News Limited & Ors v South Sydney Districty Rugby League Football Club & Ors
[2003] HCATrans 553
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S34 of 2002
B e t w e e n -
NEWS LIMITED
First Appellant
NATIONAL RUGBY LEAGUE INVESTMENTS PTY LIMITED
Second Appellant
AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED
Third Appellant
NATIONAL RUGBY LEAGUE LIMITED
Fourth Appellant
and
SOUTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
First Respondent
CANBERRA DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Second Respondent
CANTERBURY-BANKSTOWN RUGBY LEAGUE CLUB LTD
Third Respondent
CRONULLA-SUTHERLAND DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Fourth Respondent
NEWCASTLE KNIGHTS LIMITED
Fifth Respondent
ST GEORGE ILLAWARRA RUGBY LEAGUE FOOTBALL CLUB PTY LIMITED
Sixth Respondent
BRISBANE BRONCOS RUGBY LEAGUE CLUB LIMITED
Seventh Respondent
COWBOYS RUGBY LEAGUE FOOTBALL LIMITED
Eighth Respondent
MELBOURNE STORM RUGBY LEAGUE CLUB LIMITED
Ninth Respondent
MANLY WARRINGAH DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Tenth Respondent
NORTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Eleventh Respondent
EASTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Twelfth Respondent
PENRITH RUGBY LEAGUE CLUB LTD
Thirteenth Respondent
PARRAMATTA DISTRICT RUGBY LEAGUE CLUB LTD
Fourteenth Respondent
WESTS TIGERS RUGBY LEAGUE FOOTBALL PTY LIMITED
Fifteenth Respondent
AUCKLAND WARRIORS RUGBY LEAGUE LIMITED
Sixteenth Respondent
MANLY-NORTHS RUGBY LEAGUE FOOTBALL CLUB PTY LIMITED
Seventeenth Respondent
VALIMANDA PTY LIMITED
Eighteenth Respondent
AH CB PTY LIMITED
Nineteenth Respondent
BRISBANE BRONCOS CORPORATION PTY LTD
Twentieth Respondent
GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
CALLINAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON FRIDAY, 7 FEBRUARY 2003, AT 10.05 AM
(Continued from 6/8/02)
Copyright in the High Court of Australia
__________________
MR A.J. MEAGHER, SC: May it please the Court, I appear for the appellants with MR M.J. LEEMING. (instructed by Allens Arthur Robinson)
MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR S.A. GLACKEN, for the first respondent. (instructed by Nicholas G. Pappas & Co)
MR N.J. YOUNG, QC: May it please the Court, I appear with my learned friend, MR M.H. O’BRYAN, for the intervener, the ACCC. (instructed by Australian Government Solicitor)
GLEESON CJ: Yes, Mr Meagher.
KIRBY J: Just before you start, Mr Meagher, we need to put something on the record. After this appeal was part-heard, the “Australian” newspaper published matters about me which I regard as false and unreasonable. It refused to publish an apology and retraction. The subject was drawn to the notice of the parties and the intervener. The appellants’ solicitors point out that the newspaper is published by a
subsidiary, not by the appellant. They state that the appellant exercises no control over its editorial content. They further state that the appellant is happy for me to continue to participate in the appeal, so long as I believe that I can act impartially in relation to the matter. I affirm that such is my belief. The respondent and the intervener also raise no objection to my continuing participation. I am conscious of the decisions of this Court concerning the obligation of judges to perform their duties, and that is what I propose to do.
GLEESON CJ: Yes, Mr Meagher.
MR MEAGHER: Your Honours, the Court, as we understand it, has asked that the matter be relisted to address a question which might be shortly described as a competition question raised by the intervener during the last argument and to address a further question as to whether special leave should be revoked. I should indicate what our position is. As we now understand the way the point is put, we understand it to be a point of construction and our primary position is that the point is bad in law and for that reason provides no basis for the grant of special leave to be revoked such that the Court should determine the appeal on the issues which were debated. We understand that our position with respect to that point is the same as that of the respondents to the appeal.
If the Court takes the position that the point is not a bad point, we would submit that the appeal should be decided by reference to the point because the point in a slightly different form was pleaded and raised before the courts below and the response to it was what is described in the judgment of the trial judge as the “cease altogether” term.
KIRBY J: Is the point one that is dealt with in any of the articles that you have helpfully referred to; I have not read those articles?
MR MEAGHER: No, it is not, your Honour, but we would submit that a similar point having the same consequence was debated below and no other points were brought by Souths in response to it, other than this point which is described as the “cease altogether” point, which was rejected by the trial judge and not pursued by Souths on appeal.
If your Honours wish to proceed this way I will seek to develop what I understand to be the answer to the point which the intervener raises, which is, as I have submitted, turns on the construction of 4D(2).
GLEESON CJ: Just before you do that, a matter of background information, there is a case of Rural Press that raised some of the issues I think that are raised in these proceedings. We were told on the last occasion that there was an application for special leave to appeal foreshadowed, but I think that it had not yet been made. What is the current position in relation to that litigation.
MR MEAGHER: Your Honour, my clients are not parties to that, but, as we understand it, an application for special leave has been filed, but has not yet been listed. We understand it, from the communication we had from the court, that the question that is concerning the court in relation to this appeal is whether there is another basis upon which my clients would have succeeded, which made the exclusionary provisions inapplicable.
KIRBY J: So, what actually happened? The point was raised by the court. You then advanced the arguments in support of the point. You then read Mr Jackson’s submissions and you withdrew the arguments. Is that the sequence of events? I have never in all my time on the Bench seen that happen before. Mr Jackson’s submissions are often persuasive, but not normally to the opponent.
MR MEAGHER: I am not sure if – the way the point arose was that it was raised by the intervener as a reason why the Court should not take a narrow view of the construction of these provisions because it is said that these provisions, in effect, did not apply to arrangements made in the context of joint ventures or mergers.
GLEESON CJ: The intervener’s express concern was that a possible point of view was that the outcome of the case in the Full Court of the Federal Court was curious and the intervener was anxious that we should not strain the construction of the Act in order to avoid what might seem a strange result and the intervener was anxious to point out that there was – according to the intervener – a more direct and orthodox way of achieving that result.
MR MEAGHER: That is so. And, as the matter was debated shortly in this Court the clear basis upon which the point was put was not made plain. We had understood it to be put on a basis which factually characterised the new competition as – or the competition organising services as so different as not to have been the subject of the earlier competition or competitive activity between News and ARL and we sought to put an argument in our first set of written submissions which adopted that point.
We then received the ACCC’s submissions on the point which made it clear that it is put as a matter of construction and our position is, first, that as a matter of construction the point does not run. But, secondly, we accept that any argument based on a factual characterisation of the competition organising services supplied does not take account of the fact that South’s case, on the exclusionary provision, was also put in relation to the acquisition of team services which was the other side of the competitive behaviour and it could not be suggested on the evidence that the team services which the ARL and News competed for in 1997 were any different from those which were the subject of the exclusionary provision which was to operate in 2000, according to South’s case.
So that any argument based on a factual characterisation, in our submission, was also bound to fail. For that reason, the position we take is that the point is a bad one and I will now seek to develop that argument, unless the Court wants to hear from Mr Young first in elaboration of the point.
CALLINAN J: Mr Meagher, I should say that if that history is going to be revisited, I gave some advice from time to time in relation to the split and what followed in the Rugby League and subsequently I was engaged by News Limited in relation to the competition that ensued. I do not know whether any party would prefer me not to sit in view of that? I do not think I gave any advice on anything that will arise here, but I should mention that I think.
MR MEAGHER: Your Honours will perhaps recall that the facts in this case were decided by the trial judge and there was no contradictor of his findings at the appellate level. Could I then in seeking to develop the point as we understand it is put first of all remind your Honours of the relevant facts and, to do so, I will wish to take your Honours to some of the paragraphs of the judgment of the trial judge which is in volume 15 of the appeal books.
CALLINAN J: I take it there is no problem about my sitting, then, is that right? I really was asking a question.
MR MEAGHER: Certainly not for our part, your Honour.
MR JACKSON: We are content, your Honour.
MR YOUNG: We have no objections.
CALLINAN J: Thank you.
MR MEAGHER: Could I take your Honours first of all to paragraph ‑ ‑ ‑
KIRBY J: Which page?
MR MEAGHER: Paragraph 19, page 3230 of volume 15. In paragraph 19 it records at line 29 that after the litigation which was described as the Super League litigation:
the Super League competition commenced in 1997. Its teams were –
and then there are the 10 teams who were in the Super League competition. At the same time:
The ARL competition continued from 1995 but with now twelve teams –
and then the 12 teams are listed. The trial judge emphasised that there was a “distinctly higher proportion of Sydney based teams in the ARL competition” than in the Super League competition. The points, I suppose, to observe first are that in relation to the News competition there were 10 as distinct from 12 teams, and the teams came from places which included Auckland, Perth and Adelaide, so that they came from different locations and there were different numbers of teams in the two competitions. If I could then take your Honours to paragraph 25, his Honour records that:
It is common ground between the parties that the ARL and Super League competitions were of similar standard and were the two premier rugby league competitions in Australia in 1997.
Then could I take your Honours to his Honour’s findings with respect to the competition issues as they were debated; first of all, to paragraph 172 at page 3281. There his Honour sets out the two principal services which it was alleged News and ARL were competitive in relation to each other in 1997. The first was, “the supply of the services of organising and running top level rugby league competitions”, and the second was “the acquisition of services” from clubs, “namely the services of rugby league teams”. This was not a case where the supplier was uninterested in the identity of the persons who acquired its services. The supplier had a real interest in the identity of the clubs whose teams it attracted, and the evidence disclosed that there was competition on both sides.
GLEESON CJ: Mr Meagher, was an argument put at the trial that if the situation had continued as it was before this agreement was entered into, by the year 2000 there would have been some kind of radical change in what was going on, that the situation as it existed prior to this agreement was not sustainable?
MR MEAGHER: We put such an argument.
GLEESON CJ: And what was the finding about that?
MR MEAGHER: The trial judge did not actually need to consider that in view of the fact that he found that there was competition at the time the arrangement was entered into, that is in 1997, with respect to organising competitions and acquiring team services, and he found that those were the same services as were the subject of the exclusionary provision.
GLEESON CJ: But one of the things you are arguing was that it was a state of competition that had no hope of continuing.
MR MEAGHER: We put that as part of our argument that a necessary element of the characterisation of the services supplied by NRL in 2000 was the fact that those services were going to be provided in 2000, so we in effect ran an argument which said there had to be competition between these parties in the year 2000.
GLEESON CJ: By that do you mean it was necessary to find that there would have been competition between these parties in the year 2000 to apply the Act?
MR MEAGHER: Yes, and ultimately they would have been in competition but for the merger agreement and that required one to look at what the position might have been but for the merger agreement. We argued that but for the merger agreement in 1998 there may have been two competitions but eventually either one of the competitions would have failed or the parties would have merged, with the result that by 2000 there would not have been competition.
