Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Limited

[1988] HCATrans 137

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No Bl6 of 1988

B e t w e e n -

QUEENSLAND WIRE INDUSTRIES PTY LTD

Appellant

and

THE BROKEN HILL PROPRIETARY COMPANY

LIMITED

First Respondent

AUSTRALIAN WIRE INDUSTRIES PTY LTD

Second Respondent

MASON CJ

WILSON J

DEANE J

Wire(2)

DAWSON J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON THURSDAY, 30 JUNE 1988, AT 9.47 AM

(Continued from 29/6/88)

Copyright in the High Court of Australia

BlTl/1/SDL 52 30/f!/88

MASON CJ:  Yes, Mr Drummond?

MR DRUMMOND: If I could go to page 646 of the record where

His Honour described the central point	that
impressed him about BHP's conduct.	A little
less than half-way down he said:

The central point which has impressed me

is that it is doing no more than declining

to sell a product it has not previously

sold and which it desires to keep for further

processing. It wants to sell only the

completed posts, rather than the material

from which it makes them. ·

That does appear to be somewhat inconsistent
with the view His Honour expressed at the bottom
of page 634, over on to 635 where, at the bottom
of page 634, he says:

If one were to exclude from the concept

of taking advantage of market power the
use of righ~ which are available under

the general law, there would not be much

left of the section.

And then he concludes that little discussion about a third of the way down by saying:

It is not necessarily an answer on the

part of the monopolist to say, in such

a case as the present:  under the general

law I am the proprietor of these goods

and may do with them as I please. Insofar

as BHP relied on that simple contention

before me, I reject it.

To come back to that passage at page 646, our

submission is that it is wrong to say that BHP

was doing no more than what His Honour suggested

·to be the case. It was doing more; what it	was doing was refusing to sell a product for	a purpose found against it of preventing the
entry by the appellant into the star picket market
and, as that passage at page 608 of the judgment
that I have the Court to a number of times shows,
that was done with the further object of impairing
the appellant's ability to compete in the fencing
materials market. It is that aspect that brings
the conduct of BHP within the ambit of section 46,

~, in our submission.

It is an exercise of market power for BHP

to refuse to supply the Y-bar; an exercise of the power it has in the two wider markets. It

is done for an anti-competitive purpose and that

is why the section is infringed.

BITl/2/SDL	53	30/6/88
Wire(2)

In our submission, section 46 does not say

that a business organization can generally be

forced to deal with someone it does not want to deal with. It only imposes limits on the

freedom of a dominant corporation to carry on business and then it imposes limits only in a

certain relatively narrow area. I go on to suggest

that to take the rather fanciful example of the

monopolist maker of glass bottles who was asked
to supply molten glass by a person who wanted

to go into competition in the bottle-making business,

section 46 would be unlikely to require such

a monopolist to supply molten glass; it is highly

likely that there would be good safety reasons

or reasons associated with enormous costs of disrupting .the manufacturing process of the

monopolist that would prevent any finding of

a proscribed purpose.

A monopolist who is producing a product,

who refuses to supply the product to a customer,

who lacks the capacity to give after-salei service
that would preserve the image of the product,

would not be required to sell to that particular

customer. He too would, in all probability,

lack the proscribed purpose in refusing to supply.

A dominant manufacturer, say of mousetraps,

the better mousetrap and who can sell it at a
lower price than a competitor, would not be required
to supply the small competitor with the new product
to enable him to better compete. There would

who by the use of inventive resources makes

be no taking advantage of dominant power, we

would submit, in ,that situation for the reasons

basically outlined in paragraph 22 of the submission

by the Trade Practices .Commission to the effect

that the competition on the merits does not amount

to a taking of advantage.

DEANE J: -Mr Drummond, can you point to any part of the

Full Court judgment where you say there is an
error in law?	I appreciate what you are saying

here, which really is a matter of factual conclusion,

but where do you say the Full Court went wrong

in statement of a principle of law - if you

do say so?

MR DRUMMOND:  I do say so, Your Honour. They misconstrued

section 46 against the background of the findings

of the trial judge by failing to deal with the

application of the section to his findings that

BHP was dominant in those two wider markets:

the steel and the rural fencing market.

BITl/3/SDL	54	30/6/88
Wire(2)

DEANE J: I follow wbat you say about that but is there any

particular statement of law in the judgment of

the Full Court that you say is wrong?	I am just
trying to isolate what the question is?

MR DRUMMOND:  Taking up that point, Your Honour, we have

already referred, I think, to the pasage at page 674

as the critical passage in the Full Court judgment.

At about the fifth line:

The question for the purposes of s.46

then becomes whether, in so denying supply,

BHP was taking advantage of power in relation

to a market in the Y-bar.

We say that is the fundamental error that the

Full Court made. That is not the question at

all, given the findingsof the other markets.

DEANE J:	I follow that but if you look at that paragraph
it seems to be implicit in it that the only arguable
market for Y-bar was a potential market which
did not presently exist in terms of concrete trade. That seems to assume that the fact that
the main manufacturer of Y-bar is selling to the main producer of the fencing posts in the
country, does not mean that there is a market for Y-bar because the two companies are related
and that one is a subsidiary of another.

MR DRUMMOND:  That seems to be implicit in it, yes.

DEANE J:	Was the contrary of that assumption ever raised
or litigated?

MR DRUMMOND:  Your Honour, when the Full Court raised this

question in argument of the possible developments

of a Y-bar market it was argued that the potentiality

for transactions and the - - -

DEANE J: -That is not what I was putting to you.
MR DRUMMOND:	I am sorry, Your Honour.

DEANE J:	Put aside potentiality, was it argued in the Full Court that the fact that the main manufacturer
of Y-bar sold product to the main manufacturer of fencing posts in the country meant that there was a market for Y-bar in the country.

MR DRUMMOND:  Your Honour, I do not think I argued that

~. specific point. I think I limited my argument

in relation to the Y-bar proposition to there

being a market because there was a potentiality

for transactions.

BITl/4/SDL	55	30/6/88
Wire(2)

At the bottom of page 674, the Full Court, about six lines from the bottom, say:

In response, senior counsel for QWI

submitted that there was at least a "potential"

market, which QWI sought to open up by

these proceedings.

DEANE J:	No contrary view was urged upon it?
MR DRUMMOND:	Yes. That is the way it was argued in the

Full Court when the court raised the Y-bar market

issue.

DEANE J:	What would you say this Court should do if, at
the end of the day, one were to take the view
that the fact that two companies are related
simply does not preclude the existence of a market
in a product if they are companies of the type
of BHP and its subsidiary companies which are
carrying on identifiably separate manufacturing
and trading activities?
MR DRUMMOND:	We would submit that we should be entitled

to judgment. If the Court got to the position

of thinking that a Y-bar market was necessary

to be shown and that was a basis on which a Y-bar

market could be said to exist, we would submit,

we would have to succeed because there would

be found a Y-bar market. In view of the findings

that BHP is the sole operator, sole participant -
the sole manufacturer and supplier in that market,

it would have to be found that it was in a position

of substantial power in the Y-bar market. Then

His Honour has found that the refusal of Y-bar,

which would inevitably be an exercise of power

in that market, was done for one of the proscribed

purposes preventing entry into the fence post

market.

DEANE J:	You say, "If it were necessary" but, on another
point of view, if one were to take the view that
in a monopoly provision the fact that the only custaner was a captive customer could not prevent
a market, it would be a highly artificial approach
to the case not to start with that point. The
problem I am having, and I am not suggesting
that is my view, but if one were to be of that
view, how does it fit into a situation where
the Full Court has given its judgment on the

\ basis that that view was never urged?

MR DRUMMOND:  Your Honour, it is not much of an answer

to say that we did argue and call the deal of evidence that there was a Y-bar market at the

trial.

BITl/5/SDL	56	30/6/88
Wire(2)

DEANE J: It is certainly part of the answer. Perhaps your

answer is that we should just be bold, I do not

know.

MR DRUMMOND:  Yes. Your Honour, that there was a Y-bar

market was pleaded by us and it was the reason why the economist was called. His evidence is

directed very largely to that issue. Dr Norman,

in response, was called to reply to that particular

evidence so it was an issue that was, in our

submission, fully litigated at the trial and

there is no reason why, in our submission, it

could not be dealt with in the way we have submitted

here.

DEANE J:	You have answered my queestion.
MR DRUMMOND:	Thank you, Your Honour.

DAWSON J: Is there any evidence, Mr Drummond, of the way

in which AWI operated? Whether it operated entirely

separately to make a profit and whether the sale

of Y-bar was at a particular price which enabled

it to do that?

MR DRUMMOND:  The evidence was very limited, Your Honour,

but in that passage in - - -

DAWSON J:  I am really asking was it as much an arms-length

transaction as there could be between a parent

and a subsidiary?

MR DRUMMOND:  Your Honour, there is evidence along these

lines: it is in Mr Forster's evidence, to the

effect that - Mr Forster or Mr Sampson, I am

not quite sure - but he gave some evidence about

the profits that were generated by the sale of

Y-bar and that would have to be between BHP and

AWI compared with the profits generated by the

sale of posts. He gave figures for what was

the contribution made by the sale of the Y-bar

in comparison with the much larger contribution

that was made from the sale of fence posts.

Your Honour, there is that evidence which does

suggest that there were transactions which, in

legal form, were arms-length transactions - - -

DAWSON J:  I really just had in mind whether the Y-bar

was sold from BHP to AWI at a commercially-real

price?

MR DRU~MOND:  That is the evidence I have in mind, Your Honour.

It does appear that that was the case at a price

that involved a mark up. I have to say that

it was not explored in evidence how that mark up

compared, for example, with the mark up on other

products from the bar division. But the evidence

was that it was certainly sold at a mark up by

BHP to AWI.

BITl/6/SDL	57	30/6/88
Wire(2)

DAWSON J:  Which you would say would establish that it would

be able to sell at the same mark up,at the same

real price, to another person but chose not to

do so?

MR DRUMMOND:  Yes, Your Honour. And there is, of course,

also the evidence that we referred to yesterday

that the transactions between BHP and AWI in

relation to Y-bar were, in form, legal sales

involving the invoicing of product from one to

the other.

DAWSON J:	Yes.
MR DRUMMOND:	I think the passage on the contribution point

that I have just mentioned appears at page 400,

in Mr Forster's evidence. It is in response
to some questions by His Honour about the middle

of the page. His Honour puts to Mr Forster that:

the main disadvantage of selling someone
else the feed, would simply be the loss
of the profit - lower profitability?

That really evokes that passage at page 646 of the judgment where he says that all BHP is wantLrig

to do is to make posts itself. Then Mr Forster runs

on and gives evidence about the contribution

made by the sale of feed, $90 a tonne, in comparison
with the sale of products, $700-odd a tonne.

In the context in which that appears it seems

clear enough that Mr Forster was saying that

the contribution made by the sale of Y-bar feed
was $90 a tonne in comparison with the contribution
to profit and overhea~made by the sale of products,

$700 a tonne, the only sales of Y-bar being

between BHP and AWI. So that does provide some

evidence and when we add it to the evidence of

Mr Sampson about the legal form that the transactions

involving Y-bar between BHP and AWI took, that

Y-bar at a mark up in accordance with ordinary there was a sale by the one to the other of commercial practice.

If we can take Your Honours to page 497

of volume 3. In the answer to our interrogatory 45,

which was directed to a letter of 6 January 1984

which is in the record book at page 523. The

letter at page 523 is from AWI to the appellant

responding to the appellant's request for Y-bar

and it says, in the second paragraph:

"

We would be prepared to supply Y-bar
"feed" at the following price and under

the following terms:- ..... $573 per tonne net.

FIS Woodridge, Brisbane.

BITl/7/SDL	58	30/6/88
Wire(2)

And if we go back to the answer to our interrogatory

on that document, at page 497, paragraph 8B(a),

the second respondent says:

The price of "$573 .00 per tonne net

FIS Woodridge, Brisbane" was calculated

as the sum of the price paid by the Second

Respondent to the First Respondent plus

freight costs plus 25%.

And then, of course, they admit on the pleadings

that that was a price at which they knew it would

be uncompetitive for us to buy the Y-bar and

hope to sell posts. But there is some further

indication in the way the $573 is calculated,

that there was a transaction of sale and

purchase of Y-bar between BHP and AWI. I think

that is the sum total of the evidence on that

particular point - those three bits and pieces

of evidence, Your Honour.

DAWSON J: That was apparently profitable for AWI because

there were no freight costs, is that the answer?

MR DRUMMOND:  I do not think I can give a clear answer

to that question, Your Honour.

DEANE J:	But AWI's costs would have been 25 per cent less
than that?

MR DRUMMOND: If they had been 25 per cent less than that

then - - -

DEANE J: That was what you said they were selling to AWI

for. This $573 represents a 25 per cent mark up on their price to AWI.

MR DRUMMOND:  I am sorry, I have not read the passage

correctly. It does indicate that there was a

mark up by BHP to AWI on the sale of Y-bar of

25 per cent, yes, quite clearly.

WILSON J:	No, the mark up is from AWI to QWI.
DAWSON J:	By 25 per cent said to be freight.
MR DRUMMOND:	No, the mark up of 25 per cent is a mark up of the whole cost to AWI to give AWI - - -
DAWSON J:	Yes. That was my mistake, yes, I am sorry,

I was confusing - - -

~-

MR DRUMMOND:  I made a bad mistake, too, Your Honour, I

am sorry.

DAWSON J: _We now understand exactly what the position

lS.

BITl/8/SDL	59	30/6/88
Wire(2)

MR DRUMMOND:  There are also, of course, the invoices that

were tendered covering the sales, BHP to AWI, of

Y-bar in support of our damages claim which simply

show an invoicing of quantities of Y-bar at particular

prices without any break down of the price into

components. So it is our submission that section 46

does not have any general operation of being able to compel businesses to deal with customers they do not want to deal with; it has a very limited operation

only in that particular regard. If I could go to

paragraph 20 of our outline of submissions. We there

submit that if Mr Justice Pincus was right and some
element of misuse of power has to be found in the

concept of taking advantage in addition to the

proscribed purpose, then the findings made compel one
to reach that conclusion.

