paragraph (a) not

paragraph (b) of sub-s. 88(l), though with an additional provision relating to covenants upon whlch nothing turns for

present purposes. There is no warrant for reading into

sub-s. 88(12) some implied restraint upon the Commission's
power with respect to the subject matter of para. 88(l)(b).
Further, there is sound reason why the legislature has
confined the operatlon of sub-s. 88(12) to the subject matter
of para. 88(l)(a). The legislature was concerned that, ~f the Commission's power to grant authorization could be

exercised with respect to the making of an agreement or arrangement or the arrlving at an understanding so as to have retroactive effect, it would render nugatory the consequences of previous or exlstlng breaches of provlsions of Part IV of

the Act which may have occurred after the maklng of the

relevant agreements or arrangements or the arriving at the relevant understandlng. Sub-section (12) does not therefore

prevent authorlzation belng glven to a corporation's future

conduct whlch takes place pursuant to a contract or
arrangement or understanding the making of which may Itself
be outside the lurlsdiction of the Commlssion to authorize.

10.17 The Tribunal noted above that it was not necessary to reach a concluslon as to whether slnce June 1981 members of QLPPBA have in fact declded for themselves how Individual buyers should be traded, or whether joint decision-maklng

equivalent to that which had previously taken place under Schedule G has been contlnued. Whatever the answer to that questlon, the Tribunal relects the submlssion of the Meat Processors that the relevant contract or arrangement or

understanding or conduct pursuant thereto 1 s the same as that whlch may currently be In force in Queensland pursuant to arrangements analogous to those deflned rn Rules 5 and 6 of Schedule G. We accept for this purpose that there may be close correspondence between the conduct presently in force In Queensland and the proposed conduct that would be llkely to ensue if authorlzatlon were granted in the present case.

Although the Pastoral Houses are both the applicants for	authorizatlon In the present case and the members of QLPPBA,
there are differences between the proposed Constltutlon and Accredltatlon Rules and the comparable documents presently in force under the QLPPBA, lncludlng provisions wlthln the QSAA proposals for appeal and arbltration.
10.18 Also, the proposed system would involve not only the
Pastoral Houses, but as many independent stock and station agents in Queensland as applied for membership and were
accepted as members. It is fundamental to the proposed
system of QSAA that private agents be brought into the scheme with the Pastoral Houses to ensure a different working of the system under the auspices of the proposed Constitution and Accreditation Rules. Thus the subject matter of the application for authorization is n o t an existing contract, arrangement or understanding which applies in Queensland or the giving effect thereto, but the prospective arrangement and conduct, notwithstanding the existence of many
similarities in substance between the conduct said to have
taken place in the recent past and the conduct for which
authorization is sought.
10.19 There remains the submisslon of the Meat Processors
with respect to the construction of sub-s. 8 8 ( 2 ) , which was
quoted above. Sub-section 8 8 ( 2 ) must be read in relation to sub-s. 45A(1) of the Act which declares in essence that prlce fixing agreements are illegal per se. That sub-section
provides:

9u.

area of Emerald, has been ten years in business and has never
had a bad debt.

"Why are you so keen on having this system introduced? You obviously are very keen. Why are

you so keen on it? --- I recognise my

vulnerability. It is a high turnover industry. Four times in the last two years my company has turned over $1 million in eight days, and that 1s dangerous. It is dangerous.

...

I would comment, your Honour, that the industry has a low rlsk factor at present historically and by tradition, the element of risk has not been there. It is not an industry where there are a lot of failures. This court - we can only go back, what 20 years, the last Queensland meat works failure that, believe me, a lot of money and a lot of water has gone under the bridge slnce then. It 1s not an industry fraught wlth failures. It is not like selling used cars or something. It IS - we aLe dealing with fairly substantial and honourable customers generally."

Then in response to questions from counsel:

" ... it is not the large processors that are the	problem, it is more of the wholesale butcher type
processor. Some of them are a bit skinny ...
...
"And the small butchers? --- No, the small	butcher

is not a - he 1s the other end of the scale. A small butcher who is actually pushlng the knlfe, who owns his own shop and such like, not many of them fall to pay for thelr cattle, because they know that with no - with no cattle, no meat, no customer, no money and they are pretty aware of that

So it is really the category of cattle slaughterer who you would descrlbe as wholesale butchers that you are really worried about? --- Yes. It 1s a low risk industry, let us get that over.