GLEESON CJ: What was the judicial response to that?
MR MEAGHER: The judicial response to that was that the characterisation of the services which were the subject of the competition did not involve any timing element, that it was sufficient if there was competition in relation to the relevant services at the time the agreement was made. Therefore, the argument was bad as a matter of law and it was unnecessary to consider the factual questions which we raised in support of the argument.
GLEESON CJ: It seems to be an argument not entirely unrelated to the argument that the ACCC is advancing.
MR MEAGHER: It is not unrelated in its consequence in the sense that it would have, subject to those factual findings being made, provided a good answer to the case put against us. The ACCC argument turns upon the proposition, in effect, that when you ask whether two or more parties to the agreement are in competition in relation to the services which the exclusionary provision applies to, you identify the supplier who is going to be affected by the exclusionary provision and you ask: are the parties to the contract going to be in competition with that supplier in relation to those services? And they say: in this case because you have a merger or joint venture it necessarily follows that ARL and News are never going to be in competition with themselves jointly in any of the scenarios which the Act contemplates. That argument turns solely on the construction of section 4D(2).
CALLINAN J: Mr Meagher, there was never any argument that competition had to be viewed in the wider context of other football codes?
MR MEAGHER: No. your Honour. The question which section 4D poses requires a comparison between activities of two parties and asks whether in relation to those activities of supply or acquisition they are in competition. It does not require the definition of the market in which the competition takes place or an assessment of the state of competitive behaviour in the market.
I was taking your Honours to paragraph 172 to underline the fact that the South’s case was put that there was competition both on the supply side and in relation to the acquisition of services. In paragraph 173 his Honour notes that there was a limited concession made by NRL but prior to the December 1997 arrangements:
News and ARL were competitive with each other for the supply of organising services to, or the acquisition of team services from, only some of the existing twenty‑two clubs –
And he then goes on to address that submission. In paragraphs 174 and 175 at the top of page 3282 he notes that in 1997 the News interests by Mr Frykberg had conversations with representatives of some of the ARL clubs with a view to attracting those clubs to the News competition, so that the competition in relation to the acquisition of team services went beyond the clubs who were in fact being supplied to clubs who were being supplied by the other competition organiser.
Mr Whittaker from ARL gave evidence to a similar effect, that is that in 1997 he invited the Super League Clubs to participate in the new competition which he would be organising, so that there were approaches beyond the clubs who were being supplied. His Honour then says in paragraph 175:
The NRL submission in my view inaccurately characterised the subject matter of competition as it related to the then existing twenty‑two clubs. Those clubs at least provided the available pool of clubs for the two competitions. That News was, as a matter of judgement and/or accepted capacity to persuade, only interested in securing the services of some number of the clubs for its competition does not carry with it the consequence that it was only competitive with ARL in relation to those clubs in which it manifested an interest. For the purposes of determining whether ARL and News were in competition in relation to the provision or acquisition of services to or from the twenty‑two clubs, it is sufficient in my view if it be shown, as was the case, that, in aggregate, they manifested an interest in all of the clubs and that they acquired or provided the relevant services from or to those clubs.
Ultimately, the finding of the trial judge was that they were in effect in competition in 1997 in relation to the provision of these organising services and the acquisition of the team services between themselves in relation to the 22 clubs who were in one or other of the two competitions.
The next point that your Honours need to recall is that in December 1997 the parties agreed to cease supplying and acquiring those services severally. For example, in paragraph 94 of his Honour’s judgment at page 3252 his Honour states the underlying premise of the understanding which was reached between the two parties who were then in competition. That is that they:
would cease to conduct their existing competitions and would form a 50/50 partnership to own and control the proposed competition –
If your Honours go forward to paragraph 167 – your Honours may recall that the proposal between ARL and News was that the new competition be conducted by an entity named NRL which was a separate company and which was not a related body corporate because it was controlled by neither of the partners. I will come to section 4D in a moment but it requires that the services to which the exclusionary provision relates be supplied by all or any of the parties to the relevant arrangement and NRL was not, on South’s principal case, a party to the arrangement because it was created as a result of the arrangement. So News’ and ARL’s first argument was that the services to be provided in the future were not to be provided by a party to the arrangement. The response was ‑ ‑ ‑
GUMMOW J: Could you just explain that again. It was not a party to it because it was the product of it?
MR MEAGHER: Yes. If I take your Honours to section 4D(2) and 4D(1) for the moment, just to point this out, 4D(1) defines “Exclusionary provisions”. It addresses first the existence “of a contract, arrangement or understanding” and, second, the existence of a “provision” in that “contract, arrangement or understanding”. In paragraph (a) it says that “the contract or arrangement . . . or the understanding” has to be made:
between persons any 2 or more of whom are competitive with each other –
Then the “competitive with each other” is defined exhaustively in 4D(2) but the second limb of 4D(1) in paragraph (b) requires that the provision of the arrangement:
has the purpose of preventing, restricting or limiting:
(i) the supply of goods or services to, or the acquisition . . . by all or any of the parties to the contract –
So that the way that Souths pleaded its primary case was that the relevant arrangement in its forms as it was formalised was between ARL and News and our first response was that this exclusionary provision, if it is such, operates upon the supply by NRL in 2000. NRL is not a party to the contract and, therefore ‑ ‑ ‑
GUMMOW J: Wait a minute. It does not just say contract. Very advisedly, perhaps with a view to this sort of argument, it says “contract, arrangement or understanding”.
MR MEAGHER: That is so, your Honour. The point your Honour makes obviously is correct, but if I could just explain how this issue arose. We put an argument that NRL was not a party. The response was that what NRL was doing it was doing as agent for the joint venture or partnership.
GUMMOW J: The agent.
MR MEAGHER: As agent, and so that ‑ ‑ ‑
GLEESON CJ: Justice Finn found that, did he not?
MR MEAGHER: ‑ ‑ ‑ and the trial judge found that. We argued it on appeal and we lost it and I was just going to take your Honours to where that finding is.
McHUGH J: Page 3280, I think, was the trial judge’s findings.
MR MEAGHER: Yes, in 167. So that one therefore has this position as found by the trial judge. There was competition in relation to the supply of premium Rugby League competition services and ‑ ‑ ‑
GUMMOW J: Wait a minute. This expression, “NRL partnership” in 167, how is that related to the language of 4D? These arguments too easily come locked into notions that just derive purely from commercial law, whereas this section is about various economic activities.
MR MEAGHER: Could I try and address your Honour’s question? There was a partnership between ARL and News. It is a matter of partnership law in the absence of any other express agreement. Arrangements entered into before the partnership involve joint obligations on the part of the partners. The argument, therefore, was – and the trial judge accepted this – that the joint supply by News and ARL of the relevant services satisfied 4D(1) because it fell within the description by all or any of the parties to the contract. In other words, the words “all or any of the parties” were wide enough to cover both joint as well as several supply. Now, that construction of 4D(1), we submit, is correct and there is some support for it when one goes to section 45A which contains ‑ if I maybe just refer this to your Honours ‑ in 45A(1) there is a similar notion of supply or acquisition by the parties to the contract or by any of them and in section 45A(2) there is an express exclusion from the operation of that provision in relation to joint supply by two or more parties to a joint venture. So the legislation seems to contemplate that supply by the parties or by any of them is apt to include joint as well as several supply.
So that we then return, if I could to the factual position as it existed as found by the trial judge, that is: that in December 1997 ARL and News were in competition in relation to these services on the supply and acquisition side; that the same services were to be subject of the exclusionary provision, except that they were going to be supplied jointly; that the joint supply answered the description of “by all or any of the parties to the contract”.
Now, it is in effect in relation to the joint supply that the ACCC argument seems to operate and if I could explain how we understand it is put: if your Honours go to section 4D(2) it is said that the test – we accept this – for determining whether any two or more of the parties are competitive with each other is exhaustively laid down in 4D(2) and it uses the word “deemed” in a sense which extends the notion of competition to likely future competition and likely or future competition in certain circumstances. It provides that they are competitive:
if and only if, the first-mentioned person –
and then ignoring the notions of related “body corporate” and proposed “contracts”, is –
in competition with the other person . . . in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract . . . relates.
Now, on its face, it inquires as to two persons as to whether they are in competition in relation to supply or acquisition of goods and services. The ACCC argument is that the words to which the relevant provision of the contract relates refer to the exclusionary provision. Those words not only qualify the words:
all or any of the goods or services –
but they also qualify the words “the supply or acquisition”. So that, the relevant comparison is between the services in respect of these people who are competitive and the supply or acquisition of all or any of the goods or services to which the provision relates and they say that if you ask and answer the question, “What is the supply or acquisition of goods or services to which the relevant provision relates?”, the answer is, “Supply or acquisition by ARL and News jointly”. They then ask the question, “Are News and ARL in competition in relation to the supply or acquisition of goods or services by News and ARL jointly?”, which in substance is a question as to whether News and ARL are in competition with themselves jointly and they pose that question on the various scenarios laid down in 4D(2) and they say it has always answered no.
GLEESON CJ: And they go on to say, as I understand it, that if you really want to test the legitimacy in terms of competition more, of what occurred, you test it at the level of challenging the merger ‑ ‑ ‑
MR MEAGHER: That is what they say.
GLEESON CJ: ‑ ‑ ‑ rather than at the artificial level of challenging the exclusionary provision.
MR MEAGHER: That is so, although the competition test is limited to a market test; it is directed to a different subject than the exclusionary provision. In our submission, the exclusionary provision prohibitions in the Act are directed to collective conduct by competitors and the consequences of that conduct and they are not concerned with the competitive consequences; they appear to be concerned with the fact of the conduct itself and, on the face of it, it is regarded as sufficiently undesirable to be prohibited per se without any competition test. So that, what your Honour says is correct, but it has the consequence that a transaction such as this is looked at from a much more limited point of view, namely a competition test under section 50 or perhaps under the other limb of ‑ ‑ ‑
GLEESON CJ: Well, maybe it is a broader point of view.
MR MEAGHER: It may not be, because it obviously will not necessarily be the case that, if I can use the expression primary boycott conduct, will have an anticompetitive effect. It may not have an anticompetitive effect, but, nevertheless, have a very real effect upon the person who is the object of the conduct.
Could I just, to underline the way the point is put, take your Honours to the ACCC’s submissions which was supplied to the Court. The heart of the construction point is put in paragraph 14. These are submissions which, as I understand it, were revised and the final form is dated 30 January.
GLEESON CJ: Yes. Paragraph 14, did you say?
MR MEAGHER: Paragraph 14 makes the argument that the trial judge and the appeal judges:
appears to assume that the words ‘to which the relevant provision . . . relates’ qualifies only the words ‘all or any of the goods or services’ and not the words ‘supply or acquisition’.