The matters we deal with here are, of course, also relevant as going to indicate why there was a

breach of section 46 within our own preferred

interpretation of the section. But I will pass over

points (a) and (b) without any comment. Point (c)

deals with a matter I have already directed some

submissions to. Could I just add a reference after

page 631 in line 4, to page 608? Then I can pass

over (d) without further comment. Paragraph (e),

I have given citations to the passages where

His Honour referred to the monopoly that BHP had in

the manufacture of pickets, disadvantaging consumers.

The way His Honour dealt with that should be looked

at because it was, I suppose, to some extent,

slightly qualified.	At 645, His Honour said, in the
second line:

The long continuation of BHP's monopoly in

the manufacture of star pickets, while

advantageous to it, has had disadvantages to

others: presumably the rural community has

paid more for star pickets than it would have

done in conditions of free competition.

Then he goes on and explains what he means by "free

competition," but never the less he did

identify an area of detriment to consumers as a

result of BHP's conduct.

So far as our submission in paragraph (f) is

concerned, it is important, in our submission, that

what BHP did in relation to Y-bar was quite outside

ordinary commercial practice. It makes a range of

products, of which one is Y-bar; it sells all those

~, products save only Y-bar and, if one looks to the

evidence for a reason for the differential treatment

of Y-bar, it is found in the evidence of Mr Sampson

at pages344 and 345 of the record. I have already

referred the Court to evidence to the effect that a

large part of BHP's business involved the sale of

partly-processed products including partly-processed products from

the rod and bar mill, to other processors. The evidence

BlTl/9/VH	60	30/6/88
Wire(2)

indicated that some of those partly-processed
products that BHP sold to others were processed into
end-products by others and then sold in competition

with BHP's own sales of those same end-products that

it made from material it retained and processed

itself through to the end-product.

(Continued on page 62)

<'

BlTl/10/VH	61	30/6/88
Wire(2)

MR DRUMMOND (continuing):  The evidence particularly

indicated that BHP sold bulk galvanized wire to

the appellant which the appellant processed into fencing and sold in competition with the fencing

that BHP itself produced from the bulk galvanized wfre
that it retained. The evidence also indicated

the same situation applied in relation to wire rod. BHP sold wire rod to the appellant. The

appellant has now got a mill that converts wire

rod into bulk wire and thence it can be made into

fencing.

The wire rod that the appellant obtains from

BHP is converted ultimately into fencing and again sold in competition with the fencing that BHP produces from the wire rod that it makes but retains

and does not sell. So there is nothing unusual

in BHP selling intermediate products, other than

Y-bar that is, to independent processors including

the appellant who compete with BHP in the markets

for those end products. That sort of thing seems

to form a substantial part of BHP's business and

Mr Laver, in his affidavit which is exhibit 75,

paragraph 37, says that 70 per cent of all steel

products sold in Australia go to steel processors

and that BHP supplies 94 per cent of this 70 per cent.

But to come back to what the evidence indicates

as the explanation for this differential treatment

of this one bar product, Y-bar, Mr Sampson, at 344,
acknowledged that wire and wire rod produced by

BHP were sold to independent processors. And then,

at page 345, he was asked some questions about

the availability of imports of wire rod and bulk

galvanized wire and he acknowledged that if BHP

did not supply these_ independent processors with

both bulk wire and wire rod they could buy imported

materials of those descriptions at prices which

would enable them to manufacture the end products

and compete with BHP.	But there was no source
--Of imported Y-bar.

At the middle of page 345 he refers to being

aware that imported:

galvanised wire is available in the Australian

ma~ket, and it is placing pressure upon our

prices.

He also referred to the fact that BHP itself had

on occasion had to import small quantities of wire

~	rod into the Australian market and they have been
at prices competitive to BHP. And then, three-
quarters of the way down, when he is asked about - it
is referred to in the transcript as wire bar,
it plainly should be Y-bar. He is asked:

hlT2/l/ND	62
Wire(2)

Now, as far as wire bar is concerned, BHP

is the only manufacture of wire bar in

Australia?---At present, as far as I know.

And there is no wire bar imported into

Australia, so far as you know?---I am not

aware of any.

That is the explanation for the differential

treatment of Y-bar. It can refuse to supply Y-bar

to the appellant in the sure knowledge that there

is no alternative source of supply. It does not,

however, hesitate to sell all the other products

of its bar mill, all the other intermediate products

that need to go to processors for further processing.

It does not hesitate to sell all the other products of its bar mill because there are sources of supply available to competitors with BHP if BHP will not

supply those intermediate products.

What we want is to buy this product Y-bar

which is, for the reason we submitted yesterday,
in saleable form and it is our submission that

it is abnormal behaviour for BHP not to sell this

one particular intermediate product. We are not

engaging in any sort of unfair activity ourselves

in seeking Y-bar. We can only obtain it, we

acknowledge, by paying a price that will return

a profit to BHP on the Y-bar. We are not asking

for Y-bar to be supplied at cost, we are simply asking
for it to be supplied to us within the context

of an ordinary commercial transaction.

We have to give BHP a proper profit on the

Y-bar if we are to get it. We acknowledge that

and the appellant would have to then incur the

costs of setting up a plant to process the Y-bar

into posts before it could compete fully in the

fencing market with its own posts. There is nothing

out of the ordinary run of commercial transactions

_involved in what we are submitting BHP should be

required to do here. If, however, we were to go

to BHP and ask them to supply us with posts at

no cost that would be a quite extraordinary transaction

completely outside the range of ordinary commercial

transactions and if BHP refused, as in fact it

did on one occasion when we asked for posts at

a specially low price in comparison with the price

it made posts available to its other customers,

BHP would not be taking advantage of market power,

it would simply be behaving in an ordinary commercial

~ way. No commercial organization would supply a

product to any customer in the ordinary course of business at a price that simply covered its

own costs.

BlT2/2/ND	63
Wire(2)

I have submitted that we did ask for posts

on one occasion at a special price, that appears

in exhibit 31 - it is not in the record book but

may I hand up copies of this particular exhibit.

The relevant passage appears under the heading

"Fence Posts" on the first page and it is in

paragraphs 1 and 2.

DEANE J:	You do not seem too keen on competition yourself,
Mr Drummond.
MR DRUMMOND:	I think that is not unusual behaviour,

Your Honour, but once there is competition it 1s

out of your hands to some extent.

DEANE J:  You need not pursue the question.

MR DRUMMOND: If I could move on now to the proposition we

advance in paragraph 20(g) of our outline that

BHP did not give any evidence that there was anything

that might amount to a legitimate business purpose

for its refusal to sell Y-bar. There was talk

of BHP being vertically integrated. Reference

was made to that in the argument before the Full

Court recorded at page 664 and there was cross-

examination of Mr Williams, our economist, at

page 289, about, as a general principle, vertical

integration leading to efficiencies. Mr Williams

gave evidence at page 289 that vertical integration

was not necessarily explicable on the basis of
the efficiencies produced. It could also be explained

on the basis that it enabled monopoly profits to

be obtained.

But the point is, while there was cross-examination

about vertical integration in general being capable
of producing efficiencies, BHP made no attempt

at all to produce a shred of evidence to suggest

that its reason for vertical integration involving

manufacturing Y-bar, manufacturing posts from Y-bar

··and the like had anything at all to do with manufacturing

efficiencies or distributional efficiencies or

anything of that nature at all.

We have already referred the Court to the evidence from Mr Forster at pages 376 and 377 where

he described the way BHP and AWI went about producing

fence posts.	The Y-bar was made in Newcastle in
a BHP mill.	Some of the Y-bar was turned into

fence posts at the AWI post plant adjacent to the

Newcastle mill but the balance of the Y-bar was

\	sent to Brisbane where it was turned into posts in the BHP post plant in Brisbane. That does rather
suggest that there is nothing in any notion that
keeping Y-bar to itself and not selling Y-bar has something to do with manufacturing efficiencies.

BlT2/3/ND	64
Wire(2)

I should go to page 665 where some of the

other arguments advanced on behalf of BHP are

referred to. In the fourth line there is reference

to the argument on behalf of BHP that:

the "true thrust" of -

the appellant's -

case as one to force BHP and AWI to create

a new market and to enter upon a business

in which they had not previously engaged .....

by this means QWI sought to establish itself

in a business of completing the last stage

of manufacture of the star picket posts.

That really is quite an inaccurate way of putting

the appellent's position because if one goes back
to the previous page, about eight lines from the

bottom, the Full Court records the trial judge's

finding that the appellant:

was "quite genuine" in its desire to -

obtain Y-bar, not to go into the business of selling

Y-bar but simply to manufacture its own posts so

that it could better compete, in effect. So it

is quite wrong to say that we wanted to get into

the business of completing the last stage of
manufacture of these posts.

In any event, there is nothing unusual 1n our asking the Court to require BHP to give us the Y-bar, given the fact that it is simply an

intermediate product produced in a bar mill like
many other products all of which, save Y-bar, are

sold. Moving down on that page, 665, to about the twelfth line, another argument is recorded

in these words:

It was not a case of an applicant seeking

relief against a competitor from whom it had

purchased an essential ingredient of its product,

when the competitor had changed its trading

terms to "squeeze" the applicant.

Section 46(1), however, does not just protect

existing competitors. Section 46(l)(b), the

provision that His Honour specifically made findings

in our favour on, protects persons who want to

~ become competitors.

If I could turn now to the question of difficulty

of framing a remedy, His Honour, at a number of

pages dealt with this matter. At 615, top of the

page, he said:

BlT2/4/ND	65
Wire(2)

No very detailed analysis was made at the

hearing of the form of injunction -

and he there indicated that if it were appropriate

to grant relief he would grant declaratory relief

and deal with the form of the injunction at a

subsequent hearing. He did record the fact that:

BHP argued that the form of injunction was

inextricably bound up with the central question

of whether BHP had breached s 46.

He returned to that matter at page 641, at the

bottom of the page, the last three lines where

he refers to the absence of a:

history of previous trading to set a

standard, it must be difficult to frame an

order.

And then, at page 643, after dealing further with

the question of the form of the order and difficulty

in claiming injunctive relief, at the middle of

page 643 His Honour says:

Problems of the same sort underlie an award of damages.

And he has a few further comments to make about

the difficulties in that regard. But the fact

remains that at page 615 His Honour was prepared
to grant declaratory relief and deal with the form

of the injunction and also, no doubt, the

quantification of damages after a further hearing

and His Honour's confidence that such could be

achieved is, in our submission, well founded when

one takes into account just what is involved in

making the Y-bar.

The evidence was that it is made in this merchant

~ill, that a total of 11 passes through the rolling

mill are required to turn the steel billets into

Y-bar. It is only after the sixth pass that a

rod becomes dedicated to a particular shape - in this

case dedicated to Y-bar. It is the last five passes
that turn what seems to be the common feed up to
the sixth pass into Y-bar or something else.

That evidence appears in the BHP engineer Dixon's

testimony, firstly at page 351 and then at page 355

through to page 358.

Mr Forster, the BHP marketing man at page 420, gave some further information on the making of

Y-bar. He says:

BlT2/5/ND	66
Wire(2)

Y-bar is rolled every four to six weeks .....

they simply put in new rollers.

Mr Dixon had spoken about how rollers have to be bought to enable Y-bar to be produced - rollers

with a particular configuration. So the way in

which Y-bar is produced emerges pretty clearly

from the evidence.	The billets are put through
six passes.	The decision is then made whether

they are going to be made into angles or some other

shape or Y-bar, appropriate rollers are put into

place in the rolling mill and the last five passes

then complete the process to produce either Y-bar or some

other product.

In the case of Y-bar, this changing of rollers

occurs ever four to six weeks. All the other bar

products, however, that are made in the intervening

perio4 before these four weekly or so runs to

produce Y-bar, are sold. So that it is apparent

that BHP must have some forumula for fixing the

price at which it sells all these other products

which have to be processed in such a similar way

to Y-bar. BHP must have some formula for assessing

how it will price all these other products that

it sells to recoup its variable costs and contribution

to capital.

When you add to that evidence the evidence of Mr Gallagher, the BHP official in his memorandum

that I took the Court to yesterday, exhibit 11, that AWI should consider offering the appellant Y-bar at a realistic price, rather than an unrealistic

one that it was offered at, and when one looks

at what Mr Justice Pincus has to say at page 631,

at the middle of the page:

I use the expression "constructive refusal"

as descriptive of an offer to sell at an

uncompetitive price; BHP is prepared to sell

to the applicant at a price which, relatively

to BHP's other rolled products, is excessively

high.

All that body of evidence indicates that there should not be any real difficulty in assessing

damages if further evidence is available as to

what BHP's pricing practices are in relation to

all these other products which are dealt with in

a similar fashion to - as far as a large part of

the manufacturing process is concerned - to Y-bar.

' His Honour referred to a different problem

at page 643, a problem of how BHP would allocate

Y-bar if it were ordered to supply to the appellant

BlT2/6/ND	67
Wire(2)

and other people also wanted Y-bar.	At about
line 5 on page 643, His Honour said:

BHP has, according to the evidence, excess

rolling capacity and could undoubtedly make

sufficient Y-bar to satisfy all requirements,

if demand increases because of competition;

but is it to be forced by the Court to

increase its production of Y-bar? If so,

what quantities must is produce?

MASON CJ: I am not sure, at the moment, why we should be

spending so much time on the question of remedy.

If you are to succeed in this appeal in establishing that the Full Court and Mr Justice Pincus were

wrong in relation to the principles they applied

or they misdirected themselves as to what here the

real issues, then it seems to me that it would

be more likely and more appropriate that this Court

should remit the matter back for the determination

o f i s sues in a cc or dance w i th the j u d gm en t of the

court rather than that the Court should, first of all, decide

issues of fact that might arise on the correct

interpretation of section 56 and go on itself to

consider whatever the appropriate remedies were

in the circumstances.