Yes? --- But lt 1s not a no rlsk Industry and the rlsk is compounded by the fact that there are so many selling centres In Queensland and you do not know what is going on; you do not know what the purchasers of that slow payer 1s and what hls

indebtedness is state-wlde. ...

So what you really want is that Information? --- I

want to be a member of a team and know what is

going on.	But that is not the whole reason I want
to be a member of the team.	Thls case so far, and

our learned friend’s questionings have all been at one aspect of the case. We as agents have no input at all, none at all in the Industry, we have

no say .... I 11

18.11 In our opinion, the Pastoral Houses do not In fact perceive the prlmary function or purpose of the proposed system of accredltation of purchasers of livestock for slaughter.as being the containment of credit risk. In our opinlon the provision of bonds or guarantees and the threat or even possibillty that the processors would be placed on cash terms if they do not comply with concesslonal trading terms or provide security has little, if anything, to do with any present or prospective problem of bad, or doubtful, debts.

18.12 In our opinlon, the Pastoral Houses wish to have

bonds and other securltles to secure quicker payment by
processors for cattle purchased for slaughter at auction.
The ultimate alm of the Pastoral Houses in this 1s plalnly to
lessen the time which processors are allowed for payment. No
doubt, this would be of benefit to them. Hgwever, in O U T
opinion it has not been establrshed - and indeed, there was
no attempt to establish - that there is any real case for
grantlng authorization for this purpose.

18.13 In our opinlon, the scheme as a whole would be of

advantage to the Pastoral Houses in a number of ways (see

below, para. 20.1, 20.4, 20.14, 21.7). These advantages do

not give rise to benefit to the public; on the contrary, they

give rise to anti-competrtive detriment.

18.14 In the Tribunal's view, the very low level of bad debts incurred by agents in the sale of livestock for

slaughter at auction does not warrant an extensive

accreditation or credit control procedure. Any business carries a certain amount of credit risk. Any prudent business person will not do business wlth slow payers, and will obtain bank references or trade references for any new customer. These courses of action are perfectly open to

agents. There IS, In our view, no justiflcation and no need for requlring meat processors to put up securlty bonds or guarantees or provide financial statements where that

requirement is sought to be enforced by the common action of

agents through QSAA.

18.15 The obvious answer from the evidence is that if an

agent does buslness with a buyer whom he is aware has a

doubtful credit record, he does so at his own risk. Some

limited credit risk is a normal part of runnlng any business. In addition, there is this special characteristic of this industry, that it 1s part of the stock agent's function to take the del credere rlsk. For this, the Pastoral Houses are adequately rewarded.

19.      Llkely Operation of the Proposed System of Accreditatlon

19.1 Experience of the operation of Schedule G In Queensland before 1981 and experience thereafter (whether pursuant to Schedule G or not) leads us to conclude that the

likely result of the operation of the proposed new system for which authorlzatron IS sought is that buyers will be virtually compelled to keep within concessional trading terms under threat of being "put on cash". This threat means that a buyer 1s unable to take delivery of hls cattle untll

payment is made. Moreover, a member of QSAA is in practice

likely to be bound to trade on cash a buyer whose accreditation has been withdrawn, notwlthstandlng his apparent freedom of choice under the terms of the latest version of proposed Rule 6 . A member of QSAA who trades a non-accredited person on credit will be deprived of access to

QSAA's guarantees or other securities. The proposed system

is designed to encourage members to adhere to the

concessional tradlng arrangements. It is therefore likely

that a non-accredited person will not be traded by	members of
QSAA except for cash.
19.2	The evidence before us about present experiences in

New South Wales and Victoria also points strongly to the conclusion that any recommendations by QSAA and its Council and other bodies would almost lnvariably be adhered to by the Pastoral Houses and Independent agents.