Then it is submitted that the words qualify “the composite expression”. It is accepted that the alternative construction is available but argued that in effect the narrower construction is to be preferred. Then If I could take your Honours to paragraph 17 which seeks to apply that construction in the present case. It says:
The alleged exclusionary provision related to the supply of rugby league competition organising services, and the acquisition of rugby league team services, by the National Rugby League, a partnership . . . The question therefore posed by s.4D(2) is whether, at the time the Merger Agreement was entered into between News and ARL, they were in competition with each other in relation to the supply or acquisition of the services by the NRL, on any of the alternative bases referred to in s.4D(2).
Then in 18 it is put, and we accept that the answer would necessarily be no, because in December 1997 they were not in competition with themselves jointly. If the merger went ahead they would not have been. If the merger did not go ahead they would not have been, because in no scenario could you have had joint and several supply and, therefore, what the ACCC asserts is the relevant competition.
GLEESON CJ: The idea seems to be that what they agreed to in the merger was to put an end to their existing businesses and to start up a new business.
MR MEAGHER: That is so. Now, in effect, what the argument does is include in the relevant characterisation of the goods or services, which are the subject of the exclusionary provision, the identify of the supplier ‑ whether it be a joint supplier or a new corporation. That necessarily follows from the argument. The consequence of that is that it leaves this section wide open to abuse. In this sense, to take some examples, if my clients had decided to cease altogether to supply, that is each, in favour of some new and unrelated corporate entity, which may have been the purchaser of the business, subject to the new and unrelated corporate entity agreeing to a limitation of the kind which is proposed, one would be beyond the reach of section 4D(1) notwithstanding that there was plainly an agreement between competitors.
GLEESON CJ: But you would be within the reach of section 45, would you not?
MR MEAGHER: You may be within the reach of section 45 to the extent that it poses a competition test but you would be beyond the reaches of prohibition upon collective conduct of competitors which has a purpose of affecting supply or acquisition to particular people or classes of people.
GLEESON CJ: In other words, you would test the legality of what was done by reference to whether it had an anti‑competitive purpose or effect rather than applying the per se test.
MR MEAGHER: Yes, and notwithstanding that the essential elements which attract the per se test are present – that is, the collective conduct and the effect on the object of the conduct. To put it another way, my friend’s argument is that my clients, by agreeing to supply jointly, escaped the operation of the exclusionary provisions. If instead of supplying jointly they had decided that one would continue to supply and there would be some profit‑sharing arrangement or some shareholding, they would not have escaped those provisions.
GLEESON CJ: I suppose if South Sydney had challenged this on the wider basis – that is, attacking the merger as itself an anti‑competitive arrangement – they would have run into the argument that this was not anti‑competitive because the existing state of competition was not sustainable.
MR MEAGHER: That is so.
GLEESON CJ: That explains why they made the narrower challenge.
MR MEAGHER: They made a narrower challenge. There are two more difficulties with the construction which is urged, which are that it is inconsistent with the words of 4D(1)(b). Could I explain why. Section 4D(1)(a) requires that the contract be:
between persons any 2 or more of whom are competitive –
so that not all of the parties to the contract need to be competitive, only two. Section 4D(1)(b) requires that the provision have a purpose with respect to supply or acquisition “by all or any of the parties”, so that it contemplates, on its face, that the supply which is affected by the exclusionary provision can be a supply by any of the parties to the contract and not necessarily the party which is competitive with some other party. The argument which the ACCC puts requires in effect that one of the competitive parties be the party whose supply or acquisition is affected by the exclusionary provision in the 4D(1)(b) sense. So it is inconsistent with the clear provisions of the section which permit for it to be satisfied that the preventing be of supply or acquisition by any of the parties.
GUMMOW J: You point to the words “any 2 or more” in the last line of (a) and the words “by all or any” in line 8 or 9 of (b) and say they are not coextensive.
MR MEAGHER: That is so, but the construction which is urged requires that they be coextensive. There is another problem with the construction on the clear meaning of the words, and that is that 4D(1)(b) contemplates that the affected supply may be by all the parties to the contract and, as I have submitted, that it may be a joint supply, and yet the argument which is put would deny that construction.
As I submitted earlier, the words “by all or any” are broad enough to include “joint” as well as “several” supply. In this case there was supply by all by reason that it was joint supply. The argument that is put against us is that notwithstanding that fact, it is outside 4D(1)(b) and that can only be because “all” cannot include “joint” supply. As I put, one starts off with the ACCC’s proposition that this argument in any event is only one of two available interpretations as a matter of grammar. If one adopts it ‑ and we do not accept that it necessarily follows that you bring into the comparison the identity of the supplier ‑ it is inconsistent with the express words of 4D(1) in two respects.
The second point is that, as I have submitted, it leaves the section open to avoidance by device because it permits parties to construct boycotts in a way which provide for the relevant services which are the subject of the provision to be supplied by some third party which is not related, or to be supplied jointly.
GUMMOW J: Which paragraphs in your submissions of 31 January have you been addressing us on, or is it extra?
MR MEAGHER: Really paragraphs 3 through to 17. I am not going to suggest to your Honour that I have been following them in the same course of the argument. For example, in paragraph 13 we make the point that I have just been making, that the ACCC’s construction ignores the basic proposition that not all the parties to the relevant contract need to be in competition and that it is sufficient for there to be a preventing by any one or more of the parties. The point in respect of “all” we have not made in the written submission.
GUMMOW J: That is what I was wondering.
MR MEAGHER: No, we have not, your Honour.
GUMMOW J: So where would that go in? That would be in 13(a), would it?
MR MEAGHER: Yes.
GUMMOW J: How would you encapsulate it, the “all” submission?
MR MEAGHER: That 4D(1)(b) contemplates joint supply by all of the parties to the contract and 4D(1)(a) requires that two or more of them be competitive.
GUMMOW J: So that?
MR MEAGHER: I have now lost my train of thought, your Honour, I am sorry.
GUMMOW J: You said 4D(1)(b) contemplates joint supply by all and 4D(1)(a) requires that all be competitive.
MR MEAGHER: That “2 or more” be competitive ‑ ‑ ‑
GUMMOW J: Yes, “2 or more”.
MR MEAGHER: In relation to the supply which is relevantly affected which on the first basis is a joint supply, so that it contemplates parties who may now be supplying jointly having been in competition at the relevant time.
The only other general point I wish to make on this question of construction is obviously to remind your Honours that this is remedial
legislation and so that it should be construed to give it the fullest relief which a fair meaning of its language will allow. If your Honours need any support for that proposition one can find it in the judgment of Chief Justice Mason in Devenish v Jewel Food.
GUMMOW J: Yes, we have already been taken to that, I think. We have been taken to that on the earlier hearing.
MR MEAGHER: Yes. Your Honours, that is all I wish to say on this point. Obviously, there are other things I may wish to say on what the position might be if the Court took the view that it was an available point.
GLEESON CJ: Thank you, Mr Meagher. Yes, Mr Jackson.
MR JACKSON: Your Honours, may I deal with the case, in effect, as it has developed by reference to three, in a sense, headings? One is the course which the Court should take in relation to the proceedings. The second concerns the merits of the point and third concerns the course which might have been taken if the issue, as it now appears, had been agitated below. Your Honours, as to the first of those could I just say that what we submit is the appropriate position is essentially, as we submitted earlier, that this is an appeal – and, your Honours, I will develop this in a moment. The Court either can or cannot decide the appeal on the issues raised by the parties without entering into the issue sought to be raised by an intervener.
If it can do so it should decide the case and decline to enter upon that issue. If it cannot do so then in the light of the fact that the appellants do not challenge that aspect of the case below the Court should say that as the case is developed it is not a satisfactory vehicle for determining the questions of construction of section 4D and 45, relevantly, and then revoke the grant of special leave. Your Honours, may I come to develop that.
This is an appeal. It is not a proceeding in original jurisdiction and the freedom of interveners has been mostly in cases in original jurisdiction. Your Honours will see Australian Railways Union, a case in an original jurisdiction. Almost all of them tend to be cases in original jurisdiction. But, your Honours, this is an appeal from civil proceedings inter partes in which, after obtaining special leave, the appellants are hardly incompetently represented or otherwise unable, financially, for example, to look after their own interests, contend that the judgment of the court appealed from should be set aside on particular grounds.
Now, your Honours, whether the points were or were not argued before the courts below, the fact of the matter is that the application for special leave was put on particular grounds and it was made clear that those were the grounds being relied upon. Your Honours, the second thing is that one notes that at the earlier hearing in this Court on 6 August my learned friend said that the appellants did not press the point. Your Honours will see that at page 11 of the transcript of 6 August in the passage that goes from about lines 290 through to 316 in particular.
Then, in answer to ‑ your Honour Justice McHugh said:
So if I come to the conclusion that you should have won in the Full Court, nevertheless, I am entitled to dismiss your appeal?
This is in the light of the point that is being raised now, of course –
That is to say, if I come to the conclusion that both Justice Finn and the Full Court got it wrong on the competition point and you should have won, nevertheless, I am entitled to dismiss this appeal if I am against you ‑
and my learned friend said:
If your Honour is against us on the other points, that would follow from the grounds that we have raised.
Now, your Honours will see ‑ this is pages 73 and 74 of the transcript ‑ that we then made the submission which we make again, and the passages, your Honours, are from line 3145 on page 73 through to line 3170 on page 74. We made the submission that the issue was one into which the Court should not enter and a submission along the lines that I adverted to earlier.
Now, your Honours that remains so and if I could then come to events which have taken place since then and they shortly are, that after the judgment was reserved the Court on 17 September wrote to the parties in relation to the issue and one sees then – I will not go through the earlier points of it – but, your Honours, the point which emerges from that is that in their more recent submissions the appellants now no longer adopt the submissions made by the ACCC and they agree with us or our submissions that the point is bad in law and they say in paragraph 2 of their more recent submissions they do not rely on the point and they submit that the appeal should be determined on, in effect, the existing issues.
Your Honours, I am sorry to have laboured the point, but what one does see from that is that the upshot of it is that the appellant does not challenge the correctness of the decision of the Full Court on the basis contended for by the intervener. Now, your Honours, this is not the case where an intervener says that an appeal should fail for reasons additional to those relied on by a respondent. Rather, it is a case where an intervener not a party to the proceedings below seeks to set aside a judgment of the court appealed from on a new ground of appeal. Now, your Honours, I can dress it up and massage it as much as one likes but, in the end, that is what it comes to. Your Honours, that, in our submission, should receive the same welcome reception as did the Catholic Bishops’ intervention in Re McBain.
Now, your Honours, the present situation ‑ ‑ ‑
KIRBY J: In the case of Gipp v The Queen which was admittedly a criminal case and the issue of miscarriage of justice ‑ ‑ ‑
MR JACKSON: And later Crampton, of course, yes.
KIRBY J: ‑ ‑ ‑ the Court said that it would in exceptional circumstances entertain new grounds.
MR JACKSON: But by a party ‑ ‑ ‑
McHUGH J: But that was a party. He was the accused serving a sentence for rape.