MR DRUMMOND:  Your Honour, that is our submission, in effect.

It can be left to the trial judge.

MASON CJ: Well, why should we be concerned then about the

particular form of remedy?

MR DRUMMOND:  Only in so far as there may be some argument

that these difficulties of remedy go beyond mere

remedy and throw up problems in - - -

MASON CJ:  Would it not be better to await this problem until

such time as you have heard what Mr Gleeson has

to say? You could deal with it in reply.

MR DRUMMOND:

Yes, Your Honour. We would respectfully accept

that suggestion as an appropriate way of dealing

with this matter because it may well be, for the reasons I think we have touched on already, that

there are no problems of any substantial significance.

MASON CJ:  I am not sure about that but, again, it does not

seem to me that it is an area in which the Court

needs to intrude at the present time.

MR DRU~MOND:  Yes, Your Honour. I can pass on to my final

' point. At page 641 Mr Justice Pincus mentioned

the absence of American and European authority wherein a vendor has been required to supply a

new customer. So far as American authority is

concerned, it is our submission that he was in

BlT2/7/ND	68
Wire(2)

error there because OTTER TAIL POWER COMPANY V

THE UNITED STATES, (1972) 410 US 366, is exactly a case where a monopolist was required to supply

a new customer. I do not propose to take the Court

to the report, simply to say that it was the case
of a vertically integrated monopolist so described

at page 387 of the report being ordered in

section 2 SHERMAN ACT proceedings to supply wholesale

power by selling it or by wheeling it over the

transmission lines of others to new customers -

new customers in the form of municipalities - who

wanted to replace the monopolist at the retail

level of power distribution within various towns

on the expiry of the monopolist retail franchise.

So far as the European position is concerned,

His Honour at page 644 referred to Korah's work on the Competition Law of Britain in the Common

Market for the proposition that at least until

1981 there was no decision of the commission of

the European communities requiring a dominant firm

to supply a new customer but Korah in that passage

goes on and refers to experience since 1981 and

refers to a particular decision in proceedings

based on section 86 of the Article of Rome, a
monopolist, in effect, was required to supply new
customers. If I could hand the Court copies of
the relevant sections of Korah. If I could just

take the Court to page 227, about two-thirds of

the way down	one sees the passage His Honour was
obviously referring to.	After. the quotation it
said:

This is a strange statement, largely

reproducing the French law on refusals to

sell, which protects traders irrespective

of the effect on competition. It appears

to relate only to refusals to supply existing

customers, and until 1981 no decision has

required a dominant firm to supply new customers,

although on a competitive criterion that might

be as important as cutting off old customers.

Then the author goes on to refer, at the bottom of the pag~, to the GVL decision in which there

was a refusal to deal with new customers and that
was held to infringe article 86 of the Treaty of

Rome.

Your Honours, yesterday when I was dealing

with "take advantage" I should have tendered some

~	copies of the dictionaries that I referred to:
the Macquarie Dictionary and the Shorter Oxford
Dictionary of the expression "take advantage" -
I will do that now. And may I say that in relation
to that matter, the proper construction of the expression "take advantage", we would, as an

BlT2/8/ND	69
Wire(2)

alternative to our primary submission that it involves

mere exercise or use submit that positive deliberate

action is not necessarily required for there to

be a taking of advantage of power, reliance on

power which can be constituted by inaction such as a

refusal to supply may be enough.

If the Court pleases, those are our submissions.

MASON CJ:  Thank you, Mr Drummond. Yes, Mr Gleeson.

MR GLEESON:  Your Honours, to take up the matter that was

being discussed yesterday -

MASON CJ:  I notice that Mr Goldberg seems to have decamped

into the night leaving only his tent behind him

so to speak. It seems to have, as it were, subsided,

does it not, into a very minor element in this

case?

MR GLEESON:  Yes. We do not suggest that Your Honour should

make a decision now on whether the application

for intervention should be granted.

MASON CJ:  You always know that that sort of submission is

gratefully received by a court.

MR GLEESON:	Could I express in a very summary way the grounds of our opposition to the application for intervention.
Could I also hand to Your Honours, copies of the
decision of the Court of Appeal of New South Wales
in the case of CORPORATE AFFAIRS COMMISSION V BRADLEY,
(1974) 1 NSWLR 399, in which Mr Justice Hutley
canvasses very extensively the principles relating to intervention and the basis upon which people
are permitted to intervene in this and other courts.

TOOHEY J: Mr Gleeson, if the Commission had sought to

intervene at an earlier stage, could it have done

so as of right?

MR GLEESON:  No, Your Honour, because there was no claim

for declaratory relief. Section 163A of the TRADE

PRACTICES ACT empowers the Commission to intervene

but subsection (3)(b), which is cumulative with

subsection (3)(a), limits that right to the case where

a party is seeking the making of a declaration

of a kind referred to in subsection (1) and there

was no claim for delaratory relief in the present

case.

TOOHEY'J: 

Yes, thank you.

MR GLEESON: 

I should tell Your Honours that the views expressed

in a very forthright fashion by Mr Justice Hutley
and the other members of the Court of Appeal in
that case have not commanded the agreement of the

Bl T 2/9 /ND 

70

Wire(2) 

Chief Justice of New South Wales and he in a later
case of RUSHBY V ROBERTS, (1983) 1 NSWLR 350, at
353 indicated that he did not agree with what

Mr Justice Hutley had said. That is the most extensive discussion of which I am aware of the

principles relevant to intervention. Your Honours,

we point out that the basis for intervention is

said in paragraph 5 of the submissions for the

Trade Practices Commission, in the last sentence,

to be that:

the Commission wishes to place before the Court matters for its consideration which do not appear to have been placed before

the Courts below by the parties.

Your Honours will recollect that on a very quick

reading of the submission yesterday the point that
stung me immediately was the proposition in

paragraphs 10 and 11. It is true to say that that

is a factual argument that was not urged on either

of the courts below by Queensland Wire Industries.

It is a matter in respect of which there are no

findings of fact by either the trial judge or by
the Court of Appeal. We would wish to say and will

say in due course, if it is necessary to come to

it,that the evidence not only did not support

that but was contrary to it. But that is just

not the way the case has ever been approached by the Commission is saying to this Court is, if we

had been prosecuting BHP this is the target that

we would have set our sights on, it is a matter

of fact.

In our respectful submission, for the Commission

to be permitted to intervene at this level of these

proceedings and urge upon the Court a new factual

approach to the case, which has not been urged

upon either of the courts below by Queensland Wire

Industries and is not reflected in findings of

fact by the courts below, is not something that

should be permitted or encouraged.

(Continued on page 72)

B 1 T'2/ 10/MB 71 30/6/88

Wire(2)

MR GLEESON (continuing):  The other point that we would make

is that the provisions of the TRADE PRACTICES ACT

make it plain, if I may respectfully say so, that

the Trade Practices Conml.ission has no monopoly on
the enforcement of the laws contained in that

legislation. There must be many cases in which the

officers of the Trade Practices Conml.ission say to

themselves that if they had the conduct of the matter

they would be running it differently from the way

in which some private litigant is running it.

One of the most interesting aspects of the

Trade Practices Conml.ission's submission is that
it urges upon this Court an approach to market

definition which is precisely the approach to market

definition which we urged upon Mr Justice Pincus

and which contrary to some suggestions that have
been made he was not prepared to accept in one

regard. The Trade Practices Conml.ission and BHP seem

to be in heated agreement that the relevant approach
to market definition in this case is to treat as
the two markets, the market for steel and steel

products as the primary market and the rural fencing

industry's market as the secondary market. That,

of course, is consistent with the evidence of of Dr Williams.

Dr Norman projected a market for Y-bar for

a reason that has not even been mentioned to

Your Honours - and I will come to that in due course -

but it was a reason related to the proposition that

the Trade Practices Conml.ission puts in its submission

at the top of page 6 in paragraph 16. Interestingly

enough the Trade Practices Conml.ission there refers,

in support of its submission, to the evidence of

our witness,Dr Norman, who put that argument as a

reason for saying that there is no relevant market

for Y-bar, because an assertion that there is a

relevant market for Y-bar ignores questions of

supply side substitutability, but I will come

to explain in due course what was said before

Mr Justice Pincus by the economist witnesses about market definition.

So, we submit that what the Trade Practices

Conml.ission is seeking to do is make out a new case

significantly different from the case that was ever

sought to be made out or litigated by Queensland

Wire Industries and they should not be permitted

to intervene for the purpose of recasting the form

~, of a litigation. May I hand up our outline of

argument?

MASON CJ:	Yes, thank you, Mr Gleeson.
MR GLEESON:	Your Honours, no mention at all has been made

in the proceedings so far of the matters that we

refer to in subparagraphs (a) and (b) of paragraph 2

BlT3/l/MB	72	30/6/88
Wire(2)

of our outline of argument. Your Honours should

be made aware that there was, at the cormnencement
of these proceedings, after Mr Drurmnond's opening

before Mr Justice Pincus, a very spirited debate

on the subject of particulars and the question

of just what it was that Queensland Industries was

complaining about and what it was not complaining
about. That debate arose because of references in

Mr Drurmnond's opening including references to evidence

that he foreshadowed that Dr Williams was going to

give in which the complaint about BHP seemed to
involve a complaint about two aspects of its
conduct, one of which was not referred to in the

statement of claim.

The allegation foreshadowed seemed to be

that what BHP was doing was using a combination of

steps, namely, a refusal to supply Y-bar and its

policy in relation to the pricing of fence posts,

including rebates that it offered other customers

and the terms and conditions on which it was offering

to supply QWI and that it was the combination of
those two aspects of BHP's activity that was making

it difficult for Queensland Wire Industries better

to compete with BHP in the rural fencing market.

Now, that having been opened the matter was

brought to a head by a requirement following debate

that QWI make it plain whether or not it had any

complaint to offer about the terms and conditions

upon which BHP was offering to supply it and was

supplying other people with fence posts. That

debate is referred to in the appeal papers. It

begins at page 57 in volume 2 where it was pointed

out to Mr Justice Pincus that:

we have not eome....to ceurt-to defend or to

justify our.reb~te.sy.stem because there is no

charge iR the statement of claim wl'ii.ch suggests

that there. is anything about our rebate system

that contravenes any provisions of the TRADE

PRACTICES ACT.

Then it is pointed out that the:

goods referred to in the statement of

claim are ...... Y-bar.

Then on the next page it said:

~	It will emerge ..... that Y-bar is not a
cormnercially-marketed -

product. Then there were some submissions about

the nature of the claim. On the

bottom of page 60, referring to the claim for

damages, we asked for another particular. We said,

BlT3/2/MB	73	30/6/88
Wire(2)

"In relation to damages they say we should be

selling them Y-bar. Would they be good enough

to tell us at what price they say we should be

selling them Y-bar?' Because that, of course, was

critical to their computation of damages. The

ultimate answer to that was, "You should supply to

us at the same price as you supply AWI." The

entirety of their detailed calculation of damages

was based upon the cheerful assumption that if

BHP supplied Y-bar to QWI it would supply it at

the same transfer price as it supplies to AWI.

I might say that their entire claim for

damages was also based upon another extremely

cheerful assumption. It was that the monopoly

slightly. That was the entire basis upon which they asked the court to assess damages.

would become a duopoly and their claim for damages expand
was based upon the proposition that we would not

be supplying anybody else with Y-bar except

There were then questions about the form of

injunctive relief. Mr Justice Pincus required

Mr Drununond to state whether or not QWI were

complaining about the terms and conditions upon

which BHP was offering to supply QWI with fence

posts,and were supplying them with fence posts,

and the terms and conditions on which they were

supplying other people, including this rebate

matter. At page 67, after an adjournment, during

which Mr DrUim:I1.ond was given the opportunity to

think about that, he said on page 67:

we are not alleging that the rebate scheme

involves any illegal conduct.

On page 65 the judge had required Mr DrUim:I1.ond,

at the bottom of the page, to state whether or not

our activities in relation to the supply of fence

posts contravenes section 46.	Mr Justice Pincus
says he found it very difficult to feel sympathy

for us because we were so big but we were entitled

to know what the case against us was. Mr Drununond

ultimately came back and said, on the

bottom of page 68, there was no illegality being

alleged apart from that referred to in the pleadings, which

was the illegality relating to the refusal to

supply Y-bar.

Now, it is, of course, the fact that at all

~, material times QWI has purchased star picket steel

fence posts from BHP. That appears, for example,

at page 90, and the terms and conditions upon which

they purchased steel fence posts from BHP are set

out.	I think the evidence is they get as good a
price as our other big customers.	They get, I think,
the same price as Dalgetys and Elders.	Now, what

BlT3/3/MB	74	30/6/88
Wire(2)

their complaint was, as emerged in the evidence,

was that because we sell fence posts to them at

the same price as we sell fence posts to Dalgetys

and Elders, they cannot compete with us in the

sale of fence posts to Dalgetys and Elders and

other purchasers of rural fence producti. But it

is of some importance to bear in mind, and will be

relevant when we come back to the issue of purpose

and the finding attributed to Mr Justice Pincus
on the issue of purpose and, in particular, section 46(l)(b

that there is no question of preventing the entry of

QWI into the rural fencing market. They are

already in the rural fencing market competing with

us and they sell wire in competition with us.

They also sell fence posts. But their complaint

is, or part of their complaint is, that because

they cannot buy the fence posts from us cheaper than

we sell them to Dalgetys or Elders, they cannot

compete with us in trying to sell product to

Dalgetys and Elders.

Now, of course, it would obviously be absurd

to suggest that there is anything illegal in the
circumstances that we do not assist them to compete

with us for the business of Dalgetys and Elders

by selling them fence posts at a lower price than

we sell to Dalgetys or Elders. So to bring their
complaint within the rubric of section 46 they have

had to fasten on to the aspect of our conduct of

which they complain in the pleadings, that is

to say, our refusal to supply them with Y-bar.