19.3 It is likely that In practlce the Accreditation Committee would act for the purpose of eneurrng that members of QSAA adopted the same approach to a livestock buyer who 1s not accredited. The reason is plan enough, namely, that for a system of the klnd proposed to achieve success, there must be total or almost total compliance with such system. Without that degree of compliance, agents considering whether or not to comply would be worried that another agent would trade a particular buyer, thereby obtaining a competitlve advantage over agents who complied with the QSAA recommendation. Most agents would want to be in the position of being assured that nobody else will deal wlth the partrcular buyer before they make their own decisions. In New South Wales and Victorla, members of the relevant industry bodles of agents presently operating are reminded from time toime that they should comply wlth recommendations of the Accreditatlon Committee and efforts are made to ensure compliance. It is plain that to work the

proposed system must have at least a high level of persuaslve

authority amounting to effective compulslon of members of

QSAA .

19.4 Although one of the arguments in favour of

authorlzatlon 1s said to be that It would lncrease the flow of information to members of QSAA about the credit of buyers including processors, past experience In New South Wales and

9 J .

Victoria does not support this proposition. The main item of communication to members is a recommendation as to whether or not to trade a buyer as accredited. Credit details are generally not given to members. We doubt if this position would change in practice if authorization were granted in

this case.

19.5 Indeed, the Livestock Agents Bureau was in operation in Queensland before the issue of granting authorization to the QLPPBA came before the Commission. It was then possible

for agents, be they private or the Pastoral Houses, to hear

quite quickly if the Bureau thought a particular buyer was a bad risk and agents could then make their own decisions about whether they took the bid. That process also conveyed minimal information as to the credit of particular buyers.

19.6 By way of comparison, it is useful to refer to the
system of credit control presentiy operating in New South
Wales under the auspices of SSAA. under that system random

checks are made of the payment patterns of buyers selected.

Also, particular checks are conducted when the random

investigation reveals matters of particular concern. About

15 random checks take place each month, and about 25-30 checks of targeted processors. The random checks are conducted because the Accreditation Committee of SSAA does not trust "deemed" accreditations, being accreditations of buyers who had been accredited under previous systems of

credit control. Random selections are made only of

processors whose accreditations have not yet been scrutinised by the Committee. But the Accredltatlon Committee of SSAA has never used or even consldered using the klnd of external credit information that may be available from a credit bureau. Information is sought from flnancial statements and no private credit agencies are used. In our view, the evldence indicates that the credit lntelllgence which 1s in the possession of the Accreditation Committee of SSAA 1s such that very little worthwhile information is collected, let alone disseminated to agents who may enquire about the credit rating of a particular buyer or prospective buyer.

19.7 when it is remembered that the amount owing to agents upon purchases by processors, especially large processors, can reach extremely large figures wrthin a period of two

weeks of trading, we strongly doubt if the proposed system

would in fact result in an effectlve credit checking of the processors concerned. To be effective, credit checks would have to be very frequently conducted, and information would have to be sought from varied sources having real knowledge of the affairs of the processor concerned, not merely from flnancial statements such as published accounts. This would necessarily require that regularly obtained up to date information about the flnanclal he credlt information system standing and ability of the particular processor, in

particular about its liquidity. We strongly doubt if the

system for which authorization is presently sought would be able to work in this way. Indeed, it would be llkely to work much the same as It does in New South Wales at present under SSAA, which on the evldence before us appears to be neither an effective credit checking system nor an effective credit

reference system.

19.8 The experlence In the various eastern States suggests plainly to us that If authorization were granted indivldual agents would not receive useful credit information of the kind required to enable them to make sensible judgements

about how to deal with buyers of llvestock. All they are likely to receive is some form of stipulation from the Accreditation Committee or other body of the QSAA to the

effect that particular identified buyers are to be treated as cash buyers or that consideration should be given by members to so treating them. The scheme would provide few, if any, of the benefits of a credit information system. In the Tribunal's view, the proposed system would really be in the nature of a compulsory credit restriction system.