MR JACKSON: By a party, your Honour, and that is if one goes to the Pantorno and Crampton, I think the most recent case, there is no suggestion, with respect, that these decisions ‑ and the Court may say something about it which leads the point to be taken, but they are points taken by a party.
CALLINAN J: Mr Jackson, could the ACCC have applied to be joined to the original proceedings?
MR JACKSON: They could have, your Honour, yes.
CALLINAN J: There was a lot of publicity about these proceedings, was there not?
MR JACKSON: Yes, immense, your Honour, immense; publicity in the sense that many public people who are supporters of our body, active in drumming up support, as it were, and physically active in ensuring that the nature of the proceedings was publicly known.
KIRBY J: I see the force of these submissions, but, on the other hand, the ACCC has certain responsibilities relating to the overall application of the statute.
MR JACKSON: With respect, your Honour, it does not. Your Honour, what is has, if I may say so, is that if one looks at the provisions of the Act, the ACCC has a number of powers. One does not see a provision saying the ACCC is the body having the administration of the Act, and that is a gloss one can put on it. What one sees is that it is a body which has a number of statutory powers: one of them, for example, is to ground authorisations under section 88; one of them is to institute proceedings under the provisions which allow that to be done; others are that there is a specific power given to allow it to intervene – I am speaking of the Act at the relevant time – in relation to proceedings under, I think, it is section 136A or 163A, declaratory proceedings heard before a court of three judges in the Federal Court.
KIRBY J: They are not relevant to these proceedings, those specific powers.
MR JACKSON: No.
KIRBY J: But even if it did seek to intervene and was granted leave to intervene, why? Because it has something to offer to the Court relevant to the understanding and application of the Act, because the Act applies not just to your important parties, but to the whole nation; it is an Act of great importance.
MR JACKSON: Your Honour, that is true really of any enactment of the Commonwealth.
KIRBY J: Yes, but this is an Act which applies in a multitude of circumstances and it sometimes is possible for a court, focusing on the concerns of parties, to miss the nuances and ramifications of an application of an Act such as this.
MR JACKSON: Well, your Honour, that is really the point I am seeking to make. Assume that to be so and assume that the point is not one that a party, who is an appellant, seeks to take, then the situation that emerges is that the case below is one which should be dealt with by the court as one not being suitable for the court’s further consideration of the matter, because what has emerged is that the case is one which, on this assumption, has been based on a false premise. So that the Court should not deal with the matter further; it should say, we cannot deal with the matter and resolve it, because this is an issue that the parties are not raising and, your Honour, this is an appeal.
GUMMOW J: Well, not an appeal as of right and, what would be the situation if all this had arisen on the special leave application with Mr Young turning up at that stage?
MR JACKSON: Well, your Honour, if they had turned up at that stage and sought to argue the point, then the position would be, in our submission, that at that point the Court would ‑ the right resolution if I can put it that way, in our submission ‑ ‑ ‑
GLEESON CJ: Of the leave application.
MR JACKSON: Yes, of the leave application, would be to say, “Well, that is a most interesting point. It may be right, it may be wrong, but it’s not a point being taken by the parties”. If it is a point that has merit then it further demonstrates this is a case that is not appropriate for the grant of special leave. Your Honours ‑ ‑ ‑
KIRBY J: But special leave has here been granted. Your argument would have to be it is a case if the Court feels disquiet about the way the parties are presenting it and is persuaded by the points that have been put by the ACCC, in those circumstances it should revoke special leave.
MR JACKSON: Your Honour, that is what we submit. That is what I submitted at the start of the case, if that is the view the Court took, and it is what I said now. If the Court is of the view that the point is one, the resolution of which impinges upon its decision of the other issues in such a way that the Court does not think that they can be resolved satisfactorily without deciding this point, then the Court should say, “Well, it’s not an appropriate case. We revoke the grant of special leave”.
CALLINAN J: Mr Jackson, I always worry about the facts. I know that it does not seem immediately apparent that the factual findings would have been different, but we do not really know that.
MR JACKSON: I am going to come to that, your Honour.
CALLINAN J: If the ACCC have been in at the beginning and pleaded issues then there may have been factual matters bearing upon this and we just do not know that.
MR JACKSON: Your Honour, we put them at some length in our submission. I am going to endeavour to summarise in a short fashion in a few moments. May I just say a couple more things in support of the submission that I am currently making. Your Honours, it is this. We are, after all, talking about civil proceedings in this case. Now, they are civil proceedings that a party, relying upon a statutory entitlement given in respect of conduct in breach of the statute, has taken. In proceedings of that kind the parties choose the grounds on which in the first instance at trial the proceedings will be fought. There are pleadings, there are admissions of fact, there is evidence directed to the matters in the pleadings and there are issues of law that are raised or not raised as the case may be.
Your Honours, the decisions at both levels give rise to estoppels on matters of fact and of law and on appeal ‑ I am speaking about, say, the first appeal or second appeal ‑ the parties choose the grounds of appeal on the one hand, and on the other hand any additional grounds on which it is sought to maintain the judgment. Your Honours, a party can rely on a ground not taken below but only if the course of proceedings would not have been altered ‑ it is in part what your Honour Justice Callinan was observing upon ‑ but also, your Honours, when the matter comes to this Court the proceedings are limited by the course taken in relation to special leave. The argument on behalf of the intervener would in effect allow it to add a ground of appeal on behalf of an appellant. Presumably, your Honours ‑ ‑ ‑
KIRBY J: I thought you conceded that it was technically within the ground of appeal.
MR JACKSON: No, I do not think I said that at all, your Honour, with respect. I have not said that, no.
KIRBY J: I thought I had read that.
MR JACKSON: I am sorry, your Honour?
KIRBY J: I thought I had read that in the written submission that ‑ ‑ ‑
MR JACKSON: I think that is a submission made on behalf of the appellant.
KIRBY J: Yes. You contest that?
MR JACKSON: Certainly not us, your Honour. We do not embrace that, we do not agree with it. Your Honours, could I say the argument on behalf of the intervener, as I submitted a moment ago, would in effect allow it to add a ground of appeal on behalf of an appellant. Presumably also, if the ambit of intervention was permitted, it would allow it to, say, defend an appeal on grounds not relied on by the respondent. Your Honours, if one took an extreme case, in pursuance of preserving the integrity, as it were, of its view of the legislation, you could have a situation where on the one hand it relied on a ground of appeal not relied on by the appellant, but on the other hand defended other aspects of the appeal by grounds not taken by way of notice of contention. Now, your Honours, that is ‑ ‑ ‑
KIRBY J: These are very powerful discretionary matters in this case, but you must weigh against them, it seems to me, the unacceptability of a court accepting even agreement between the parties as to the law which the court considers to be wrong. We are a Court of law and justice, and we cannot simply leave it to parties to agree on the law if that appears to us to be a wrong understanding of the law.
MR JACKSON: Your Honour, that is why, on the one hand, the gateway in is the gateway of special leave. One has to demonstrate that the case is one which is a suitable vehicle for the resolution of the issue and that the issue truly arises. But gateways let people out as well as in, and what I mean by that is that if having got in it emerges that one should not have been allowed in, then it is also the way out.
KIRBY J: Our gateway does not often swing out. It seems to have a problem on the hinge.
MR JACKSON: Well, your Honour, it does sometimes, and I must say I have been on both sides of the hinge occasionally. But, having said that, this is an unusual case. It is an unusual case because you have an intervener seeking to take a point by way, in effect, of appeal that the appellant does not seek to take. That is unusual. It is very difficult to recall or see any case in which this has happened.
KIRBY J: That is because in Australia we have had a very rigid view about interveners which final courts in other countries have not taken. We have begun to change that slightly, and where there is a statute of great importance and some complexity with a statutory authority that has responsibilities in respect of it, it seems to me that the Court should take the advantage of that.
MR JACKSON: Well, your Honour, one can see an amicus curiae situation, say, in the United States, and if one bears in mind that there may well be a distinction to be drawn between cases where, on the one hand, one is talking about the exercise of an original jurisdiction and, on the other hand, a case where one is talking about an appeal, then this is case which is an appeal. Your Honours, could I go back for a moment to what ‑ ‑ ‑
GUMMOW J: In the end, it may come back to the scope of section 73.
MR JACKSON: Indeed, your Honour, that is a possibility. I do not really want to get to the point of having to be section 78B notices and ‑ ‑ ‑
KIRBY J: I think Justice McHugh raised that issue in Gipp. He said it is inherent in the nature of appeal in the Constitution that you cannot, as it were, raise something that – you are not showing error if the matter has not been ventilated in the court below. I think that is what his Honour said in Gipp, but that was not the majority view in Gipp, although it is true, as you say, that was a case where a party was raising it and it was very important – indeed, determinative – for the party.
MR JACKSON: Your Honour, of course, no doubt anything can happen, but it would be a very curious situation if, say, in relation to criminal appeals you had people coming along saying on behalf of – not persons representing the appellant ‑ but someone saying, “Even though the appellant does not take this point, the case should succeed on that basis”.
KIRBY J: Well, I remember a case where Mr Bennett appeared as Solicitor for the Commonwealth and tried to intervene in a criminal matter and he was sent away.
MR JACKSON: Yes, and no doubt deservedly, your Honour ‑ ‑ ‑
GLEESON CJ: If your argument is right that the point is not embraced by the grounds of appeal and there is no application to amend the grounds of appeal, then our task is to deal with the grounds of appeal, is it not?
MR JACKSON: Well, your Honour, the Court’s task is to deal with the grounds of appeal relied on by the appellant. I do not want to labour the point, but the appellant has said in absolutely clear fashion, “This point brought along is one which we do not argue”.
GLEESON CJ: But Gipp was a case about an attempt, amongst other things, to supplement a notice of appeal by adding an additional ground. There is no such intent here.
MR JACKSON: No, your Honour. Whether it would or would not be covered by a ground of appeal it does not really matter because it is a point – it is not one that is raised on behalf of the appellant. It is as simple as that. Could I say, your Honours – if I could just adopt, with respect, what was said by your Honour the Chief Justice in Re McBain; Ex parte Australian Catholic Bishops (2002) 76 ALJR 694 at 700, paragraph [23] – I would refer to it, your Honours, mutatis mutandis, of course – but if I could go to the first sentence:
This Court is asked, by people who were not parties to the action in the Federal Court, to quash the decision of Sundberg J on the ground that it was wrong.
Your Honours, I will not read out the remainder of the paragraph but could we refer your Honours to the whole of the paragraph. It is germane to the present issue, in our submission.
KIRBY J: That was a proceeding in the original jurisdiction.
MR JACKSON: Of course, your Honour, yes.
KIRBY J: But you say that is a fortiori.