What they say is, "We want to go into the business of manufacturing fence posts from Y-bar and we want

to take a profit", and what they further say, and

said in the court below, was "We would not even

buy your fence posts from you at a cheaper price

than you sell to Dalgetys or Elders now because

we want to take a manufacturer's profit." That was said, for example, on pages 161 to 165. On

page 161 Mr Dart, the senior witness for QWI, was

being cross-examined and it was being put to him

that this whole disagreement started with an

unsuccessful application by QWI to get cheaper

fence posts, that is, with an unsuccessful application by them

to have us supply them with fence posts at a

lower price than we supply Dalgetys and Elders.

I think my learned friend handed up to

Your Honours, this morning, the letter in which

there was reference made to that matter. They said

they wanted to be a Y-bar distributor, and at

' 162 he was asked about that. Question:

What is a Y-bar purchaser/distributor?---Well,

a Y-bar distributor was Australian Wire

Industries as defined by BHP. They had one

distributor, that was Australian Wire

BlT3/4/MB	75	30/6/88
Wire(2)

Industries. We either wanted to be a distributor

similar to them or to be able to purchase Y-bar if they did not want to classify us

as a distributor.

What did you understand to be the meaning

of the expression a Y-bar distributor?---A

Y-bar distributor is a person who purchases

products maybe to add value to them and make

profit from it.

When you say "maybe" to add value to them

you knew did you not that AWI did not sell

the Y-bar feed which it purchased from

BHP?---That is correct.

And you were certainly not intending to sell

the Y-bar feed that you wanted to purchase

from either BHP or AWI were you?---No.

You wanted to be a Y-bar distributor in the

sense that you would purchase Y-bar from either

BHP or AWI and using your own manufacturing

resources convert the Y-bar into steel fence

posts and sell the steel fence posts?---That

is correct.

And then there is some further questions about

the offer. At the top of 163:

And it was your understanding that AWI had

never in the past, in any part of the the question to Queensland, sold Y-bar to

anybody?---That is correct.

And he says at the top of the next page that has:

been so for decades.

That has been so, in fact, since 1920 when Y-bar

first began to be manufactured in Australia for use as a feed stock for the manufacture of star

picket fence posts. He says that goes back to

the 1920s. At page 165:

Your primary objective in 1983 was to obtain

supplies of fence posts - steel fence posts,

was not it?---No, we had supply of steel

fence posts.

~\

Your primary object was to obtain supply of

steel fence posts on better terms than you were

then getting them?---And/or Y-bar.

BlT3/5/MB	76	30/6/88
Wire(2)

What I put to you as your primary object

then is still your primary objective, is

not it, Mr Dart?---Not at all.

Your objective in these proceedings, is not

it: ~--Our objective is to obtain Y-bar

and be acknowledged	as a bona fide fencing
manufacturer.

Then on page 212 to 213, three questions down: And you would have been content, at that

stage, if BHP had agreed to supply you with

steel fence posts - or AWI had agreed to

supply you with steel fence posts, at a price

that made you competitive with AWI, would

not you?---Yes.

And all along up to the present time, you would have been content, would not you, if

they had agreed to supply you with steel

fence posts at a price that made you

competitive with AWI?---Not at all.

You never even inquired -

there was some questioning about attempts they

had made to get steel fence posts from overseas - You never even inquired of the overseas

steel manufacturers ..... as to what price they

would sell steel fence posts for, did you?

---No.

Was that because you did not want to know?

---Not at all.

Was the reason you did not want to know

because these proceedings were on foot?-..;-We

wanted to but Y-bar to manufacture fence posts.

We did not want to buy posts at that time.

And then two questions from the bottom:

The fact is ..... last year, an overseas

steel mill offered to enter into negotiations

with you about the supply to you of Y-steel

fence posts?

I pause there.	When they wrote overseas and asked
,	for Y-bar nobody even answered their letters but
when they asked for Y-bar fence posts they got
an offer which they did not pursue.

You did not even inquire of them as to the

price at which they would be prepared to supply

you with Y-steel fence posts?---That is correct.

BlT3/6/MB	77	30/6/88
Wire(2)

Nor did you inquire of them as to the

details as to the quality ..... ?---That is

correct.

So you do not know today whether or not it

would be possible to buy Y-steel fence posts from

overseas at a price that would be competitive

with AWI?---No.

You have not taken the trouble to find out?

---We took the trouble to find out about Y-bar.

You did not take the trouble to find out about

the price at which they would supply you with

steel fence posts?---No.

Even though you knew that there were on

foot legal proceedings based upon a claim

that your inability to obtain fence posts

at a price competitive with AWI prevented

you competing effectively in the Queensland

rural fencing industry's market?---It did

not enter into our determination.

Is the reason why you did not inquire as

to the price of overseas steel fence posts
that you thought that the information .....

might be embarrassing ..... ?---Not at all.

And ther:· they say:

We certainly would not be interested in

having an agency line eg fence posts.

Is this the position that if today BHP or

AWI offered to supply you with finished

fence posts at a price that made you

competitive with AWI, you would reject

the offer?---Yes.

So that is what they are after. They are after

a piece of the manufacturing business and, in effect,

what is being sought is that BHP make over to

Queensland Wire Industries part of its existing

business of manufacturing steel fence posts.

The evidence of Mr Forster was that the market

for steel fence posts is declining and has been

declining for some time. If BHP supplies part of

its Y-bar production to Queensland Wire Industries

so that Queensland Wire Industries can go into the

i	business of manufacturing steel fence posts, what
is supposed to happen to the part of BHP's business
that Queensland Wire Industries takes up. Now,
this, of course, is a question that was agitated
before Mr Justice Pincus in relation to the subject-
matter of relief. The fact is that the simple

BlT3/7/MB	78	30/6/88
Wire(2)

corollary of the proposition, that BHP declines to

supply Y-bar to anybody else, is that BHP uses

itself all the Y-bar which it produces. The

interesting question in the present case is;

is BHP supposed to produce more Y-bar than it

needs for its own present manufacturing purposes

in order to assist QWI to go into the business of

manufacturing fence posts and taking a profit

at that level of the business? Queensland Wire

Industries'application to buy Y-bar is not,

business of manufacturing fence posts, which is

apparently, accompanied by any offer to compensate

a profitable business.

That, of course, was the basis of ·a large part

of QWI's claim for damages, as calculated before

Mr Justice Pincus. A substantial part of the

damages that they claimed are the profits that they

would make out of adding value to Y-bar by manufacturing

steel fence posts. Now, of course, they say we

have a plant which will enable us to cut the Y-bar

lengths into smaller sizes, punch holes in the top

of it, make a point on the end so that it can be

driven into the ground and coat it with the requisite
coating.

What if, Your Honours~ all they needed was a plant and some tar to enable them to engage in

the coating? Would they be entitled to require

us to supply them with uncoated fence posts so that

somebody who has got $5000 and enough money to buy

some tar and a tar bath can come along and force

us to suppy him with uncoated fence posts which
are a perfe.ctly vendable product and can criticize

us because our motive in not supplying him with

uncoated fence posts is because we do not want him

to compete with us or to be able better to-·

~ompete with us in the rural fencing market business.

That is the problem that this whole question of forcing a vertically integrated manufacturer to

supply intermediate product to a would-be competitor

gives rise to. We are not inventing the wheel in

Australia in this case. This is a well-trodden

path in other jurisdictions and in the United States

the answer to that question - and, of course, they

are dealing with different legislation at a different

section, the answer to that question has been said

~-	to be, except in the case of what are referred to
as essential facilities, the answer is "No". I
will refer the Court to a judgment of Judge Posner in the Court of Appeals in the United States where
His Honour said: "There is emphatically no duty
upon any businessman to assist his competitors."

B1T3/8/MB	79	30/6/88
Wire(2)

Of course, what has been recognized in the United

States, in terms of purpose, is that a purpose

of protecting your own legitimate business interests

is always merely the corollary or maybe merely

the corollary of not assisting someone better to

compete with you. The example that is thrown up

in the United States where this subject is discussed

is always the following, and it is interesting to

see how section 46 and section 51 of the TRADE

PRACTICES ACT apply to it.

Suppose you have a person who owes his

monopoly to a patent and a wUU.ld-be competitor applies

to him for a licence of the patent and the monopolist

says "No, I am not going to licence the patent."

The would-be competitor says "Why?" and the monopolist

says "Because I do not want to assist you to be

able to go into competition with me." On my learned friend's construction section 46 would apply to that situation perfectly and there is nothing in

section 51 to prevent it applying.

If I could take Your Honours to section 51

in that regard. The only provision that is

potentially capable of protecting it in section 51

is subsection (3). But subsection (3) expressly

excludes section 46. Now, if we go back to the language of section 46 as it is construed by my

learned friend. To translate it into practical

terms let me suppose that the monopolist is a

manufacturer of an ethical pharmaceutical and

because of the existence of a patent the monopolist

is the sole supplier in Australia of a very valuable

ethical pharmaceutical which, for example, relieves

hypertension, and some other pharmaceutical

manufacturer comes along and says, "I would like

to compete with you in the supply of anti-hypertensive

drugs. I want a licence of your patent" ana the

first person, in more or less polite terms, declines

the application.

Now, turning to section 46. There you have

a corporation, that is. enjoying what my learned

friend describes compendiously, and we are prepared

to accept his description,as dominant power; it

owes that power to the patent which it enjoys and

it is taking advantage of that power by declining

supply. It is ensuring that its competitor cannot

get its hands on the product which the competitor

needs to compete with it and its plain intention

~.	is to prevent its competitor selling the drug in competition with it. What is there, in the language of section 46, if my learned friend's construction
of it is correct, to prevent section 46 prohibiting
that conduct.

BlT3/9/MB	80	30/6/88
Wire(2)

If there is anything in section 46 that

prevents it prohibiting that conduct it must be in

the concept which we accept as a composite concept

of taking advantage of market power. One word

that has not come in for any discussion so far

in submissions is the word "power" and the meaning in

this connection of the word "power". The concept

of taking advantage of power does not, in our

respectful submission, apply to the example that

I have given about the dominant drug manufacturer and the reason it does not apply will be developed

later, but he certainly has the purpose, there is

no doubt about that.

(Continued on page 82 )

~,

BlT3/10/MB 81 30/6/88

Wire(2)
MR GLEESON (continuing): If I could come back to our submissions

on the top of page 2. A point that has arisen in

discussion before Your Honours is the point that we

address in paragraph 3(a) and I should deal with that

in a little more detail.

This case was argued in the Full Court on the basis that BHP and AWI were one entity and any

suggestion otherwise disappeared very early in the

proceedings before Mr Justice Pincus because of the

evidence of the economist witness called by my learned

friend. At pages 263 to 265 QWI's economist was

being questioned and it was his analysis of the facts

and their relationship to section 46 upon which QWI

relied. At the bottom of page 263, in cross-examination,

Mr Williams was asked this:

economists, when they speak about competitors

in markets, think in terms of firms, do not

they?---Generally, yes.

They usually express themselves in terms of

firms rather than corporations?---Yes.

And one of the reasons they do that is that

they would not regard, usually as relevant,

the distinction between a corporation and

its wholly-owned subsidiary?---That is right.

And in the present case, you would treat BHP and AWI as one firm?---Yes.

And you would not regard as relevant the

circumstance that BHP happens to sell Y-bar

to AWI?---I would regard it as irrelevant.

Exactly. And it would not make any difference

to the evidence that you have given if BHP

caused AWI to go into liquidation tomorrow

and carried on its manufacturing operations

in relation to fence posts in the way we

know it, in fact, does at Hamilton in

Brisbane?---It would make no difference at

all.

And, pausing there, of course, it would be very odd

if it did make a difference. If BHP could put itself

beyond the reach of section 46 in the present case

by winding up and divisionalizing Australian Wire

Industries, that would be a very simple step to take. Then, further over to page 265, there is

~'	some interesting evidence of this witness on the subject of market definition. Further down, at the bottom of page 264, again, the cross-examiner
goes back for his hat:

BlT4/l/SH	82	30/6/88
Wire(2)

We can dismiss as irrelevant, for this

analysis, the fact that BHP happens to

sell Y-bar to AWI, cannot we?---Yes.

So the fact that BHP sells Y-bar to AWI

is irrelevant to any conclusion that you

have expressed on whether there is a market

for Y-bar?---Yes.

The judge says he wants to follow that.

Do you treat - are you really treating the

fence posts as made and sold by BHP/AWI?---

That would make no difference to what I have

to say, at all.

That would be the way any economist would

treat the fact situation that you have before

you, is it not?---Any good economist, I think.

Then, further down:

Now if somebody came along to the BHP premises

at Hamilton and said, "We would like to buy

the uncoated fence posts before they go into

that tar bath". You would say then would you,

that there is a market, or at least a submarket,

for uncoated fence posts?---It may be appropriate

to do so.

This witness, of course, had said there was a market

for Y-bar and he was contradicted by Dr Norman.

As I said to His Honour earlier, in defining

markets one cannot just look at a product

but one has to look at a problem, and one

asks, "What would be an appropriate way to

define a market with respect to the problem?"

Well, now, suppose the problem is this: the

man who is doing the bidding has some tar

and some tar baths?---Yes.

Tar and tar baths are not very expensive to

acquire, are they, as you understand it?---

I should not imagine so.

No. So if somebody using a relatively modest

amount of money has got hold of some tar and

tar baths, and his problem then is that he

complains to the court or to the Trade

Practices Commission that BHP will not

supply him with uncoated fence posts, which

he desired to coat and put on the market?---Yes.

That is the problem?---Yes.

BlT4/2/SH	83	30/6/88
Wire(2)

In your analysis of that problem would

you regard it as appropriate to identify

or describe the uncoated fence posts as

a market?---Yes, I would regard it as

appropriate.