19.9 In the case of a possible bad risk, it is lrkely that

this information would in fact only be recelved after the
damage had already been done. An example of the failure of
the previous systems of credit control adopted in the eastern

when that risk is in fact a real one is provided by the	States to deal sufficiently promptly with the risk .rf fallure
failure of Andersons in the 1960's. Andersons was a meat processor whlch engaged in the slaughtering and exporting of beef on a large scale. It suffered severe financial difficulty In 1967. Schedule G was operating at that tlme, but it did not prevent losses to the agents when Andersons
went into receivership in 1967. It collapsed because it
continued to buy whilst credlt was available. It is llkely that credit would not in fact have been stopped through the availability of more credlt informatlon. There were strong rumours before Andersons collapsed about its flnanclal stability, but agents contlnued to sell cattle to Andersons at auction in large numbers. Andersons was paying over the
perceived market prlce for cattle and the Pastoral Houses supported the company in its purchases by allowing it continued credit
19.10 It 1s also plain that "the bush telegraph" generally spreads the word very quickly rf a meat processor is in
default or has a liquidity problem. Most agents would not
knowingly allow another agent to sell cattle to a meat processor who is In default. There is little doubt that market intelligence between agents is qulte reliable and they hear quickly enough about a purchaser whose financlal standing is in doubt. If one of the Pastural Houses or other agents put a purchaser, whether a processor or not, on cash terms, the word would spread through the industry qulckly. To use the words of Mr. Roberts of Elders: "The Industry has
whole State. intelligence spreads within a district rather than over a the best grapevine of any industry". Probably this 20. Analysis of Effects
20.1 We have found that the proposed system of bonding and
accreditation is largely directed to securing quicker payment
by processors for cattle purchased for slaughter at auctlon. It is thus approprlately described as a (temporal) credlt restriction system. we have also found that it 1s likely that It would be in practlce a compulsory system, one I n which all, or almost all, members would accept recommendations from QSAA as blnding them to comply wlth such recommendations. These are the two key features of the proposed system. We here examine the implications of these
features for the generatlon of benefit and detriment to the
public.
2 0 . 2 We have also found that the system 1 s likely to generate little useful Information or make any significant contribution to the containment of credit risk. Nevertheless we shall examine more closely what might be the implications for benefit and detrlment to the publrc were the system to enjoy some limited success in this regard.
20.3 Upon this closer analysis we find the effects of the
proposed system not to be appropriately described as beneflts to the public; rather they constitute anti-competitive
detriment, as the following demonstrates:
20.4  A collective system of credit restriction is, In
essence, a concealed prlce rise. The Pastoral Houses' worklng capital posltlon would be enhanced, that of meat processors dlminlshed. The Pastoral Houses' recelpts, unllke those of the prlvate agents, are not required to be segregated in trust accounts. Thus a shortening of credit

I U U .

terms would improve the Pastoral Houses' cash flow. While there is little competition as to rates between the Pastoral Houses, their rates are sublect to price control, i.e. they

are held to a maximum of 5%. Thus, the restriction on credlt could be expected to have a similar impact upon profitabillty to a price rise.

2 0 . 5 The independence of agents who join OSSA might well

be undermined. Certainly we predict this happening in the

collective enforcement of uniform credit terms. We think, however, that the effect upon the private agent's capacity for independent decision-making and competitive pressure upon the Pastoral Houses might be more generally inhibited. As we have seen, it IS the private agents that presently offer competition as to rates. It 1s desirable, too, that in the future the private agents not be shackled in their capacity for independent assessment and response to the dynamic forces operating about their industry.

20 .6 It was submitted that there is public benefit in the creation of an industry-wide trade association to secure the

more effective representation of the interests of livestock

agents in Queensland. Perhaps so . But there is no connection between the establishment of this elaborate bonding and accreditation system and the establishment of a useful trade associatlon. Moreover, lf there be any merlt in the creation of a speclallsed credit bureau to monitor credit information relating to purchases of cattle, such a bureau would be b-tter operated by independent professional people,

1u1

in possession of appropriate technical expertise and the

capacity to guarantee confidentlallty.