MR JACKSON: I was adopting it mutatis mutandis, your Honour. Yes, it applies as strongly ‑ indeed, more strongly. One is, after all, speaking about an appeal which the Court has held to be an appeal in the more traditional sense, if I can put it that way. I do not mean the Court’s powers are limited but it is an appeal looking for error in the court below. The true position, in our submission, is, as we said at the earlier hearing in the transcript at pages 73 to 74 to which I took your Honours earlier and we would simply submit on this point that the Court either can or cannot decide the case on the issues raised by the parties without entering into this issue and, your Honours, if the Court cannot do so then special leave should be revoked.
GUMMOW J: Do you so apply on those contingencies?
MR JACKSON: Yes, your Honour, I am sorry, I do. Your Honour, I do. I place before that that condition, of course.
GUMMOW J: Yes.
MR JACKSON: We do not suggest that the Court cannot decide the case on the issues that have been raised and we do not say anything, of course, about trying to revoke special leave on that basis. What we are saying is if the Court needs to decide it on the intervener’s basis the case should go out the door, as I mentioned earlier.
Your Honours, could I come, then, to the second point we would seek to argue and that is the merits of the point. I do not propose to go over the area that has been covered by my learned friend already but may I just say a few things about it.
We would commence by saying that the argument on behalf of the intervener does not, in our submission, give effect to the words of section 45(2) and section 4D. Now, your Honours are aware that section 45 draws a distinction between, on the one hand, “contracts, arrangements and understanding” which have the purpose or effect of substantially lessening competition, on the one hand, and provisions which are “Exclusionary provisions”.
Your Honour, could I just say one other thing, an introductory matter. This is a case where in relation to the words of section 45, relevantly, and the words of section 4D Parliament knowing of suggested difficulties, by reason of their ambit, has refrained from altering their terms.
GLEESON CJ: On the previous occasion you gave us your submissions on the meaning of the word “purpose” and your nailed your colours to the weathervane.
MR JACKSON: Yes. Your Honours, could I also say the second thing about it is, in a general way, that it may be difficult to identify an exact underlying rationale for the prohibition except to say that Parliament has formed the view that conduct of that kind should be proscribed and that is, if I may say so in passing, one of the faults in the academic criticism of the decision below. They do not give sufficient weight to the fact that courts do not have the freedom to do other than to give effect in circumstances like that to the words that the legislature has used.
Your Honours, when one goes to the words of section 45(2) – if I could go to those for a moment – one sees that they draw a distinction between, on the one hand, the making of a contract, et cetera – can I use the expression “contract, et cetera” to cover arrangements and understandings for brevity – a contract, et cetera, containing an exclusionary provision and the remainder of the contract may be saved by section 4L. On the other hand, in section 45(2)(b) giving effect to a provision.
Your Honours, the recognition that the provision and the contract may not be the same – I mention that because when one comes to section 4D part of the argument on behalf of the intervener appears to be that the provision where this expression is first used in 4D(2), the word “provision” is the same “provision” as that referred to as the “relevant provision”. Your Honours, one sees in the opening words of section 4D(1) a reference to:
A provision of a contract . . . shall be taken to be an exclusionary provision ‑
if various matters appear.
Your Honours, when one looks at section 4D(1)(a) the opening words refer both to a “contract” or a “proposed contract” and they require as to the parties to the contract or proposed contract, et cetera, that they or at least two of them are – and that obviously means now are – “competitive with each other”.
The terms of section 4D(2) are provisions which simply define what is meant by being competitive with each other, or in competition with each other in terms of section 4D(1)(a). Section 4D(2) is really no more than a definition section.
Your Honours will see that when one comes to section 4D(1)(b) it is speaking of the provision in question having the purpose there set out. By the use of the word “purpose”, which is speaking perhaps in part at least of the effect which the provision is sought to have, it is speaking necessarily of a time after its making, so that necessarily what is contemplated, in our submission, by section 4D(1) is that it is speaking of a provision which relates to an effect after the time of its making and your Honours, in relation to that ‑ and speaking of the consequences of its making.
What I mean by that is that if one goes then to the definition in section 4D(2) it is speaking of circumstances existing at the time when the contract or proposed contract is or may come into operation, but it is looking to see in a sense what the effect - in the context where that will have an effect in the future.
I should say, your Honours, that the notion of being competitive at the time when the contract has been made has been accepted on a number of occasions in relation to this provision. An early example which has been followed, your Honours, if I could just give the reference without taking your Honours to it, is that of Justice Franki in the Trade Practices Commission v TNT Management Pty Limited (1985) 6 FCR page 1 at page 74 about point 7. Your Honours, one sees the answer to the question whether the parties are competitive with each other expressed by looking at four possibilities. Your Honours, if I could go to just the first of those possibilities initially and if I endeavour to extract the words of 4D(2) that are relevant, they are these, that:
A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person . . . is . . . in competition with the other person . . . in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract . . . proposed contract . . . relates.
Now, your Honours, if one takes that provision, it is clear that it is looking at the time when it was assumed the contract is made. The effect of the contract or a likely effect of the contract is to reduce the supply, prevent, restrict or limit the supply of goods or services or their acquisition in the future and is looking at the time when the agreement is made. What that leads to, your Honours, in our submission, is the view that it is speaking of the situation now but saying are they in competition now in relation to the supply or acquisition of those goods or services? If so, then, if one enters into an agreement of this kind what is prohibited is the fact that it may in the future have some effect of the nature referred to in paragraph 1(b).
Your Honours, if one goes to the other tests in section 4D(2):
is likely to be, or . . . would be, or would be likely to be –
the position, in our submission, is that they elaborate upon that position and give it a wider operation.
Now, your Honours, could we also note that one sees in section 4D(2) that it speaks of in the first few lines:
is, or is likely to be, or, but for the provision of any contract –
et cetera. When one comes down to the last few lines, it then uses a different phrase, “the relevant provision”, that being the provision that refers, in our submission, to the provision which is the exclusionary provision.
Your Honours, could I go then to the third aspect of the matter on which we wish to address some submissions and that is the course that might have been taken. Your Honours, in relation to this, the case below was conducted on the basis that the area or subject of competition marked out and to which the 14-team term applied as an exclusionary provision was the supply and acquisition of services for top level Rugby League competitions. If it had been contended, as it now is by the intervener, that the subject of the 14-team term for the purpose of the test was the supply and acquisition of services by NRL for a single, unified and merged Rugby League competition, then we may have met that contention in a number of ways.
One is that to which we refer – if I can give your Honours the reference without going to the detail of it ‑ refer in paragraphs 3.15 and 3.16 of our supplementary submissions in relation to the present hearing. That is by pursuing the line of inquiry that each of News and ARL remained competitive for the supply and acquisition of services from NRL through the clubs they sponsored or subsidised.
The second way in which we may have met the contention was by contending that there were other parties to the arrangement , namely the clubs, who were competitive for the NRL services. Your Honours, we refer to that in paragraphs 3.17 and 3.18 of our written submissions. Could we say two other things about it, your Honours. The first is that section 4D(1)(a) refers to any two or more. Section 4D(1)(d) refers to all or any of the parties and, your Honours, reference to “clubs” in a somewhat similar situation. The position of clubs was adverted to by Justice Toohey in Hughes v Western Australian Cricket Association Case (1986) 19 FCR 10. Your Honours will see that at page 36.
Your Honours, also if as the intervener contends the “but for” proviso in section 4D(2) concerns the exclusionary provision, two questions would arise. The first is would there have been a merger at all absent the 14‑team term? Your Honours, we deal with that in paragraphs 3.12 and 3.13 . The other feature is did the “cease altogether” term have the purpose proscribed by section 4D(1)(b) and affect a particular class. Your Honours, that is referred to in our written submissions in paragraphs 2.13 and 3.19. Your Honours will see in paragraph 3.19 that we say that Justice Finn held that the “cease altogether” term did not have a purpose proscribed by section 4D(1)(b) but he added there was no particular class affected by the “cease altogether” term. We did not appeal that finding but if the competition point now raised had been raised in the Full Court it might have been open to us to challenge that finding. Your Honours will see that referred to in paragraph 3.19 of those submissions. Your Honours will also see a reference in the opening words of 3.19 to, “as already noted”. That is a reference back to paragraph 2.13.
Now, your Honours, those are issues on which the Court does not have the benefit of findings from the primary judge, on which it does not have the assistance of reasoning from the trial judge or the Full Court. Your Honour the Chief Justice asked in relation to the ‑ what the evidence was about what the position might have been in 2000. The position was, your Honours, that Justice Finn did not need to deal with the issue. The only one in the Full Court who dealt with the issue was Justice Merkel. Whilst he did not actually decide the question, it is probably correct to say he was more inclined to be our way than the other way. We have set out the references, your Honours, in paragraphs 2.11, 2.16 to 2.17 and 3.13 of our written submissions.
Your Honours, if I could just say finally in relation to the case, and in relation to the argument concerning section 4D(2), this is a case where, in our submission, if I could adopt in relation to this new point what we had said in our earlier submissions, in our first written submissions in paragraph 1.1 and 1.4, namely that the circumstances of the case are really quite straightforward; two entities were in competition with each other, each supplying and acquiring services to and from an identified group of persons. The two of them agree to cease competing with each other, and a provision of the agreement is to supply and acquire services to and from only some of those persons, and that was something that was planned. Your Honours, those are our submissions.
GLEESON CJ: Yes, Mr Young.
MR YOUNG: If the Court pleases, if it is appropriate, we can elaborate on the merits and alleged deficiencies of the point of construction that we have raised. The issue was one we raised because of our submissions concerning the issues of purpose and class that have been the subject of argument on the appeal. We were concerned that a strained interpretation was being urged of those aspects of section 4D because of the assumption that this case fits squarely within section 4D in the first place.
In our submission, the issue raised by section 4D(2), given the undisputed factual findings, is this, were News and ARL in competition with each other:
in relation to the supply or acquisition of all or any of the goods or services to which the –
14-team term –
relates.
We say, given the judge’s finding, that it is appropriate to look straight past NRL, the corporate vehicle, to the partnership which his Honour found had agreed to supply the rugby competition services.
Now, can I identify the 14-team term. I appreciate this has been done on the earlier occasion, but I think it is helpful simply to take the Court back to it. It is in Justice Finn’s judgment at paragraphs 88 and 99 – I am afraid we do not have the pages of the appeal book; we are working off ALR 632 and 635.
McHUGH J: It is page 3250, 3251.
MR YOUNG: The 14-team term as pleaded is set out in paragraph 88, and I will not read that. That is expanded upon by extracting provisions of the merger agreement in paragraph 99 and the clauses that seem to found the alleged 14-team term appear to us to be 7.5, and 7.8 in paragraph 99.
GLEESON CJ: Does this mean it depends upon the level of generality or particularity with which you define the goods or services to which the 14‑team term can relate?
MR YOUNG: Not in this case, your Honour. There is no issue at all, but that the 14-team term related to the new competition services to be supplied by News and ARL as part of the new competition. We say it does not also depend on any dissection of what I have called new competition services into competition‑organising services or acquisition of team services or any other further dissection. On any view of things, all such services were being supplied or required by the partnership of News and ARL. Justice Finn at paragraphs 274 and 275 then described this term as one of the defining characteristics of the new competition and those findings and characterisations were adopted by Justice Heerey and Justice Merkel.