That is the logical conclusion, is it not,

of the evidence that you have given in

relation to Y-bars?---They are consistent,

yes.

Yes. You could take the process of

manufacture, which, so far as you are

concerned, goes on entirely within one

firm, at any stage from the production of

molten steel, through to the emergence of

the final tar-coated Star picket fence -

that means fence post -

and if somebody offered to buy a product

at any stage in that manufacturing process,

you would be prepared, other things being

equal, to say, for the purpose of analysing
the anti-trust problem that then arises,

there is a market in that product?---Yes,

I would.

Now, that, of course, was criticized by Dr Norme.n

on a different ground that I will explain to

Your Honours in due course but that was the logic

accepted by this witness of the argument that was

being presented and adopted by QWI in the case.

At page 276, three questions from the top:

You agreed before lunch, did not you, that

in your analysis of the problem, you regarded

the fact that a wholly-owned subsidiary of

BHP's was involved in the process was

irrelevant?---Yes.

In other words - and you analysis of the

problem would have been exactly the same if

AWI had never existed?---Yes.

And it follows that your analysis of the problem would have been exactly the same if

there had been no transaction of sale and

purchase between BHP and AWI?---Yes.

..

So that is an irrelevant consideration?---Yes.

Now, this is a matter that arose at an early stage before Mr Justice Pincus and was abandoned by the witness upon whom QWI were placing principal reliance for their analysis of the problem and never re-emerged

BlT4/3/SH	84	30/6/88
Wire(2)

during the· course of the hearing except, of course,

that that was agreed with by Dr Norman and that is,

no doubt, why,when the matter was argued in the

Full Court, the Full Court was not presented with

any argument to the effect that anything in this

case turned upon sales between BHP and AWI.

DEANE J:	Does it emerge whether the assumption would also
apply to two different subsidiaries of the one holding company - - -
MR GLEESON:	No, Your Honour, we were - - -
DEANE J:	- - - who might be at one another's throat?
MR GLEESON:	We were grateful for what we got and did not

pursue it any further.

DEANE J:	Yes.
MR GLEESON:	It was just common ground between us for the rest

of the case and I might add that there is nothing in

the Trade Practices Commission's submission that would

take a contrary view. They would take the same view

as Dr Williams and Dr Norman.

I perhaps should also say, in fairness to and

in support of those witnesses, that this is an issue

that has been dealt with fairly recently by the

Supreme Court of the United States which has come

to an identical conclusion to theirs. Your Honours, everything I say about United States' authorities is subject to the rider which I accept they are dealing with a different section, but could I hand up copies

of the decision of the United States' Supreme Court

in COPPERWELD CORP V INDEPENDENCE TUBE CORPORATION,

467 US 752. Your Honours, one of the ways in which

the problem arises in the United States is that their

law is a law against monopolization. Everybody has

emphasized to Your Honour in the present case that

our law is not a law against being a monopoly or

against monopolization but they, then, have to look

at combinations and conspiracies and one of the

questions that has exercised them is whether you

can find what they call an inter-firm or an intra-firm

combination. At pages 771 to 772, the court said

this - perhaps at the top of page 770:

There is also general agreement that

§1 -

. .._

that is of the SHERMAN ACT -

is not violated by the intemally coordinated
conduct of a corporation and one of its

unincorporated divisions. Although this

Court has not previously addressed the

BlT4/4/SH	85	30/6/88
Wire(2)

question, there can be little doubt that
the operations of a corporate enterprise

organized into divisions must be judged

as the conduct of a single actor. The

existence of an unincorporated division

reflects no more than a firm's decision

to adopt an organizational division of

labor. A division within a corporate

structure pursues the common interests

of the whole rather than interests

separate from those of the corporation

itself; a business enterprise establishes

divisions to further its own interests in

the most efficient manner. Because

coordination between a corporation and

its division does not represent a sudden

joining of two independent sources of

economic power previously pursuing

separate interests, it is not an activity

that warrants §1 scrutiny.

That is the point. You are here always talking

about power and the question is whether it is

appropriate to divide up a group when you are

dealing with an issue of power.

Indeed, a rule that punished coordinated

conduct simply because a corporation delegated

certain responsibilities to autonomous units

might well discourage corporations from

creating divisions with their presumed benefits.

This would serve no useful antitrust purpose

but could well deprive consumers of the

efficiencies that decentralized management

may bring.

For similar reasons, the coordinated

activity of a parent and its wholly owned

subsidiary must be viewed as that of a single enterprise for purposes of §1 of

the SHERMAN ACT. A parent and its wholly

owned subsidiary have a complete unity of

interest. Their objectives are connnon,
not disparate; their general corporate

actions are guided or determined not by

two separate corporate consciousnesses,

but one. They are not unlike a multiple

team of horses drawing a vehicle under the

control of a single driver.

i\ That must mean all heading in the one direction, too.

With or without a formal "agreement," the

subsidiary acts for the benefit of the

parent, its sole shareholder. If a parent

and a wholly owned subsidiary do "agree"

BlT4/5/SH	86	30/6/88
Wire(2)

to a course of action, there is no

sudden joining of economic resources

that had previously served different

interests, and there is no justification

for §1 scrutiny.

Indeed, the very notion of an

"agreement" in SHERMAN ACT terms between

a parent and a wholly owned subsidiary
lacks meaning. A §1 agreement may be

found when "the conspirators had a unity

of purpose

and so forth and it goes on to deal with that. taken up in cross-examination with Dr Williams and

he agrees with this approach:

The intra-enterprise conspiracy doctrine

looks to the form of an enterprise's structure

and ignores the reality. Antitrust liability

should not depend on whether a corporate

subunit is organized as an unincorporated

division or a wholly owned subsidiary. A
corporation has complete power to maintain

a wholly-owned subsidiary in either form. The

economic, legal, or other considerations that

lead corporate management to choose one

structure over the other are not relevant to

whether the enterprise's conduct seriously

threatens competition.

DAWSON J:  They talk of coordinated behaviour there but it

does not seem to matter in the end whether it is

coordinated or not. It is a question of power.

MR GLEESON:  Yes. It is a question of power, yes, Your Honour.

So that that proposition that was established at a

very early stage of these proceedings is one that

has been adhered to throughout and QWI should not be

permitted to resile from it at this stage of the

proceedings and it is interesting to note that the

Trade Practices Commission, in its submission, does

not seek to take a contrary stand on that point.

DEANE J:	It is a strange notion, though, is it not, that just
because a holding company or subsidiary may distort
the economists' desired diagram of competition, if
you have  holding company entering a market as seller

'¼	and subsidiary entering the same market as buyer and
possibly controlling the market by their various
activities, on this approach, you just ignore that
they are there.

MR GLEESON: Except, Your Honour, I think the corollary of that

is this: it would come, no doubt, as a great cause of

BlT4/6/SH	87	30/6/88
Wire(2)

alarm to the Trade Practices Commission to learn

that if BHP were to establish its new - any steel

mill in Sydney and reorganize its arrangements

and divisionalize AWI or, in some other way, make

AWI cease to be an independent corporate entity,
it would then put itself in the present case beyond

the reach of section 46.

DEANE J: Well, that may or may not be but what I am really

putting to you is that something has gone wrong somewhere if lawyers and the courts allow the

economists' desires not to have their things

spoilt in terms of analysis to control a sensible

operation of the law.

MR GLEESON:	However, Your Honour, when the matter comes to the High Court, the way in which it has been litigated
in the courts below is important.
DEANE J:	I was not directing my question to the strength of
your general submission.
MR GLEESON:	Yes. Your Honours, in paragraph (c) on page 2,

reference is made to some of the examples that were

put in cross-examination to Dr Williams. I have

already referred to the example of somebody who just

got enough equipment to tar coat these fence posts

and demanded supply of them. Your Honours have

heard about the questions he was asked, asking him
to look back to the days no longer true, I think,

of when ACI was a monopolist in the glass industry

and think of a person who came along, perhaps with

a machine that put tops on beer bottles and say,

"I would like to buy the uncapped beer bottles from

you because I have a bottle capping machine that will

put them on and I would like, then, to compete with

you in the sale of capped beer bottles".

We refer, on the bottom of page 2, to the

American experience in this connection and to what

is called the "essential facility" doctrine.

Your Honours, not because I intend to read any

substantial parts of it but because it is referred

to in the judgments below, could I hand up to

Your Honours copies of some extracts from that work of Areeda & Hovenkamp which is one of the

leading works on antitrust law in the United States.

I will simply take Your Honours briefly to a couple

of portions of it.

'I,

At page 578 - the page numbers are on the

bottom of the pages here - dealing with

monopolization in the context of vertical

integration, the authors begin to discuss what was

regarded as a somewhat controversial decision in

the United States where a company that had a certain

BlT4/7/SH	88	30/6/88
Wire(2)

degree of control over ski facilities in a

skiing area was found to have contravened the

TRADE PRACTICES ACT because of what I think was

a discriminatory refusal to make some of its

facilities available to a would-be competitor

and that is the ASPEN case and, on page 578,

the authors discuss what they call ASPEN's

potential reach and limitations and they say:

Virtually any act of a monopolist -

Your Honours, may I interrupt what I am saying to

make a point that there is a temptation to think

of section 41 in terms of a law applying to a

monopolist.As has been pointed out by Mr Goldberg

and as has been accepted by Mr Drununond, that is

not so, and it is important that it is not so. It

is not only monopolists who enjoy the level of power

which subjects a firm to section 46 and I would wish

to disclaim in anything that I say, any suggestion

that section 46 only applies or ought to be construed

as though it only applies to monopolists -

Virtually any act of a monopolist might be

condemned under the jury instruction approved

by the ASPEN Court. Consider several examples.

And Your Honours will see where I got the first one,

or my example,from. He says:

Indeed, is it not obvious that the refusal

to license has -

the anti-competitive -

purpose or effect?

And then he gives various other examples of this

conduct. Then, on the top of page 579, he says: the ASPEN Court did not consider the implications	It is, of course, readily apparent that for other situations of the jury instructions it
approved. It surely did not intend to legislate
on so grand a scale as to subject all the
preceding illustrations to a jury's policy decision upon a monopolist's duty to deal or cooperate with rivals. Furthermore, the
ASPEN Court's own formulation is itself
qualified in several ways.

~

And then they refer to some doctrine of absolute

privilege which, apparently, is known in United

States' law.	The sixth qualification on page 580
is that:

ASPEN leaves monopolists free to refuse to deal or cooperate with rivals for legitimate business reasons.

BlT4/8/SH 89 30/6/88

Wire(2)

Then,on page 581, they refer to the decision

of OLYMPIA EQUIPMENT LEASING CO V WESTERN UNION TELEGRAPH COMPANY, (1986) 797 F 2d 370, which

is on our list of authorities. The leading

judgment in that case was written by Judge Posner.
I think this is the case - I am not sure - in

which there was an application for leave to appeal

or leave for a review of this decision and the

application came on before a bench consisting of

Judge Posner and one other member and they refused

leave to review it and Judge Posner, according to
the report, then retired from the bench and the
other member of the bench who stayed on then said

to counsel that his notice of appeal exceeded

bounds of legitimate strong criticism of the

judgment below into mere abuse. He must have been

very pleased to see Judge Posner there when he

turned up on his application for leave.

Judge Posner is the economist judge in the

United States who has written a number of influential

decisions in this area of the law and he deals in

this matter on - the page numbers have disappeared

from my copy - page 375 where, at the bottom of the

left-hand colunm, he says:

Opinion about the offense of

monopolization has undergone an evolution.

He says:

Forty years ago it was thought that even a firm with a lawful monopoly ..... could

not be allowed to defend its monopoly

against would-be competitors by tactics
otherwise legitimate; it had to exercise

special restraint - perhaps, indeed, had

to hold its prices high, to encourage new

entry. So Alcoa was condemned as a

monopolist because it had assiduously

created enough productive capacity to supply

all new increments of demand for aluminium;

it would not have been condemned if by

keeping its prices high it had keptdemand

down to a level that it could supply

without increasing its capacity ..... .

Later, as the emphasis of antitrust policy

shifted from the protection of competition

as a process of rivalry to the protection of competition as a means of promoting economic

,;,	efficiency ..... it became recognized that the lawful monopolist should be free to compete
like everyone else; otherwise the antitrust
laws would be holding an umbrella over
inefficient competitors. "A monopolist,
no less than any other competitor, is
permitted and indeed encouraged to compete aggressively on the merits ..... "

BlT4/9/SH	90	30/6/88
Wire(2)

Today it is clear that a firm with

lawful monopoly power has no general duty

to help its competitors, whether by holding

a price umbrella over their heads or by

otherwise pulling its competitive punches .....

'There is a difference between positive and

negative duties, and the antitrust laws,
like other legal doctrines sounding in tort,
have generally been understood to impose only

the latter."

There was some mention yesterday of the distinction

between action and inaction.

So, if a firm went to a monopolist and said,

"Please - for the sake of competition - give

me a loan so I can compete with you and make

this a competitive market", and it was turned

down, it could not invoke the SHERMAN ACT.

A monopolist has no duty to reduce its prices

in order to help consumers -

and so on.

We place emphasis in the construction of the expression "taking advantage of power" upon that

distinction between action and inaction and upon what

are called positive and negative duties. Now, could

I then come to the subject of market definition.

First, could I deal with the findings of

Mr Justice Pincus on this subject which, as we have

respectively submitted, were somewhat incomplete

because His Honour did not, in the event, find it

necessary to make them complete. On page 613,

His Honour refers to the markets which were alleged

by QWI and they appear in the middle of page 613.