20.7 It was submitted by counsel for the Heat Processors

that in essential respects the new system would operate to reinstate the old, so far as the Pastoral Houses are concerned. One of the reasons, indeed, given by the Pastoral

Houses for proposing the new system was, as expressed in	the
affidavit of one of the exeuctives, that there	is

"uncertarnty as to the legality of the existing bondlng system". Granted that the new system has some signlflcant dlfferences from the old, namely, rn its coverage of the

independent agents, its wider information network, its appeal system and its nominal "voluntary" character; it 1 s stlll the case that it shackles the Pastoral Houses' own independent capacity for competltlon, whatever that be - both now and in

the future. One example of how that might operate is the inhlbltlons placed upon each Pastoral Houses' capaclty to develop an independent strategy in response to forces maklng

for change. Another would be the removal of some of the incentives to efficiency in the conduct of their widespread

establishes that it is common for the Pastoral Houses to be	netowrk. To give one pertinent example, the evidence
slow In despatching invoices to purchasers. Elders In particular has a reputation in the Industry for the slow delivery of invoices. The average tlme taken by the Pastoral Houses to despatch lnvoices to purchasers appears to be about l or 8 days after sale, but delays of up to 14 days are not
uncommon. This particular system would tend to encourage the

IUL.

making of cornerclally unjustlfiable demands upon buyers	and
would at the same	tlme insulate agents from normal

consequences of any inefficlency in thezr systems In relatlon to the rendering of Invoices and requlrlng of payment for goods sold at auctlon.

2 0 . 8 More generally, we have written above of the opportunities and temptations for collusion associated with the exlstence of the credlt bureau of QLPPBA. The authorization of this ystem would enhance such opportunitles and temptations.

2 0 . 9 It was submitted to the Tribunal by counsel f o r the

Pastoral Houses that there is a

"pubiic benefit in malntaining a strong adversary system to direct dealing in the auction system so that producers and in partlcular small to medium sized producers have effective choices as to the means by which they deal wlth meat processors. The physical auction system 1 s the most robust competitor presently avallable to dlrect selling, as well as constitutlng the dominant market indlcator. For the auction system to remain viable and vigorous, there must obviously be confidence in the system".

20.10 In a broadly competltive market settlng, the

strengthening of the physical auction system vis a vis dlrect
selling, and other marketing modes, might well be thought to

benefit the public. Producers and processors, alike, would

freely choose between alternatlve marketlng modes.	However
that is not the case here.	We have found that the Pastoral
Houses, when acting ~olntly,	do possess significant market
power; and that this	would be enhanced by many independent
agents' uniform adherence, in practice, to	the

recommendatlons of the Accredltatlon Committee and Executzve. Further, the Accredltatlon Rules would be Imposed by collective means upon reluctan:. meat processors unable or unwilling to avold substantlal use of the physlcal auctlon

system. There is no sense accreditation system would foster effectlve competition. in whlch it might be said that the

20.11 Meat processors are strong buyers. But to strengthen the position of the Pastoral Houses by authorization of the accreditatlon system is little more than to permrt them to exercise their market power to change uniform and restricted credit terms, and to shift the costs of risk-bearlng to the processors.

20.12 We have concluded that the system 1s unlikely to

diminish the Incidence of del credere risk through improved information. Rather, the system would shift the cost of that risk to meat processors as a group, compelling most of them to furnlsh securities and guarantees. Calculations were

placed before us of the impllcations for working capltal
costs of the processors.	We accept that there would be
significant costs.	In our opinion they are unnecesary, in

that the rlsks are not great and there are alternatlve techniques of risk management available, such as the exerclse of care and prudence on the part of stock agents. In our

view they are Inappropriately located, In that they would be borne by financially sound and unsound processors alike, and

l U 4 .

serve no functlon in stlmulatlng the exerclse of due care and prudence. They could deter the entry of new meat processors to the industry.

20.13 It was argued that the meat proce=sor is better able

to bear the rlsks of default than is the producer or small

agent. But the producer delegates to the agent the functlons

of credit-management and risk-bearing. That is what the del credere function means. This 1s the justificatlon, in part, for the agent's commission. It 1s the agent who 1s In the position to seek out the relevant information regarding

credit-worthlness, on behalf of the producer, and to manage

the credit function with due care. Economic efflciency will be served if It is the agent that bears the credit risk as well as the rewards, for he will then be appropriately motivated'ln his task.