Can I just take a moment to contrast something that has been referred to which is the “cease altogether” term which was the subject of a cross‑claim. Justice Finn explained that at page 679 in paragraphs 306 to 309. As his Honour says in paragraph 306:
This term is relied upon as a true alternative to the fourteen team term.
It was advanced by Souths. The circumstances in which the alternative was advanced included what is set out in paragraph (b) in 307:
If . . . the supply and acquisition by the partnership of services with respect to the NRL competition was a relevantly different supply and acquisition of services from those formerly supplied and acquired by ARL and News (or Super League) as the former is joint supply and acquisition while the latter is several; then ARL and News made a contract or arrangement containing an exclusionary provision because they agreed . . . neither of them . . . would supply or acquire the services which each had previously supplied and acquired –
et cetera. That was alleged to be an exclusionary provision. The footing for going to the alternative was effectively the construction we have raised as to why the 14‑team term does not qualify as an exclusionary provision.
Justice Finn dealt with that in paragraph 309 and rejected it on two grounds. In the middle of the paragraph it did not have an exclusionary purpose and the alternative ground was that:
it applied without discrimination to the world at large.
There was no appeal to the Full Federal Court from those findings by his Honour. The two competing approaches to the application of section 4D(2) expressed very simply would seem to be this, that Souths and now News appear to contend that the way in which the subsection is to be applied is to put to one side the identity of the supplier or acquirer and the circumstances and timing of the supply and acquisition altogether and simply to identify by broad type the kind of services the subject of the alleged exclusionary provision. That is, we would say, an abstract and generalised approach that is inappropriate where the task is really to identify the circumstances of competition which of course have aspects of timing, aspects of identity of supplier, of geography and so forth. Competition as a process is a real and practical matter, not an abstract and generalised one.
That is perhaps a critical way of describing the approach which the Full Court adopted and Justice Finn adopted, which is to base the conclusion on the type or kind of services and only that. Our submission is that section 4D(2) focuses on the particular supply or acquisition to which the term relates, which on the facts as found was the supply or acquisition by a partnership of ARL and News jointly in circumstances where the previous competition had been brought to an end.
Your Honour the Chief Justice asked Mr Meagher whether our construction of section 4D(2) was unrelated to the timing argument which is the way in which the 4D(2) point had been put by News before the Full Court and before Justice Finn. In our submission, they are not unrelated. Timing alone is an insufficient basis for the construction of 4D(2) because, of course, as Mr Jackson pointed out, it looks ahead and not simply deals with present competition but with competition that is likely to occur in the future or which might occur in certain circumstances.
So timing alone would not be a sufficient basis, but timing is an aspect of competition, so when the subsection lays down a requirement that the parties be in competition, or likely competition, timing cannot be ignored. So there is that connection between the two arguments. Essentially, we would say that the timing argument was a similar argument to the one we have put. It was to the same effect, but it did not really grasp the entirety of the inquiry required by section 4D(2).
Mr Meagher correctly said that we contend that the words at the end, to which the relevant provision relates, do qualify the composite expression that precedes, which is:
the supply or acquisition of all or any of the goods or services –
and not simply “goods or services” so that you go into a characterisation of the services. If that were right, if you characterised electricity and gas as energy, and that was the service, they would always be competitive, without any further inquiry, simply because they satisfy some generalised description.
Now, there are several reasons, in our submission, why our approach is to be preferred. First, the alternative approach reads the words “type” or “kind” of goods or services into the language of the subsection. Secondly, the point we have just made, the words to which the relevant provision relates qualify the composite expression. That is not simply a technical or drafting argument; that is because the point of the exercise is to analyse the process of competition, and that cannot be understood or analysed or identified without focusing on the identity of the supplier, the nature, context and timing of the supply. All of the cases on market definition would say that those various dimensions must be analysed in a real world and practical way.
Thirdly, in further support of the composite expression argument, there is an analogy with section 45A, the price fixing provision, subsection (3) and also (8). Section 45A is of course a per se provision. In subsection (1) – and I will, for the sake of simplicity, read it, omitting a few words being various alternatives – it speaks of a purpose or likely effect of fixing the price for or in relation to:
goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding –
dropping down to the last words –
in competition with each other.
It is a similar requirement to section 4D(2). Then that is expanded upon by section 45A(8), not by reference to the concept of goods or services competing with each other, but by reference to the composite expression:
The supply or acquisition of goods or services by persons in competition with each other –
is then given an expanded meaning. That is why “supply or acquisition” is, in our submission, integral to the way in which section 4D(2) is to be applied.
So the question really becomes, you must identify under 4D(2) the supply or acquisition to which the term relates. Not just the goods or services, but the supply or acquisition.
The next reason why we say our construction is to be preferred is that it more closely adheres to the statement of principle of Justice Wilcox in Eastern Express (1991) 30 FCR 385. Can I take the Court to that case – the relevant paragraph is 108. Can I say that the case went on appeal to the Full Federal Court, but the Full Federal Court decision was confined to the predatory pricing issue. The 4D(2) issue arose on a cross‑claim, which was not taken on appeal.
GLEESON CJ: I do not seem to have paragraph numbers.
CALLINAN J: You mean page 408?
MR YOUNG: I am sorry, it is page 420.
GLEESON CJ: Thank you.
MR YOUNG: Can I take the Court back, just to give the context of the issue. Page 419, last complete paragraph. The Court will see Justice Wilcox is considering a cross-claim by ESN which alleged that:
the quota provisions amount to an exclusionary provision within the meaning of section 4D(1) -
The quota provisions were to this effect, that the various real estate agents who came together as a consortium to launch a newspaper in the Eastern suburbs of Sydney would subscribe for advertisements according to a particular quota, the level of the advertising subscription. The argument was that that was an exclusionary provision. Justice Wilcox rejected the argument, applying section 4D(2).
In the middle of that paragraph to which I directed the Court at page 419, the issue was identified as being whether the real estate agents were “in competition with each other” in circumstances where that competition related “to the supply or acquisition of goods or services to which the contract” related. The argument seemed to be that they were not generally, but to some extent they competed with each other for “preferred pages” for placement of their advertisements.
His Honour rejected the suggested application of section 4D(2) in the second complete paragraph at 420, saying in the middle of the paragraph:
If the word “services” is defined broadly, so as merely to refer to real estate advertising services, it may justly be said that these are services to which the quota provisions relate. But ESN’s difficulty is that the agents are not in competition with each other in relation to services generally. Even on the ESN argument, the agents engage in a limited competition for some preferred pages of the newspaper. If the word “services” is defined narrowly, to accommodate the limited nature of the competition . . . these are not services to which the quota provisions relate. The dilemma for ESN is that on no reading of the word “services” does the area of competition coincide with the area of contractual regulation.
Just applying the reasoning here, if the relevant services are defined specifically in the real world context as being the services of the new competition to be supplied jointly, then the parties are not in competition with each other. If defined broadly as being rugby services, then that ceases to be an accurate description of the supply or acquisition to which the relevant provision relates. So the same dilemma exists here.
Can I give the Court a reference to another case that is of some assistance. It is the Full Federal Court decision in the second Pont Data Case 27 FCR 492. The case concerned agreements relating to the use of what might be called stock exchange data. The earlier case referred to an agreement restricting access to the data within Australia. This case concerned what was described as a foreign agreement, contemplating the use of the data outside Australia, but imposing restraint upon certain wholesaling operations in respect of that data outside Australia. The facts are referred to in that respect at page 495, the first two paragraphs.
The court’s decision turned on 4D(2) and whether the parties were competitive in respect of the supply of data overseas, and the answer was given that they were not. At 497, second paragraph, the court poses the question, extracts 4D(2), and then pointed out that one of the relevant parties, JECNET, only provided services to Australian clients. Then at the top of 498, the court concluded that 4D(2) was not satisfied:
ASXO and Pont had not been shown to be competitive or to be likely to be competitive (in the sense stated in s 4D(2)) in relation to the supply of Signal C information to non‑Australian users.
Therefore no exclusionary provision; although those two parties were competitive in relation to the supply of the same type of information within Australia. That Full Federal Court decision sits in some tension with the approach of the Full Federal Court here, which made everything turn on characterising the general type of services.
Next, the further reason for referring the construction advanced by the ACCC lies in the difficulties and anomalies recognised by Justice Finn and Justice Heerey in their respect judgments. Can I go back to Justice Finn firstly, Justice Finn, at paragraph 293, page 676 of the ALR. In the Full Court then a very similar concern was expressed by Justice Heerey at paragraph 94 in the Federal Court Report. That is at page 477. Can we also point to this oddity. If a new joint venture were to be formed, under which the parties agreed to jointly supply goods in future, they would be entitled to fix the price of the goods they supply under section 45A without committing any per se contravention because there is an explicit exemption for joint venture price fixing in section 45A(2), yet the burden of this argument is that whilst you could fix the price you could not restrict who your customers were without there being a per se exclusionary provision within section 4D(2). The contrast between those two outcomes appears to the Commission to be an oddity of the construction.
The idea that section 4D(2), as Justice Finn and Justice Heerey indicated, could apply to prevent a new business being formed to in future provide services jointly at pain of the per se contravention of the Act, seems to be an outcome that it is difficult to believe was intended by Parliament. It would make the section operate, moreover, in circumstances where there would be no competitive concern and where the parties otherwise by their agreement would not be substantially lessening any form of competition within section 45. Why extend section 4D for such a situation?
Can I turn to the criticisms that have been made of our construction by firstly News and then South Sydney. The first point made by Mr Meagher, the first criticism made by News, is made in writing in paragraph 8 of News’ supplementary written submission. It was made again orally. In the second sentence of paragraph 8 the criticism is made that the ACCC’s:
construction makes the identity of the supplier a distinguishing and necessary characteristic of the goods or services in respect of which there must be competition.
In our submission, all our construction does it to make the identity of the supplier or acquirer of the services to which the alleged provision relates a relevant element in characterising whether there is a supply or acquisition in competition. There is nothing surprising about identifying the supplier as part of a process in assisting in fully determining whether there is a process of competition going on in respect of the subject matter of the provision.
Next, in the same paragraph 8 and again in paragraph 13, the point is made that the ACCC’s construction is said to have the consequence that the parties who are competitive must include the party upon whose supply or acquisition the exclusionary provision is to operate. It is made in the opening words of paragraph 8 and the last words of paragraph 8 and it is returned to in paragraph 13 to make the same point by reference to the words of section 4D(1)(b), “all or any”, and that point was made orally.