At the bottom of page 613 and the top of page 614

he refers to our suggestion as to what were the

appropriate markets for the purpose of the analysis

of the problem. They happen to be the same as the

·markets that the Trade Practices Commission urges

upon Your Honours. Now, it is important to bear

in mind that Mr Justice Pincus did not, contrary to

what has been said repeatedly in this Court, accept

our first proffered market and that appears on

page 620.	We supported that market definition with
the evidence of Dr Norman.	I should explain to

Your Honours what is referred to in the first

sentence on page 620 and this was Dr Norman's

reason for rejecting a market in Y-bar as being

relevant to the analysis of this problem. He said

"'	it is hopelessly narrow, partly because it ignores
the possibilities of substitution on the supply side
as well as the demand side. What has to be remembered,
and all the economists agree on this,is that the
problem of market definition is not just a problem
of showing that there is a market in some commodity.

BlT4/10/SH	91	30/6/88
Wire(2)

It is also a problem of defining the market in a manner that is relevant to the analysis of the

problem at hand. If I could take a reference,

for example, to another industry altogether and

one that has been the subject of market definition

in the Trade Practices Tribunal: in one sense,

from a lawyer's point of view, it might be said

that there is a market for drink, a market for
alcoholic drink, a market for spirituous alcoholic
drink, a market for rum and a market for red mill

rum. Now, an economist would practically never accept that red mill rum is an appropriate market

definition for the purposes of antitrust analysis

and he would probably be very unlikely to suggest

that rum was an appropriate market definition for

the purpose of antitrust analysis. In the beer case,
the Trade Practices Tribunal had to look at the
question of whether the market that was relevant
to their analysis of the problem was beer, bottled

and bulk, or bulk beer or alcoholic beverages or

refreshing drinks. They settled on beer, bottled

or bulk, and they would not have included whisky in

the relevant market that they were adopting for the

analysis of their problem. And Dr Norman rejected

Y-bar as a market relevant to the analysis of the

present problem, as appears from his evidence, upon

the ground that it is too narrow and rejects supply

side substitution. He says, "From the point of view

of the supplier, BHP, they can choose whether they

will make merchant bar or angles of some particular

shape as well as Y-bar and you cannot treat Y-bar

as being a market relevant to the analysis of the

problem." But Mr Justice Pincus was not happy with

that. That was our case but he rejected that. He

said:

Expert evidence was given for BHP that,

in the practice of economics, the limits of

a market are sometimes determined by reference

to substitutability -

But, in the middle of page 620, he says:

Section 4E suggests to me that it is not that sort of substitutability which the

legislature had in mind.

And then he says:

It is only if one adopts the wider notion

of substitutability just rejected that

it is possible to accept BHP's first

contention as to the market.

So, he rejected the existence of a market for steel and steel products and then he says:

BlT4/ll/SH	92	30/6/88
Wire(2)

It appears to me that the second view

propounded on behalf of BHP, that the

market is one for the supply of rural

fencing materials -

is right. Now, then, he went on to say that,

on either view, BHP is dominant but that does

not constitute acceptance by him for the purpose

of his later analysis that there was a market for

steel and steel products. The only market that

you find him accepting anywhere in his judgment

is the market for rural fencing products and, of

course, this case just does not work at all if

that is the only market. The problem cannot be

analysed in those terms at all and, of course, he
did not accept the markets contended for by QWI.

At least, he nowhere said he accepted those markets. The only place in Mr Justice Pincus' judgment where you will find him accepting a market is on page 620 and, oddly enough, there, you find him rejecting the

first market for which we contend.

Now, my learned friend has repeatedly said

Mr Justice Pincus accepted the two wider supply

markets in this case and that, with respect, is not

an accurate reading of Mr Justice Pincus' judgment.

(Continued on page 94)

..

BlT4/12/SH	93	30/6/88
Wire(2)

MR GLEESON (continuing):  We point out that neither Court below

accepted or even discussed the evidence of Dr Williams

which was challenged at length in cross-examination

and contradicted as to Y-bar by Dr Norman. Then we

make the point that however as it is generally agreed,

and was certainly accepted by Dr Williams and

Dr Norman, that there are two aspects·of market

consideration that are both important, first to

identify a market and second to define it in a

manner appropriate to the resolution of the problem

in hand. If Your Honours read the evidence of

Dr Norman, Your Honours will find that he went so far

as to say, and this was challenged in cross-examination,

that you cannot have a market without a problem.

Dr Norman's assertion that there arose a market in

Y-bar at the time QWI put up its hand and said,

"we want to buy some",was accompanied by the

proposition that the day before QWI put up its hand

and said'we want to buy some'there was no market for

Y-bar and was also accompanied by the proposition that

without any dispute or disagreement between BHP and

QWI about this matter there was no market for Y-bar.

I have attributed that to Dr Norman, I am sorry, I

meant Dr Williams .

Dr Williams, in cross-examination, went to the length of saying that you only have a market when

you have an antitrust problem. He was then asked if

the Australian Bureau of Statistics went around

counting the number of markets in Australia how would

they be able to do that and he said, "That could not

be done. What they would have to do is find out and

identify the TRADE PRACTICES ACT problems that

exist in Australia and that is how you would find out

what the markets are". That was a sort of
cross-examination directed at reductio ad absurdum
but I only refer to that to emphasize the importance
which both the economists attached upon not merely
finding transactions but upon defining 'market' in a

manner relevant to the dispute at hand. And without

tating Your Honours to the references in paragraph 7

that we give, they all illustrate and refer to the

fact that when a dispute about market definition

arises in a TRADE PRACTICES ACT case, the problem involves product definition and that is the degree of particularity with which you identify the

relevant product. It also involves defining the

matter by reference to the level of cormnercial

activity, that is is it the wholesale market or

the retail market? It also involves geographical

definition: is the market Australia wide or

.. ,	Queensland and the north rivers of New South Wales
or whatever else may be the case?

DEANE J:	Mr Gleeson, within all this economic evidence, was
there, for example, anything to suggest that if AWI
BlTS/1/SR	94
Wire(2)

had not been a subsidiary of BHP but had been an

independent purchaser and manufacturer there would

not have bLen a relevant Australian market in Y-bar?

MR GLEESON:  That question never arose, Your Honour,because

the economist -

DEANE J: It seems to be almost implicit in what you are

saying.

MR GLEESON:  I am just saying that the way the matter was

litigated - - -

DEANE J:	I mean, what you are saying the econorr.ists . said?
MR GLEESON:	The economists very early on established the proposition that they did not see a relevant
distinction between BHP and AWI and the entity or
the group was just referred to throughout the rest
of the case as BHP/AWI.  And that, no doubt, is
the explanation for the attitude taken before the
Full Court of the Federal Court by counsel for QWI.
DAWSON J:	But if BHP sold off AWI and continued to operate

on the same basis there then would be a market?

MR GLEESON:  Well, Dr Norman would say, no. Dr Norman would

say, if AWI were a completely separate entity from

BHP, there would not be a relevant market for Y-bar.

The relevant market would be for steel products or

merchant bar because Y-bar is too narrow a definition.

He would say, there is no market for Y-bar in that

case for the same reason as there is no market for

red mill rum. That does not mean there are no sales

of red mill rum, it means that no ·one would ever

define a relevant market for purposes of a TRADE

PRACTICES ACT problem that narrowly and that for

two reasons: people who.buy rum can substitute

something else for red mill rum and people who

manufacture it can manufacture something else other

than rum or red mill rum or presumably can.

DEANE J: Carry the analogy on: people who manufacture steel

fencing posts, where does your analogy lead you?

MR GLEESON:	No, it is people who manufacture -
DEANE J:	They can buy timber?
MR GLEESON:	That was a live issue in the case. We submitted

that the market, as Your Honours will have seen,

~ was for rural fencing materials not for steel fence

posts.

DEANE J: That would lead you down a dangerous path, would

it not? If the market is for manufacturers feed stock,

dealing with manufacturers of rural fencing posts?

BlTS/2/SR	95
Wire(2)
MR GLEESON:	Mr Justice Pincus said to Dr Williams when he

accepted a proposition like that, "You mean to say

that shepherds are in the same market" and

Dr Williams said, "That could well be right if you

found an internal memorandum of a fence post

manufacturer: saying,we have got to put the price

of fence posts down because there is a lot of

unemployment amongst shepherds". In other words,

it is a question of substitU::ability, but Dr Norman

emphasized on both the supply side and the demand

side and tha 4 according to Mr Goldberg yesterday,
is the main point that the Trade Practices Commission

desires to have this Court accept in this case.

Now, the next matter is the matter of purpose.

Mr Justice Pincus' findings on purpose have to be related to his findings or lack of them on the

question of market.	At page 644, Mr Justice Pincus
said:

it should be inferred that the purpose

of B.H.P. 's refusal of supply fell at

least within paragraph (b) of

section 46(1) - prevention of entry

into a market.

And he holds that that prevention relates to a

market. Now that, with respect, is a little odd.

The only market His Honour has found is the rural

fencing market and the evidence before His Honour

was that QWI is already in that market. QWI buys

and sells steel fence posts and, of course, they

buy and sell and compete aggressively with us in

the sale of wire, all of which forms a part of the

rural fencing market. It is not easy

to understand quite what His Honour meant when he

said, without elaborating, that the purpose in

paragraph (b) existed, unless he meant something

very narrow indeed, u.nless he meant that the purpose

was to prevent them manufacturing fence posts

because that is the only thing that they are not
doing at the moment that they want to do.	They are

in the market.That he found on page 620. They are
not competing as effectively in that market as

they would like to be and that was part of their

complaint. But that is not a paragraph (b) purpose - - -

MASON CJ:	That is a ( c) purpose , is it?
MR GLEESON:	We would not even accept that it is a (c) purpose,

~ Your Honour, with respect - - -

MASON CJ:	Why not?
MR GLEESON:	- - - because we are not preventing them engaging

in competitive behaviour,	we are diminishing their
competitive capacity.	They cannot compete as

BlTS/3/SR	96
Wire(2)

effectively with us but paragraph (c) talks about

deterring or preventing a person from engaging

in competitive conduct.	They are already engaging
in competitive conduct.	Now the finding that he

made on page 644, without elaborating, was identified

by the Full Court as being related to a letter

that my instructing solicitors wrote ~~fore action

pursuant to a direction that Mr Justice Pincus in

fact gave and that is referred to at page 662. It

was in the nature of an answer to interrogatories

but it was really, I think, a response to a direction

to my clients:

AWI's policy ..... was either to

refuse supply of steel Y-bar or to

offer to supply steel Y-bar at an
uncompetitive price because it wished
to preserve the business of the
manufacture and wholesale sale of

fence posts conducted by it in

association with BHP.

Now that is the admission which formed the basis

of the finding of "purpose"made by His Honour and
of course, as I said, we do not accept that that

satisfies the descriptions in (a), (b) and (c) and

having regard to the only market that His Honour

found on page 620 it is a little puzzling. The

position becomes eveTh more puzzling when one looks

at the summary that His Honour gave of his findings

at the end. He says on page 646, at the bottom:

B.H.P. is _dominant in the relevant markets.

Without explaining what they are. And then he says:

It is the sole domestic supplier of Y-bar.

And at the top of page 647:

It has refused to supply Y-bar to the

applicant, thereby preventing the

applicant from competing with it in the

star picket market.

Now he has not found on page 620 anything called

"the star picket market" and that would be an

impossibly narrow market definition, we would

respectfully submit. Steel fence posts are not only

made out of star pickets. Some of them in Australia

are made by Boral who have only one per cent of the

i'market, but they are made by Boral out of a

different shape. A steel fence post is only made

out of Y-bar in Australia because as a matter of

history that is the shape that we find easiest

to drive into the ground. In America, according to the

BlTS/4/SR	97
Wire(2)

evidence, steel fence posts are made out of T-bars.

It is just a question of the Australian solution to

a corrnnon problem. You do not want them to catch

fire, you do not want borers to attack them and they

have got to be able to have wire punched through

them and so since the 1920s BHP have been achieving

that result by making something in the shape of a

"Y'. 1 In America it is done by making something in the	shape of a 11T '.' There are other steel fence posts made
by other manufacturers in Australia, although they
only have a small share of the market. What His Honour
meant by 11the star picket market:' is not easy to understand, but he never regarded it as important to go into the detail of all these questions.
His Honour did, however,find as a fact at pages 645 and 646
the wherewithal to compete and of preserving one 1 s that a purpose of not providing a competitor with
own business and not assisting his is something that would be regarded in ordinary corrnnerce as normal and
legitimate business behaviour. And we rely upon
that finding of fact.

There was evidence, contrary to a suggestion that

is made by Mr Justice Pincus in his judgment, that

BHP did not call as a witness anybody who knew about

this. We called the rural marketing manager who gave

evidence, in cross-examination by Mr Drurrnnond, as to

the policy that he adopts in this regard and the

reason for it and he dealt with that at pages 388 to 389.

That was Mr Forster and :Mr Gore was cross-examining

him. At page 388:

In your position, as manager, rural marketing,

would you in August 1987 oppose the supply

by BHP to QWI of y-bar at a price which

would enable QWI to compete with AWI in

the marketing of the star picket posts?---Yes,

I would.

And your reason for opposing that supply would be to maintain AWis market share in

relation to rural fencing products; is
that correct?---That is not correct.	The

reason why I would oppose that proposition

is the fact that it is more profitable for

AWI or Wire Products -

that is a division of BHP

to manufacture fence posts. I mean, if

,,	we start - you know, we are not in the
business of selling unfinished products;
that is what we are all about. Now, you
know, that is nothing to do with
maintaining market shares; it is to do
with profitability.

BlTS/5/SR	98
Wire(2)

Yes, but BHPs profitability as opposed

to AWis profitability is not your

concern?---Well, it is all one and the

same.

All one and the same?---BHP steel group

is all one and the same.

The evidence was that AWI operates as part of the

rod and bar products division in BHP steel group.