20.14 The Pastoral Houses would not have a malority on the Accreditation Committee but they would always be represented on it. To the extent that the Accreditation Committee would receive hard financlal information on individual meat processors, the Pastoral Houses would have privlleged access to it. It 1 s not proposed that thls information be

disseminated to members rn general: it IS "confldential"

informatlon. Thls means that the members of the Accreditation Committee would be glven an advantage vis-a-vis the remalnlng membershlp. It could also mean that they secure Inappropriate financlal information regarding competitors. For, as we have seen, agents and processors may sometimes compete In the purchase of cattle; processors assume some of the functions of agents when making dlrect purchases; and Elders operates as both agent and processor.

Nor 1s the Tribunal satisfled that the confldentlallty arrangements would preclude AMH from obtalnlng access to lnformation about the flnancial posltion of meat processors who are its competitors.

20.15 The llkely result of the proposed system, lf

authorized, 1s that it would provide a centralised and compulsory machlnery to ensure that an obligation of prompt payment is in fact Imposed on meat processors and other

purchasers whlch will be strlctly enforced. The enforcement 15, however, likely to be discrimlnatory in that processors

probably would be required to provide security for ad hoc

reasons having little, if anythlng, to do with their creditworthiness. Our concluslon is supported by experlence in New South Wales and Vlctoria of the systems presently there in force.

20.16 It would not be surprising if, for example, AMH were not required to provide securlties, with QSAA content to

accept a letter of comfort from Elders. In the Tribunal's

view, such a result would act as a severe anti-competltlve
detriment to other processors.

20.17 There 1s some evidence from the Pastoral Houses that, if authorization is not granted, some meat processors may attempt to extend their times for payment. It was argued

I U .

that the proposed system offers a useful control over the meat processors' proclivities. However, an alternative

control is available, namely to offer a discount for prompt

payment. Also, the Pastoral Houses' fears may simply mean that in practice there will be competition by processors for purchasing cattle from agents who tend to be more indulgent in relation to the provision of credit. On the other hand, it is clear that the proposed accreditation system would enable the security arrangements to be weapons to further the control of time taken by processors for payment. In OUT view this should simply be left to market forces.

20.18 The alternative of rivalrous conduct of the Pastoral Houses and other agents in relation to the time for payment afforded to processors purchasing at auction should be permitted; Without the benefit of the authorization and without the proposed system the Pastoral Houses would have to meet competition in the marketplace. If other agents permitted their payment patterns to extend, the Pastoral Houses would have to consider their own position and meet

that development in a competitive manner. The processors

would be allowed to shop around between agents for the terms

that best suited them and agents could bargain with the

processors accordingly. We not only see nothing wrong with

such conduct, but	regard it as a matter of positive public
benefit.

20.19 It was submitted by counsel for the Pastoral Houses that competition in credit terms is impracticable. But we

1u l

have just described one quite practical mode for credlt competltion. Another lies In the indlvidual agent's making his own assessment of credit-worthiness.

20.20 Mr. Teys, a meat processor, was asked whether

thought that the proposed system was not "quite a harmless
kind of arrangement"? He replied:

he

"I do not view it as a harmless arrangement.

Why? --- Because an agent - if we had an accreditation thing put up to us, they could collectively start saying to us, right, we are not going to truck your llvestock. You are golng to -