That overstates our construction. We do not argue that the victim or target of a restriction must always be a party to the arrangement or one of the two competitors, nor do we argue that the person who agrees to restrict its supply - that is the supplier - or to restrict its acquisition so as to harm some other party must always be one of the two competitors. The language, as has been pointed out by both other parties, “all or any” permits of some greater flexibility in that respect. But the usual case will be that the persons who are in competition will be agreeing to restrict their supply to some third party or their acquisition from some third party; that will be a common case. It is the only case alleged here, so it is the only case relevant on these facts to the application of section 4D(2). The only case alleged is that ARL and News restricted their supply of their services to 14 teams and they were in competition when they did so.
Another criticism made in News’ submission, not referred to orally, is at paragraph 14 where it is said:
It would be to elevate form over substance to insist that the goods or services in respect of which there must be competition have as one of their defining characteristics the identity of the supplier or acquirer. One does not usually describe two services as different merely because they are provided by different persons –
In our submission, in the context of analysing competition, that is an abstraction and it is artificial. In determining whether two parties are in competition in relation to the supply or acquisition of goods or services you look at the substitutability of the goods or services but you also look at the circumstances, timing, geographic area and other aspects of the process of supply or acquisition.
To do otherwise is to disconnect the goods and services from the actual course of the economic process of supplying or acquiring them. The other point made by News is that our submission rests:
upon the identity of NRL.
That is made in paragraph 15. That is not the case. Our argument looks straight past NRL, accepting the trial judge’s findings that the real principles supplying the goods or services in question were ARL and News. Our case is that that they were supplying the goods or services jointly, according to the trial judge’s findings. If that is so, that is the circumstance to which section 4D(2) must be applied to determine whether their supply and acquisition was a competitive one, or, as we would put it, a joint one as part of a new business in relation to which they were not in competition.
Can I turn then to the matters raised by Souths in their outline of submission. The principal point raised by Souths is again the characterisation argument that I have already addressed. In paragraph 3.2 they say the question is whether they are services of:
the type or kind . . . The present debate turns on the proper characterisation of the service –
For the reasons we have given, we submit that is not the case. The point they make relates to the “but for” phrase in section 4D(2) and it is raised in paragraph 3.3 and then 3.7, 3.8 and 3.9. Souths make this point that section 4D(2) does not say “but for the provision”, a definite article, as if it is referring to the same provision mentioned in subsection (1) and then mentioned at the end of section 4D(2) by the words:
the relevant provision –
It reaches a bit more broadly than that and speaks about:
but for the provision of any contract, arrangement or understanding –
They are correct in pointing to the ambit of that language but it does not assist their construction at all nor is it central to our argument.
Just before I go to develop that point, can I point out to Court that there is in this respect some unexplained difference between the choice of words in different provisions. If we look on the one hand at section 45(3) ‑ ‑ ‑
McHUGH J: It arises from the fact that the drafter misunderstood the American law on collective boycotts, is it not? Under the United States law, collective boycotts are only prohibited if you are boycotting a competitor. Section 4D is much wider.
MR YOUNG: Section 4D goes wider, your Honour, but it still has the component that the ‑ ‑ ‑
McHUGH J: It is contrary to what the Swanson Committee wanted, I think.
MR YOUNG: It is and not only in that respect, your Honour. But just about the choice of language, your Honour, can I just contrast with section 45(3) for a moment. The Court will see that 45(3) is also a definition of competition for the purposes of section 45(2)(a)(ii) and (2)(b)(ii). That uses the expression “but for the provision” and it is obviously in context a reference to the same provision as that which is alleged to substantially lessen competition.
Likewise, section 47(13), which is part of the exclusive dealing provisions, it defines competition by saying:
(b) a reference to competition, in relation to –
exclusive dealing –
conduct ‑
and towards the end the expression is used:
but for the conduct –
“The conduct” is also a reference back to the specific conduct which is said to attract section 47 in the first place. However, can I point out that the wider words of 4D(2) introduced in the 1977 amendments after the Swanson Committee Report is a form of words also chosen when Parliament introduced 45A(8) at the same time in 1977, that is “but for a provision of any contract”. Section 45C(5), again a 1977 amendment, is “but for a provision of any contract”. Now, we cannot explain why the different words are chosen but they do not have any real consequence in this case.
We criticised the reasoning that preceded by saying “but for the merger” and that was in the Full Court judgment. We did so for a different reason. It is this: the 14-team term relates only to the new competition services. Those services would not exist but for the merger. But for the merger, NRL and News might have been continuing to supply separate competition services or that might have failed by then and something else may have happened. But it cannot be said “but for the merger” these new competition services would continue to be supplied. There would not be any new competition but for the merger. So the point that Mr Jackson made about these words leads nowhere in this case. It is possible those words might have some application in some other case, but they do not lead to the conclusion that one ignores the real commercial position that a new competition has come into existence with new competition services and only those are the subject of the 14-team term.
Can I draw out one - if we are wrong about that and these words “but for the provision of any contract” were intended to have some wider significance, it would have quite far‑reaching consequences. In Melway, this Court pointed out that vertical restraints between a manufacturer and a distributor, intra-brand, allocating territory or restricting competition between distributors, are not always anti‑competitive in respect of competition in the broad between different brands. It is not to be supposed that those sort of restraints are necessarily anti‑competitive or not of benefit to the competitive process. They may well be. Those points were made in the joint judgment in Melway at paragraphs 15 to 20.
But if this wide reading were right, and one manufacturer recruited a distributor who had previously worked for a competitor, then, but for the new distribution agreement, they would have been in competition with each other in relation to the same type of goods and therefore the new distribution arrangement, insofar as it allocated territory or restricted the activities of the distributor, would be a per se exclusionary provision. With respect, in our submission, that cannot have been intended to be the consequences of saying “but for the provision of any contract”.
The consequence of our interpretation is not that terms such as the 14‑team term fall outside the Act altogether. It means such terms or merger agreements fall to be tested under section 45 by applying a substantial lessening of competition test, or they fall to be tested under section 50, when the merger involves an acquisition of shares or assets, again by applying a substantial lessening of competition test. At the end of the day, that is what would have happened to the “cease altogether” term. The “cease altogether” term – and I have taken the Court to the passage in the judgment of Justice Finn – that was directed towards a different set of services: ceasing the previous services as part and parcel of agreeing to jointly proceed with new services. So they were different services.
The learned trial judge found that they did not fall within section 4D, no exclusionary provision, but that term would then have fallen to be tested under the general provisions of section 45, concerned with substantial lessening of competition. In our submission, therefore, our approach does not have difficult or improbable consequences, unlike that urged against the construction we advance.
Now, we have nothing to add on other matters. We wish to confine our submissions simply to the questions of law that we say do arise. Perhaps they arise, given the way the parties have proceeded, on the fringe of matters, perhaps even standing outside the grounds of appeal, but nonetheless, in our submission, they are appropriate matters of general law to bring to the attention of the Court by a party such as the ACCC.
In our submission, the ACCC in substance is charged with the administration of this Act; they are the responsible body called upon to enforce the provisions of this Act, both criminally and civilly. They administer the administrative arrangements under the Act for authorisations and undertakings and, as the leave affidavit indicated, a significant part of the ACCC’s enforcement activities these days are directed towards section 4D. Unless there is something ‑ ‑ ‑
KIRBY J: There used to be a provision allowing the National Companies and Securities Commission, I think generally, to intervene in matters in the courts, or purporting to allow that.
MR YOUNG: There is, your Honour, and it is in my experience fairly common practice, both at trial and appellate level, for judges in this country to ask that ASIC be represented when important matters are raised bearing upon the construction of the Corporations Act.
KIRBY J: Is that provision – did that pass into the statute governing your client?
MR YOUNG: Not the ACCC, no.
KIRBY J: Well, is that not a significant omission? In one of its predecessors, there was this general facility provided by the statutory scheme.
MR YOUNG: Yes, after the date of the events we are concerned with there is an intervention section that has been added. It is not in the copy of the Act I have in front of me. I think it is section 87CA.
KIRBY J: What is it, I am sorry?
MR YOUNG: Section 87CA.
KIRBY J: To the Trade Practices Act?
MR YOUNG: Yes.
KIRBY J: But in the constituting statute of your client there is not such a general provision.
MR YOUNG: No. The Trade Practices Commission is constituted by the same Act. It is unlike ASIC, which is constituted by its own Act.
That right of intervention was recently exercised by the ACCC in a case involving Roche vitamins in Melbourne relying upon section 87CA. That was last ‑ ‑ ‑
KIRBY J: But, given that the parties are in enthusiastic agreement that they do not wish to advance this matter, it puts a court in a very awkward position, even if not a constitutionally difficult position, that it is disposing of an appeal which the parties define, the record is defined by the parties and they, having considered the matter, rebuff the point, why would it be a suitable vehicle for the court to pass on the point, where those who have the carriage of the appeal do not wish to argue it?
MR YOUNG: Well, your Honour, it may come down to the interconnection, if any, between this point and the other issues that are tendered for decision by the Court. We raise the matter because we saw it as having some bearing upon the issues that were squarely tendered, being purpose and class. Now, the interconnection may be indirect, but if it exists, then our point stands perhaps in a somewhat different position than it would if it were simply an extraneous point being tendered as an additional or separate matter that the Court should consider. It is really only raised because we conceive that, as indeed Justice Finn and Justice Heerey pointed out, that a good deal of straining of terms within section 4D was going on.
GLEESON CJ: Mr Young, can I take you back to the paragraph 293 in 177 ALR that you referred to?
MR YOUNG: Yes.
GLEESON CJ: You pointed out that Justice Heerey made a similar observation.
MR YOUNG: Yes.
GLEESON CJ: I would just like to understand that a little better than I do at the moment.
MR YOUNG: Could your Honour give me the paragraph number again?
GLEESON CJ: Paragraph 293. This is advanced by Justice Finn and Justice Heerey as a surprising consequence of the argument advanced by Souths and, as I understood your submissions, you said, yes, it is a surprising consequence, but the answer to it is the construction we place on 4D(2).
MR YOUNG: Yes.
GLEESON CJ: Can you give a practical example of what Justice Finn has in mind there?
MR YOUNG: Can I give your Honour perhaps two examples: one would be to take the idea of a mining joint venture. Now, it is very common for mining companies to engage in joint ventures to develop a particular deposit; just take a gold miner. It may have other mines and other deposits where it is either the sole owner or a joint venture with other people and generally across the industry it may be said to be competing with all other gold mining companies notwithstanding that in one particular joint venture it has agreed to jointly supply gold with the particular partner in that joint venture. If section 4D were to apply to a joint venture agreement under which those joint venturers agreed not just to fix the price but to restrict supply by ceasing sending gold to one smelter, terminating them and sending it to another smelter, it might be alleged that this arrangement, in respect of the gold from that mine, was an exclusionary provision, because
they have agreed to restrict the supply of gold to one smelter by cutting out another.
That is an everyday situation but I think Justice Finn was perhaps focusing on an example where the new business is constituted, let us assume a computer business, by people who were previously competitors. They join forces and they agree to restructure their respective distribution networks in a way which that has restrictive impacts on the people they previously supplied as re‑sellers. The concern expressed would seem to be that any restrictions imposed on the new network of distributors that perhaps cut out others would be alleged to be an exclusionary provision, if these arguments are correct, ignoring the fact that they have put up a new business enterprise.