I think, Your Honour Mr Justice Deane asked a

question yesterday of whether and how Y-bar is

referred to in BHP internal documents. There is

actually in evidence a brochure which identifies

the products of the BHP rod and bar steel products

division. It is at page 533 and it does not mention

Y-bar.	The relevant product of the BHP steel
division, in this regard, is steel fence posts.	Now,
we then come to the concept of taking advantage
of market power for a proscribed purpose.	We

agree with the submission that this is a composite

concept containing a number of elements. We should

draw Your Honour's attention to some aspects of

the history of section 46. Could I hand up some

extrinsic material in respect of which we have

given notice, Your Honour?. It is some extracts

from the report of the Swanson Coffimittee and the

Blunt Cormnittee on section 46, that is the Trade

Practices Review Cormnitteeand the Trade Practices

Consultative Cormnittee.

Your Honour, the fact is, as a matter of

history, that there was an attempt made to have

Parliament or to persuade people that section 4n

ought to be amended by deleting from it the expression

"take advantage of" and substituting the word "use"
and that attempt was not taken up. There is a
typographical error in the index. The Swanson

Cormnittee's Report is of August 1976 not August 1986.

On page 5 of this book, the number is in the bottom

right-hand page. Under the heading "monopolization"

there is some reference to history. And it said:

The submissions generally reflected

acceptance of the present position of

dealing with monopoly power within the

structure of the TRADE PRACTICES ACT.

The submissions also accepted the concept

underlying the present provisions
dealing with monopolies which go, not to

the creation and continued existence of

\	monopolies, but to the abuse by monopolies
of their power in relation to competitors. The Cormnittee considers that in Australian conditions, at the present time, this

BlTS/6/SR	99
Wire(2)

system of dealing with monopolies is

the most suitable.

Then at 6.5:

Views were expressed to the

Committee that 'take advantage of'

was capable of a double meaning. It could mean simply to use or it could

mean to misuse. Similarly, the word

'to' could change its meaning according

to whether one interpreted it as 'in

order to' or 'with the result that'.

Then they refer to the TOP PERFORMANCE MOTORS case to which my learned friend has referred and at 6.8:

In light of this line of judicial

interpretation, we do not feel it would

be appropriate for the section to be

changed other than in the respects we

have elsewhere suggested ..... However, we

draw to the attention of the Government

our understanding that there is concern

by some (who believe that their normal

and proper competitive conduct might be

proscribed by the section) that the section

may not always be interpreted in this way.

Accordingly, we suggest to the Government

that it keep close watch on the manner in

which this section is interpreted.

Then in 6.10:

In relation to the second basic

issue, the Committee considers that the

rationale of the section would be largely

negated if a contravention required

proof that one of the matters in

paragraphs (a), (b) or (c) had occurred.

It is hardly appropriate to allow the

conduct to be checked only after the
damage has occurred.	The Committee

recommends that the section should apply

when:

the~corporation is in a position

substantially to control a market; and

the corporation has used, otherwise
than in normal competitive behaviour, the

~,	power it has by virtue of being in that
position.

That is the kind of limiting factor. In America

of course, they call things like this a rule of

reason. But that is the kind of limiting factor that

BlTS/7/SR	100
Wire(2)

has been employed in the United States' cases to

keep out of the area of requiring vertically integrated

manufacturers to assist their competitors by

supplying products. And it was against the background

of that recommendation that the words "take
advantage of" were left in in the amendments to

which my learned friend referred to yesterday in

his analysis of the history of this. Now there was

an attempt to have those words taken out and the

report of the Blunt Committee, .. which in this regard
was not accepted, is the second document here and

on page 13 of the bundle of papers, in paragraph 9.27,

that Committee said:

The Words "taking advantage of the power"

In our view these words mean "use market power"; that is, the overt

deliberate exercise of market power. To

avoid confusion and misunderstanding we

recommend that the word "use" replace
take "advantage of".

Now it was contrary to that recommendation that the words "take advantage of" have been left in and

remain in section 46.

DAWSON J:  We can use extrinsic materials to explain the

failure to amend the legislature?

MR GLEESON:	My learned friend yesterday, Your Honour, going through the history of the legislation said
Donald & Reydon made an error in the publication in 1978 I think he said, when they ascribed to the words
"take advantage of", a meaning that they no longer
had in the light of the legislative history. And
we say that the account that my learned friend gave
of the legislative history is incomplete and that
those words were deliberately left there with their background of judicial interpretation to which
Mr-· Justice Pincus referred. This is a controversial
matter and has been for some time a controversial
matter - that is the question of whether"take
advantage of" includes a :perjorative element and we
have given Your Honours a reference to what I think is the most recent case in the Federal Court on the
subject, which is MIDLAND MILK.  It is referred to
in that bundle of submissions that my learned friend
handed up yesterday.  The report is MIDLAND MILK V
VICTORIAN DAIRY INDUSTRY, (1988) ATPR, page 49,254.
What does not appear from the reference to this case,

• in my learned friend's submissions, is the following

statement by Mr Justice Forster. This was a

decision earlier this year, where His Honour said

at page 49,267:

BlTS/8/SR	101
Wire(2)

Is there a serious issue to be

tried as to the Authority's "taking

advantage" of its market power in

imposing condition 6? I accept, with

respect, what Mr Justice Pincus said

as to this ingredient -

he goes on to express his own views:

An earlier case, TRADE PRACTICES

COMMISSION V C.S.B.P ..... spoke of the

concept of "taking advantage" as

entailing an element of conscious

predatory behaviour. Clearly, in my

view, notions of this kind are

involved in this ingredient of the

section.

But, Your Honours, there is another approach which

produces the same result and it relates to the

necessity to consider what I referred to earlier

as the meaning of power and the concept of taking

advantage of power. The texts and authorities

here and abroad all explain the concept of market

power as being something which means absence of

constraint. To say that a person enjoys a particular

level of power in a market is to make a statement
about the relative freedom or absence of constraint
under which he operates in relation to such matters

as raising or lowering his prices. Complete market

power consists in an ability to raise or lower your

prices in a fashion totally uninhibited by the

conduct of anybody else. Absence of market power

consists in the need to look over your shoulder all

the time, to respond to other people's activity in

terms of raising and lowering prices. Probably

the extremes of those two situations never exists

in real life so it is always a relative concept.

Of course, when a person is alleged to be, to use

a neutral term, using or exercising or enjoying power

in.a market,the very first step is to define the

relevant market, that is,to produce a definition

of'market"which is relevant to the analysis of the

problem in question. And that is why we and Dr Norman

were urging upon His Honour that the relevant

market here is the market for steel and steel products

in Australia, what Mr Drummond calls "the wider supply

market". He did not accept that, although he said

if he had accepted it he would have found we were

~ dominant in it, nor did he accept the narrower market

,of a market for Y-bar. But let me assume for the

moment that the relevant market is the market for steel products in Australia. To say that a person

has power in the market for steel products is to

say that he enjoys a freedom from constraint in

business decisions that he takes in that market.

BlTS/9/SR

Wire(2) 102

It is never absolute, but it is relevant and it

might be great enough or extensive enough to satisfy

the threshold requirements of section 46. And the threshold requiremencs of section 46 are satisfied

by power falling a long way short of monopoly power,

particularly since the recent amendment.

Now, you can never find as a fact that a

person is using or exercising, let alone taking

advantage of, market power unless you find as a

fact that the conduct in which he is engaging is

something in which he would not or could not engage

but for the absence of constraint. And that, of

course, is what the Trade Practices Commission
recognize in paragraphs 10 and 11 of the submissions

they have made to this Court and that is the point that has never been faced up to by Queensland Wire

Industries in the way in which they put their case.

There is no finding of fact by the courts below that

BHP refused to supply Y-bar because there are not

other people supplying Y-bar. A vertically integrated

manufacturer who has the degree of market power

sufficient to satisfy the threshold test in section 46

may consume the entirety of the intermediate product
which he produces himself as a business decision
regardless of whether or not there are other people

who also supply the intermediate product.

There is, in the present case, evidence in the

form of an internal BHP memorandum discussing what

they would do if Smorgan started to supply Y-bar

and the interesting thing is they came to no

conclusion. They said, it would depend on the

circumstances. Now Your Honours have been referred,

by my learned friend,to that internal memorandum and

he referred to it in a different context and for

a different purpose .

DEANE J:  Was there any evidence why Smorgans will not

supply a Y-bar type product untreated?

J:,1R. GLEESON:  No, Your Honour, we in the court below commented

on a number of occasions on the absence from the

witness box of any evidence from Smorgan as to why

they will not supply Y-bar.

(Continued on page 104)

.. ,

BlTS/10/SR	103
Wire(2)

DEANE J:  What would you say of this example: say the relevant

market is steel and steel products and BHP had a large

shop in which it said, "We'll sell all the untreated

products from our mill" and QWI went in and said,
"Among those untreated products is Y-bar. We'll buy

that" and BHP said, "No, we've changed our mind, we

won't sell Y-bar to anybody at all other than our

subsidiary because if anybody at all gets Y-bar

they'll be in a better position to compete with our

subsidiary as a manufacturer"?

MR GLEESON: If you found, as a matter of fact, that BHP's

ability to do that resulted from the absence of

constraint from - - -

DEANE J:	The absence of anybody else who was in a competitive
position to supply Y-bar.
MR GLEESON:	You would have to find not only the absence of it

but the connnection. In other words, it would only be

a use of market power if it was something that they

could only do because of the absence of a competitor.

DEANE J: Well, I follow. It would be a section 46 case if you

found that. Does it not really indicate that this

market argument is really a bit of a byway?

MR GLEESON:  We would submit not, Your Honour. The reason why

market definition is so critical is because you cannot

identify the relevant power or the relevant exercise

of the power without identifying the relevant market

nor, of course, can you point to foreclosing competition.

DEANE J:	But accepting your primary contention as to market, and perhaps, again, this has never been put, but why
can it not be said, if the market is a market for
steel products, "You have Y-bar, an untreated steel
product, which you'll supply to your own subsidiary.
You supply all the other products of your mill. You
won't supply Y-bar to QWI to prevent it competing with your subsidiary and the only reason why you're
doing that is that you have the power in the market
for steel products resulting from there being no relevant
competitor with you in that market"?
MR GLEESON:	You would have to prove the latter as a matter of

fact.

DEANE J:	I follow that but - - -
MR GLEESON:	But even there, we would say, that is not taking

~ advantage. So far I have been discussing this in

' neutral terms on the basis that -

DEANE J:	Mr Gleeson, you are taking me up, and quite legitimately,
at the wrong point, it seems to me, in that the point of
my question is where is the relevance of all this
discussion about market in that simple example?
BlT6/l/PLC	30/6/88
Wire(2)	104
MR GLEESON:	The relevance would be at the question of fact that was raised in the last step of it, Your Honour.
If the allegation of fact - if the judge was
being invited to find as a fact that BHP were only
able to do what they do do because nobody else sells
Y-bar, then to investigate that proposition of fact,
you would need to define the relevant market and then
look at conditions in it.
DEANE J:	But why is it not sufficient to say that no matter

what be your identification of relevant markets, and

even if you accept your definition, that the question

comes down to this: .is BHP refusing to supply QHI with

Y-bar which it has available to supply and which it does supply to its own subsidiary, because it knows

that in the market for steel products it has no

competitor who will supply it?

MR GLEESON:  That is the same question of fact, yes,

Your Honour. That, of course, still leaves the
question additionally - but it is not relevant to
the point Your Honour is putting to me - it leaves

the question of the meaning of the expression, "take

advantage" and whether somebody has got a duty to

assist his competitors.

DEANE J:  I do not want to push you too far, but if one

were, at the end of the day, to come to the conclusion products, BHP is refusing to supply a product which

it has available, it is doing it to protect its

subsidiary from competition and it is only able to

do it and it is only doing it because it is, and it

knows it is, free from relevant competition. If one

reached all those conclusions, would it not be a

section 46 case?

MR GLEESON:  No. First of all, you would have to reject the

proposition that the distinction between BHP and its

subsidiary was irrelevant. Of course, if it was a

section 46 case, BHP could fix it up quickly enough

and just desubsidiarize AWI.

DEANE J:  I was referring to the subsidiary morefor the point

that the product is there, available to be supplied,
and it is there in a context where it is the only

product from the mill that is not supplied if a

customer wants it.

MR GLEESON:  Two things about that: Your Honour says, "available

to be supplied."	As a matter of fact, BHP's subsidiary
consumes all the Y-bar that BHP produces.	So the

~-- proposition, "available to be supplied," must mean that,

by trying harder, BHP could produce more Y-bar, and

that is probably true, or, alternatively, of course,

by rationing its subsidiary. It is only in that sense

that it is available. The second thing is that when

it is said that any other products will be supplied

by BHP there is no evidence at all as to whether and

BlT6/2/VH	30/6/88
Wire(2)	105

to what extent those other products, are the subject
of only a s-ingle use, for example. I do not think

there is any evidence dealing with the question of

whether one of the unique features of Y-bar is that

Y-bar is the only product that can only ever be used

for one thing, namely, making steel fence posts.

DEANE J:	I will stop interrupting you after this, but can I
just put this to you? What, if looking at the evidence, the inference was quite plain that if QWI went into
BHP and said, "We want to buy Y-bar not for the purpose
of making fence posts and competing with you, but for the purpose of making ladders," that BHP would obviously sell it to them in its untreated state?
MR GLEESON:	That would be relevant to the issue of purpose,

Your Honour, but it would not, in our respectful

submission, be relevant to the issue of taking

advantage of.

DEANE J:  Even if it was apparent that the only reason why

BHP refused to sell it for the purposes of fence posts was to exclude competition at the manufacturers of

fence posts level, :in acontext where it could only

do that. In other words, exclude competition at the
manufacturer's level by reason of its dominant position

of the supply level.