I do no - I do not mlnd someone saying - an agent	the - the 12 days could go to seven days. ... Now,
coming to me and saying, 'I'm sorry, I don't want to take your bld today.' Well, that is fine. I - you know, if an agent said that, that is fine. I can - I can make other arrangements and - and - and there is competltion there, but if we have an accreditatlon, ~t is taking away the competition Morex that he - the other agents were reluctant to that we have wlth an agent. ... In the respect of
trade hlm. This is three years or so ago, but a private agent said, I'll trade this fellow', and he went up there, and the bigger - the market was
market so good for this private agent, but that absolutely the best market. . .. he made this
private agent took his own chance on his credit arrangements. He has got paid for all of hls livestock. There was no - no problem, I do not think. He - he seemed to have got pald, and he
still goes there, and he stlll dominates his
market every week.
Yes? --- And - and that is the competition that
that agents have now 1 s golng to be dlmlnished ... [we've got] - that competltron that - that -
under It --- Yes? --- because he - that sltuation - that person
would have been put Into a sltuatlon that the
private agent would not have been able to trade
hlm .. .
Yes? --- where out of his wlt he has made a market for that man ---
Yes? --- and that man has enjoyed being
Independent. "

I U U .

21. Conclusion

21.1 We have earller stated our flndings on particular matters under the relevant headlngs and need not repeat them.

A summary will suffice	for present purposes.
21.2 What is asserted in essence by the Pastoral Houses in support of authorizatlon is	that the proposed system:

will not be dominated by the Pastoral Houses;

will be of equal benefit to the Pastoral Houses and
Independent agents alike;

wlll give r l s e to a better system of credlt control wlth bonds and guarantees being provided for the benefit of all members, not just the Pastoral Houses;

will reduce the del credere risk to agents;

will provide information to agents whlch is not

presently available to Independent agents, namely,

informatlon as to the financial stabillty of	processors
and other purchasers of llvestock;

will offer greater abllrty to monltor payment patterns

In accordance wlth concessional trading terms;

l U 9 .

will not be inimlcal to competition or result in

anti-competitive detriment.

21.3 It 1s hard to Indication of any real or imagine an industry which shows less

substantial crpcljt risks than the

sale of livestock; the history of the	Industry over many
years proves this.

21.4 The Tribunal 1 s not satlsfied that the proposed system of market intelligence would give rise to such improvements or that any real differences would occur in practice in warning agents about purchasers OK prospective

purchasers who may be credit risks.	Any increase in the
available credit	information would we think be marginal.

Past experience the in Eastern States shows that

recommendations to members as to the risks involved in dealing with a particular purchaser or prospective purchaser are of limited practical use.

21.5	Even viewing the proposed system on the basis that
the Accreditation	Rules include the most recently drawn
proposed rules, including Rule 6 , it is likely that it would
be in practice a compulsory system. It	is unreal to think
that the system would operate in practice as voluntary.	The

Tribunal is satisfied that the system would be one in which all, or almost all, members would accept recommendations from

QSAA as bindlng them to comply wlth such recommendations. It

is likely that the proposed system would operate in practice, not as a means to reduce credit risk to agents, but to accelerate payment by purchasers.

11U.

21.6 We are not satisfied that the proposed accredltatlon system would glve rise to any publlc beneflt. On the

contrary, in our n e w It is hlghly llkely that It would	give
rise to conslderable antl-competltlve detrlment.

21.7 We consider that the proposed system would constitute an exercise of market power without redeeming public benefit to shorten credlt terms, shift the risk-bearing function, impose undue credit costs upon processors, achleve privileged access to financial information and discrlminate ln the imposition of security requirements.

21.8 The system would give rise to an inefficlent

allocation of rlsk-bearing: agents would not be appropriately motlvated in thelr del credere functron; and some potential newcomers to meat processlng could be inappropriately deterred by bondlny requirements.

21.9 Whilst, in the short run at least, the attractlveness of the auction system could be increased for producers,	thls
would not be the result of	Independence of the prlvate agents could be undermrned; and competition on the merits. The
the Pastoral Houses encouraged to malntain a co-operative stance, one to another. The system would preclude competition in the terms of credit whlch, In the Tribunal's view, 1s just as valuable as any other form of competition.

21-10 The Trlbunal refuses to grant he authorlzatlon sought and sets aslde the declslon of the Commlsslon grantlng the authorlzatlon. The authorlzatlon granted by the Commission will therefore not come Into force.

I certify that this and the preceding one

hundred and ten (110) pages are a true copy of the Reasons for Declsion herein of the Tr-ade Practices Tribunal.