In our submission, it is a real concern as this case demonstrates because we would say this: if the merger arrangement did not have anticompetitive consequences in the first place under section 45 and the “cease altogether” term did not have ordinary section 45 substantial lessening consequences, it would be odd then that per se provisions would apply to the working out of that merged competition in circumstances where in essence there is no competitive concern with the arrangement.
I mean, true it is that section 4D lays down its own requirements and there is not anticompetitive effects test within section 4D but at the end of the day it is a provision of Part IV of the Trade Practices Act and the general object of the Act is to enhance the welfare of Australians through the promotion of competition, that is section 2, and it is an odd consequence that per se contraventions of an Act that have at the very least civil penalty consequences as well as civil consequences, should attract per se ban or contraventions in circumstances where in many instances it will be difficult to find legitimate competitive concern with the new business enterprise.
That, we would say, is the sort of difficulty that underlay the concerns expressed by both judges.
GLEESON CJ: Thank you.
MR YOUNG: If the Court pleases.
GLEESON CJ: Mr Meagher.
MR MEAGHER: I will address first the question which your Honour the Chief Justice asked. Could I invite the Court to go back to paragraph 292 of Justice Finn’s judgment at page 3314 of volume 15, remembering that the issue before him as to how section 4D should be construed was the same as the issue which was argued before this Court, that is, that purpose depends upon effect, so Souths argued, and particular could be satisfied by effect or exclusion without any regard to the reasons that these provisions were inserted and as to whether specific persons were to be the object of the activity. His Honour, at paragraph 292, says that:
while the purpose of having resort to the proposed selection criteria underpinning the fourteen team term was to differentiate between those who would and those who would not be selected . . . it did not on the evidence before me have or have as well the purpose of discriminating against a particular applicant or class of applicants for selection.
Now, that in effect encapsulates the construction of section 4D which we earlier debated, which Justice Finn adopted. He returns to that subject in the next paragraph, where he observes that if the Souths’ argument was correct it would carry the consequence that for whatever reason if competitors enter into partnership and define the scope of their partnership in a particular way which affects customers, then no matter how justifiable their reasons for doing so they have agreed to an exclusionary provision. That was the point, in our submission, that the trial judge was seeking to make.
GLEESON CJ: And no matter whether what they are doing enhances the state of competition in the market.
MR MEAGHER: That is so. And indeed ‑ again referring to the subject of primary boycotts, primary boycotts can be undertaken for many reasons which have nothing to do with anti‑competitive behaviour. They may be, as your Honour points out, to enhance competition in some respect in the market but nevertheless there is a per se prohibition, subject of course to the right to get an authorisation.
Could I make one point which I omitted to make in my argument in‑chief, and that is to refer the Court to section 45(7) which takes out of the operation of section 45 contracts, arrangements or understandings which are in relation to acquisition of shares or assets; in effect circumstances which might involve mergers, either affected by acquisitions of assets or shares. Now, the presence of that subsection there is a possible defence. It underlines, in our submission, that the legislature recognised that mergers, joint ventures and the like might otherwise come within the broad provision of section 45(2) either as exclusionary provisions or as provisions which have substantial effects of lessening competition.
Indeed, in this case News did raise that subsection by way of defence but that defence was rejected because there was not established to be a sufficient relationship, either direct or indirect, between what happened and the acquisition of shares or assets. That subject, if your Honours want to note, is dealt with by the trial judge at paragraph 322 and following of his judgment.
GLEESON CJ: Suppose you had a market for steel in which there was a major supplier and two very small suppliers who were really no match for the major supplier and the two smaller suppliers agreed between themselves to merge their operations or to form a partnership and at the same time to make themselves more efficient by concentrating on the manufacture and supply of particular types of steel product. That might enhance the state of competition in the steel market by presenting the major with a significant competitor instead of two insignificant competitors. Would that fall within 4D?
MR MEAGHER: One would have to inquire whether the arrangements between the two small competitors involved restrictions or limitations upon the supply of persons who they had previously supplied.
GLEESON CJ: They are going out of business. They are just not supplying the particular type of product any more.
MR MEAGHER: One would then have to ask the question which was in effect asked in this case on the way we say it should be construed, that is, were those provisions included in this merger or arrangement under which they were to cease business for the purpose, or for a substantial purpose, of preventing supply to those persons or was that simply a consequence which was neither the focus of the agreement nor intended. I am loath to mention this, your Honours, but in Rural Press v ACCC the purpose question certainly arose and that was a case where there was geographic market sharing and the parties, in effect, agreed to restrict their supply of newspapers beyond certain markets because of the threat otherwise that each would compete in the other’s area.
KIRBY J: There might be a redefinition of the market in the hypothesised case because, if you have chosen to isolate your activities into a particular submarket, then it may be that ‑ ‑ ‑
MR MEAGHER: Section 4D does not inquire about markets; it simply inquires as to whether there is competitive behaviour in relation to supply or acquisition between the two people. One does not have to identify the outer bounds of the market, one does not have to identify the state of competition in the market. Section 4D, as we submit, directs attention in its significant parts to the reasons why the particular provision which has a consequence or effect was inserted in the arrangement.
KIRBY J: But it must postulate some market, because it would only be, would it not, operating in respect of activity within Australia?
MR MEAGHER: If there is competition in relation to the supply or acquisition of goods or services, there must be a market, I accept that, but 4D does not require one to examine the extent of that market or the state of competition in it. It simply requires an inquiry between two persons who are parties to an agreement as to whether they are in competition and, if so, in relation to what? Then the further inquiry is: is that same thing the subject of some exclusionary provision in the sense defined?
My point that I was seeking to make in relation to the Rural Press decision is that in that case, which was decided on the purpose issue without any regard to the further issue which arises in relation to particular and class, the court noted that there was no evidence to suggest that what the parties did had anything to do with denying supply to the people who might be affected by what they did. They were really irrelevant to the commercial decision of the parties and on that basis there was no exclusionary provision.
Your Honours, there were two other points I wished to make. If I could take your Honours to the Souths’ written submissions to identify the issues which have been debated before this Court as between Souths and my clients. The first respondent’s supplementary submissions are dated 20 December and could I take your Honours to paragraph 1.4. Now, we accept that the issues which have been debated before this Court so far are fairly described in that paragraph.
The first issue, if one is looking at section 4D(1), arises under paragraph (b)(i) and it, in short form – although not fully and correctly – could be described as an argument about objective and subjective. That is, is purpose determined by what it does or as to why it was included? The second issue is the particular issue which we debated and again the issue there is whether persons are particular, or a class is particular merely because they form part of a group which is affected by what it does.
Those two issues arise under 4D(1)(b). They do not require this Court to address the competition issue which the ACCC has raised. The decision of those two issues does not turn on the competition issue. If there is separately a finding of competition then the requirements for the exclusionary provision is satisfied.
Now, our position is that we did not raise the point in the form which it is raised by the ACCC. We conducted this case on the basis that that point is a bad point. It is not available, and we have sought to urge the Court to that point of view. Unless the Court is satisfied that it is a good
point, in our submission, there is no reason to revoke special leave in this case. The case squarely raises two significant issues in relation to the construction of section 4D, and they have both been debated.
The final point I would wish to make is that in answer to a question from the Court as to whether the ACCC argument depends on a characterisation of the supply or acquisition, it was said that the identity of the supplier and the timing of supply are relevant. Now, our submission is, when you understand the ACCC point it makes the identity of the supplier essential, not relevant. If it is only relevant, then it does become a question of factual characterisation, and the point has been decided – and there is no good reason for this Court to address the point or consider further the point, if it turns solely on a question of factual characterisation. Your Honours, those are our submissions.
GLEESON CJ: Thank you, Mr Meagher. Mr Jackson.
MR JACKSON: Your Honours, in relation to the submissions on behalf of the ACCC, concerning the symmetry that should exist between section 4D and that part of section 45 and other parts of the Act, may we simply refer to – the reference is to passages in four of the reasons in Devenish (1991) 172 CLR 32 in which members of the Court said that one should not construe provisions on the basis that there will not be some overlapping, or in the sense that different provisions may be applicable to the same conduct. The relevant passages are at page 43, about point 7; page 47, about point 8; page 51, about point 6 to the end of the page; and page 56, about point 3.
Your Honours, that really means, of course, that what one should do, in our submission, is to apply the terms of the Act. The terms of section 45 and the incorporating section 4D in various circumstances are likely to have or potentially have a wide operation. That is recognised in one sense but the difficulty is avoided by the operation of the authorisation provisions. The authorisation provisions are provisions which specifically require there to be taken into account by the Commission, and if necessary by the tribunal, matters of the public benefit to be obtained by such a provision.
Could I just give your Honours the references or take your Honours for a moment if I may to section 88(1) which says that:
the Commission may, upon application . . . grant an authorization to the corporation:
(a) to make a contract . . . where a provision . . . would be, or might be, an exclusionary provision . . .
(b) to give effect to –
in effect -
an exclusionary provision.
Your Honours, when ones comes to the test to be applied in determining whether such an authorisation should be given, your Honours will see that set out in section 90(8):
The Commission shall not:
(a) make a determination granting:
(i) an authorization . . .
unless it is satisfied in all the circumstances that the proposed provision . . . would result, or be likely to result, in such a benefit to the public that . . . should be allowed to be made . . .
(b) . . . such a benefit to the public that the contract, arrangement or understanding should be allowed to be given effect to.
KIRBY J: Which subsection?
MR JACKSON: I was last reading, your Honour, from section 90, I think it is subsection (8)(b). The point I would seek to make about it is, your Honours, that in relation to those provisions, what one has is a situation where the public benefit is to be taken into account by the Commission. So your Honours will see that certainly the provision may in some circumstances have a wide operation but, equally, provision is made for the regulation of its operation in particular cases.
Your Honours, so that is the first thing we would seek to say. The second thing, your Honours, is this, that reference was made to the observations of Justice Wilcox in the Eastern Express Case. Those observations were considered in the present case. Your Honours will see that referred to by Justice Finn at paragraph 199, page 3288 and Justice Heerey in paragraph 113, the relevant page being page 3460. Finally, your Honours, we would seek to say this, that what has been said about section 4D is that it suggest in a sense that it is a provision of some complication. But, really, if one takes the simplest case to which it refers, it simply expresses the legislative value, as it were, that a provision is an exclusionary provision if two or more persons in competition with each other agree to prevent, restrict or limit the supply of goods or services to particular persons or classes of persons and the only test is whether they are
in competition with each other at the time they make that agreement. Now, your Honours, that is the provision pared down and it operates, in our submission, plainly in a case of this kind.
GLEESON CJ: Thank you, Mr Jackson. We will reserve our decision in this matter and we will adjourn until 3 pm on Monday.
AT 12.48 PM THE MATTER WAS ADJOURNED
0
2
0