Assoclate

- Date: 14 April 1989

Counsel for John Dee (Exports)	Mr. C.A. Sweeney Q.C. wlth
Pty. Limited:	Mr. M. Cashlon

Solicitors for John Dee (Exports) Messrs. Allen Allen & Hemsley

Pty. Limited

Counsel for Elders IXL Limited,
Dalgety Farmers Llmlted and	Mr. R. Contl Q . C . wlth
Primac Association Llmlted:	Mr. N. Cotman
Solicitors for Elders IXL Limited,
Dalgety Farmers Llmlted and	Messrs. Sly & Russell
Primac Association Llmlted:
Counsel for Trade Practices
Commission:	Mr. J. Hilton
Solicitors for Trade Practices
Commission:	Australian Government Solicitor
Date of Decision:	14 April 1989

APPENDIX A

LIST OF WITNESSES AND OCCUPATIONS

Wltnesses giving oral evldence

David Geoffrey ARMITAGE Stock Station and Agent,

Armidale; Chairman,
Accreditation Commlttee of New
South Wales Stock and Station

Agents Association

Benjamin BALL Dlrector of Marketing, South

Burnett Meatworks Co-operative

Assoclation Ltd.

Andrew William Robert	Corporate Adviser, Ernst &
BLOMFIELD	Whinney
Baden John CAMERON	Chief Executive Officer, Unlted
Graziers Assoclation of
Queensland
John Bruce CAMERON	Manager Accounting, Elders
Pastoral Queensland

Clifford Brlan CAMMACK Llvestock Manager, R.J.

Gllbertson (Qld) Pty. Ltd.

Gary Willlam DANIELS Senior C edlt Officer, Elders

Pastoral Queensland

Howard James GARDNER	Chief Executive, CALM Services
Barry Thearle HART	Director, Hart Holding Group

Richard James HUGHES Assistant Manager, C-lee-sland,

Dalgety Winchcombe FGC

Edwrad James I N G M Manager - Rural Flnance, Primac
Assoclatlon Ltd.

Darryl Gregory KIRKBY General M nager , Pastoral

Divislon (Livestock Sectlon),

Elders IXL Ltd.

Thomas Esmond KNOX	Llvestock	Auctioneer,	Dalby,
Qld.

Michael James MAGUIRE Stock Statlon and Agent,

Emerald, Qld.

George Stephen PRATT Managing Dlrector, Lee Pratt

Pty. Ltd., Casino, NSW

Brlan Robert QUINN Legal Llaison Officer, Elders

IXL Ltd.

Geoffrey Graham ROBERTS	General Ma ager, Elders 2'Lstoral Queensland
Kenneth Maynard SAVAGE	Stock and Statlon Agent,
Rockhampton, Qld.
Donald Joseph STEELE	Secretary, Queensland Livestock
Property and Produce Brokers
Assoclation
Clifford Geoffrey TEYS	Livestock Manager, Teys
Brothers Beenlelgh Pty. Ltd.
Roy David TURPIE	Stock and Station Agent,
Ballarat; Member , Credit
Committee of Victorian Stock
and Station Agents Association
Philip Laurence WILLIAMS	Reader, Graduate School f
Management, University of
Melbourne
Colin James WOODHEAD	Senior Branch Inspector, Elders Pastoral Queensland
Statements Tendered
Graham William ACTON	Managlng Dlrector, ACtOn Land 6 Cattle Company
Maurice Gregory BINSTEAD	Manager, Binstead 6 Klrk
Jef f rey James DANIELS	Stock and Station Agent
Quentin John Barclay ELLIS	Secretary/Director, Harry Ellis

Trading Pty. Ltd.

John McDonald ENGWICHT	Pastoralist
Robert McDonald ENGWICHT	Pastoralist
Peter Malcolm HUGHES	Managlng Director, Hughes
Grazlng Co.
Terence John LOAGUE	Livestock Department Manager,
Central Queensland Meat Exports Co. Pty. Ltd.
John ONLEY	Partner, Hamilton park Grazing Company
George Edward PETERSON	Pastorallst
Betty Ollve SHANNON	Pastorallst