MR GLEESON:  What Your Honour puts to me, of course,goes to the

heart of the question of what section 46 is intended

to achieve. May I, first of all, look at the problem

as though there were no section 46 there. If there

were no section 46 there, as Mr Justice Pincus

pointed out -and this is implicit in the reasoning

of Judge Posner- if there were no section 46 there,

and somebody like QWI came in and made that application,

they might find the exit door very quickly. Or

somebody polite might say to them, "Would you like a

loan, too?" Now, the question is whether the

consequence of section 46 is that anybody, and it is

not only a monopolist or not only somebody who is dominant, I might add now, that anybody who passes

strength there referred to, can be forced to assist	the threshold test in 46 for the level of business
a would-be competitor to compete with him because
that will always be the corollary of the proposition that he is doing something with the intention of
stopping the would-be competitor competing with him.
Ourrespectful submission is that if section 46 goes that far, it goes_a v~ry long way indeed~
~	Your Honours, if I could go to paragraphs 10 and

11 of the outline of submissions of the Trade

Practices Commission, my learned friend, Mr Drummond,

in his submissions has sought, with respect, to

overcome the absence of submission or finding of fact

on the points raised in paragraphs 10 and 11 by saying,

"MrJustice Pincus said, 'I have found all the elements

against BHP except taking advantage of'," but if you

BlT6/3/VH	30/6/88
Wire(2)	106

really look in detail at the findings of fact

of Mr Justice Pincus and at the way in i;,7hich he dealt,
for example, with the issue of market definition,
it really is not fair to attribute to him findings

of fact, for example, of the kind referred to in

paragraphs 10 and 11. The factual argument put by

the Trade Practices Commission here, of course, does go to the heart of the question of whether what is

involved here is a use, to use a neutral term, of

the market power in the steel and steel products

market. As I say, Mr Justice Pincus was not even

prepared to accept that there was such a market.

He says that BHP:

Is not constrained by anyone else -

this is the Trade Practices Commission

and that it refuses to supply Y-bar because

it knows no other company will supply it.

Now, one question that arises is whether that is an inference that is available from the limited

evidence on the subject. Another question is whether

or not that is the correct inference; and a third question again is whether there is any finding of

fact in either of the courts below to that effect.

We would respectfully submit that the answer to the

second and third question; is plainly no. It is not

a question that you will find being explicitly

addressed in the courts below at all, and that, for the way in which the case was conducte~ It is not,

for that matter, a question that you will remember

being specifically addressed by my learned friend,

Mr Drummond, in his argument to Your Honours yesterday.

And yet, it is the central issue of fact, assuming

that the expression "take advantage of" has got no

pejorative meaning.

We would say that the evidence does not support

that factual conclusion which this Court is being

,isked to make for the first time by an aspiring
intervener.	The assertion is, apparently, that it

stands to reason,or common sense. There is no evidence

referred to to support these assertions of fact in

this outline of argument. Apparently, the proposition

is that it stands to reason or common sense that if

Smorgan started to sell Y-bar, BHP would make it

freely available. Now, the exhibit

is in volume 3, at page 487, in our respectful

submission, indicates that that is not so. At page 487

and following, you have this memorandum dealing with

~-	the strategic options that would be available to BHP
in the event that Smorgan manufacture a Y-bar section and supply either Y-bar or fence posm to the market.
That is the problem addressed on the top of page 487. And the author of this document, on page 489, comments
on the various options that would then be open to BHP, and he makes a recommendation on page 490 as to

BlT6/4/VH	30/6/88
Wire(2)	107

various options that would be adopted, depending upon

what BHP management determined in that event was

BHP's ultimate objective. Incidentally, this is an

interesting relevation of the internal attitude that

they are all one. There, Your Honour will find them

just saying what would happen in those circumstances

would depend upon what BHP thought was best for it. But the important point here is that nowhere is it

said "If Smorgan start to sell Y-bar, we will

obviously have to· start to sell it." And yet that

is the factual assumption underlying the Trade

Practices Commission's submission in paragraphs 10 and

11.

What they say is, "We will do what is in our

own intereststo maximize our own profitability, and

where those interests will lie and how we will

maximize our own profitability will depend upon the

circumstances." Option C, you will notice, is to

supply only AWI. That Option C, which is referred

in paragraph Bon page 490, in effect, is to do

nothing or carry on as before. But, Your Honour, the

reason there is no finding by Mr Justice Pincus on this

issue which is addressed in paragraphs 10 and 11 of

the Trade Practices' submission is because he was not

asked to make a finding on those issues of fact, and

you can read the evidence.

Of course, this is, we know, what the Trade

Practices Commission would regard as the critical issue if it were conducting the case before

Mr Justice Pincus but it just does not happen to be

what Queensland Wire Industries regarded as the

critical issue and it is too late in the day to raise

it now, in our respectful submission. There is

evidence that tends and can be used for the purpose

of argument now in either direction on this issue,

but it is not for this Court, in our respectful submission, to draw conclusions of fact on that

subject. Decisions that were made as to what witnesses

were and were not called by BHP in these proceedings

below were made on the basis of the way the case

was being presented by Queensland Wire Industries.

Decisions as to what witnesses would and would not

be called from BHP were not made upon the basis of

an expectation that the Trade Practices Commission

would turn up a year later in another court and

contend for an approach to the case which accorded

with its own view of the relevant application of

section 46.

~, Now, we submit, Your Honours, in paragraph 12 -

although this is, for reasons that I have given, not

essential to our argument - that Mr Justice Pincus

was right to treat the concept of taking advantage

of power as not being neutral. We point out,

Your Honours, as Mr Justice Pincus mentioned, that

the purposive element of section 46 is satisfied

by finding a purpose. All it needs to be is a

BlT6/5/VH	30/6/88
Wire(2)	108

aubstantial purpose. The purposive element of

section 46 does not require the finding of a

dominant purpose or the finding of a sole purpose.

Once you accept that the purposive element of

section 46 is satisfied by finding a purpose, then

there is nowhere in 46 to take account of any other

purposes or aspects of the conduct in question,

unless it is in the words, "take advantage of power."

We say otherwise it would be unlawful for a

monopolist not to grant a licence of his patents.

A monopolist who refuses to grant a licence of his

patents will almost always have as a substantial
purposes one of the purposes it referred to in

section 46 (1).

So we support the reasoning of Mr Justice Pincus

and I will not attempt to elaborate it. The reasoning

is very full and His Honour has referred to the

various authorities on the subject and we submit

that it is correct. In paragraph 14 where we make

the additional submission that a decision by
BHP to use all the Y-bar it makes for the purpose
of its own requirements of feedstock for fence
posts and not manufacture additional Y-bar for other

would-be fence post manufacturers is not taking

advantage of power in a market. We say this

proposition does not depend upon finding a pejorative

element in the expression, "taking advantage."

BHP's decision to consume all the Y-bar it

produces might create or sustain dominance in the

market for fence posts, but it is most certainly not

an exercise of power in the market for fence posts.

It must be an exercise of power in some anterior

market. The only possible anterior market is the

one rejected by MrJustice Pincus, that is the market

for steel products,and market power can only be	a
reference to freedom from constraint.	But BHP's

decision to consume all the Y-bar it produces has not been shown or held to be a consequence of freedom

f.rom constraint. There is no finding of fact that if

be forced to supply Y-bar to others including	BHP were not possessed of substantial strength in the market for steel and and steel products, it would
Queensland Wire Industries. That, Your Honours, may
be the reason why the court, in the Federal Court,
thought that the case ended when the concluded by
finding that there was no market for Y-bar. Although they do not say so, it may be that the
reason why Their Honours thought that, having found
~,	that there was no market for Y-bar, the case was all over, was that they were accepting, at least implicitly, the proposition that we put: that if the relevant market is the market for steel or steel products there
is no finding of fact by the trial judge which
supports the proposition that the refusal to supply
Y-bar is an exercise, even in the neutral sense, of power in the market for steel and steel products

BlT6/6/VH	30/6/88
Wire(2)	109

because there is no finding of fact that we are doing

something that we could not do but for our market

power. Or, to put it another way, that we would be

forced to supply Y-bar if it were not for the

strength in the market for steel products. We

submit the appeal should be dismissed for those

reasons.

MASON CJ:	Thank you, Mr Gleeson.	Yes, Mr Drummond.
MR DRUMMOND:	My learned friend has addressed at length on the issue of market definition.	What is really involved

is an attempt to reopen a matter, or indeed to open

up a matter, which was just not an issue at the

trial. Could I take Your Honours to page 619 where

the limited relevance of any debate over market is

referred to by His Honour under the heading,

"Market and Power Power." His Honour said:

The definition of market did not loom very

large in this case, largely, I think, because

it must have seemed improbably that the

relevant market could be so defined as to

lead to a conclusion that BHP's position was

not dominant in it.

And he recognized that there was no concensus so

findings had to be made.	But that was the way
BHP conducted the case at first instance.	As
His Honour mentioned at page 612:

The BHP attack -

at the bottom of the page -

was concentrated on the second -

element, namely -

taking advantage.

That was the real matter in issue in the case. So

the situation really comes back very much to the
proposition I think Your Honour Mr Justice Deane

put to my learned friend: if the findings were that BHP

is dominant in the steel products market, and it

refuses to supply a product for an anti-competitive

purpose, it can only do it because it is free from

competition, that must be a section 46 case. In our

submission, that is really the situation one has here.

~, Our learned friend's focusing on the findings

by Mr Justice Pincus in relation to market and the

suggestions that there is confusion in them, in our

submission, really amount to an attempt to open up

this whole question of proper market definition

which has not been the subject of any challenge in

the Full Court. Indeed, there was an express

disavowal of any non-acceptance of findings by

BlT6/7/VH	110	30/6/88
Wire(2)

the trial judge when special leave was sought by

senior counsel for BHP on that occasion, and there

has been no attempt to give any indication of

intention to contest findings of fact in relation

to market, or the like, until we arrive in this

particular Court. To suggest that there is confusion

in what Mr Justice Pincus did belies the clear wording

of his judgment. At page 644, in the passage my

learned friend referred to, he certainly found that

the purpose was:

Prevention of entry into a market.

And, as my learned friend rightly points out, that is unlikely to be the markets, and we submit that it

is indeed the two markets, the wider markets, that

His Honour has already found that BHP was dominant in and in one of which the appellant was competing -

the fencing market. When His Honour said, at page 647,

that that third market was the star picket market,

that is exactly what His Honour meant. There is no

reason for any doubt on that point. His Honour

repeatedly referred in a number of places to his

having found that there were not one market, but

relevant markets, plural, in which BHP was dominant.

For example, at the bottom of page 646 in his summary.

Everything is consistent with the argument that

we have advanced, that His Honour plainly found there

were two markets in respect of which BHP had

dominant power, the steel market and the fencing

market, although he was not terribly enamoured of the

notion that there was a steel market, because, as at

646 and other passages in his judgment, he records

express findings that BHP was dominant not in one

market but in relevant markets. That was not a matter

that was the subject of any substantial contention at

the trial, as His Honour records in his judgment,

and it would be wrong to allow it to become here a

critical issue.

Our learned friends submit that something turns on -

or that the fact that we want to take a manufacturing

profit from turning Y-bar into posts exculpates BHP

from any conduct involving the taking of advantage

of any dominant power it may have. In our submission,

the answer to that proposition is that if BHP has,

as one purpose, a desire to prevent us taking

manufacturing profits and reducing its manufacturing

profits, that does not assist BHP because section 4F(b)

of the Act to which His Honour adverted makes it clear

,	that as long as a corporation with dominant power has,
as one of its substantial purposes, an anti-competitive purpose of the kind proscribed, it does not matter
what other purposes it may have - and there is an
express finding in this case that there was the
express proscribed purpose in existence as a purpose
motivating BHP.

BlT6/8/VH	30/6/88
Wire(2)	111

It is also submitted that something turns

on the fact that we make no offer to compensate BHP

for the loss of part of its business of adding value

to Y-bar and making it into fence posts which would

result from our success in this case. But the case

that we make, and have made, is that BHP is in

effect earning monopoly profits by keeping the Y-bar

to itself. There are findings that we have been

disadvantaged in the share of the fencing market that
we have been able to obtain because of that refusal.

That is exactly the sort of situation that section 46,

in our submission, envisages. If it does bite it

will almost invariably bite on the dominant corporation

by depriving it and reducing its monopoly profits.

MASON CJ:  Mr Drurrrrnond, it may be a convenient time to adjourn

now. How long will the balance of your reply take?

MR DRUMMOND:  Fifteen minutes, I think, Your Honour.

MASON CJ: Very well, we will resume at 2.15.

AT 12.38 PM LUNCHEON ADJOURNMENT

<i

BlT6/9/VH	112	30/6/88
Wire(2)
UPON RESUMING AT 2.20 PM:

MASON CJ: Yes, Mr Drununond?

MR DRUMMOND:  If the Court pleases, our learned friend

instanced the holder of a patent who refuses to grant a licence to a potential competitor as an

indication for adopting the approach to section 46

that they contend for. There is a fallacy _in our

learned friend's proposition and the fallacy 1s

that it assumes that holding a patent for a single

invention will confer on the holder sufficient

market power to satisfy the threshold test in

section 46. Take the drug example put forward by

our learned friend: the probabilities are that there

are a large number of hypertensive drugs on the

market, so that a patent for a new one would be

highly unlikely to result in that new drug becoming

all by itself a discrete market. There are not as

many markets as there are patents in the patent

office.

Our learned friend also refers to our contention

as leaving open the possibility that someone could

come in at the eleventh hour, for example, could come

in and say, "I've got a tar bath. I want the posts

and I'm just going to paint them"; and, if our

interpretation is right, BHP would be obliged to

supply those posts. Such a proposition would need

to involve a close examination of the facts and,

in our submission, it may be that quite a minor

disruption to BHP's production activities in

carrying posts through from Y-bar to painted post
would provide a, sufficient justification to prevent
any finding of a taking of advantage of market power

by BHP refusing to supply the fabricated posts to

such a potential competitor.

· My learned friend also referred to the American

Court of Appeal decision in OLYMPIA to the effect

that at least in America a firm with lawful monopoly

power has no general duty to help its competitors,

whether by holding a price umbrella over their heads

or by otherwise pulling its competitive punches.

There is a difference, according to the passage read

by our learned friends, between positive and negative

duties in the antitrust laws, like other legal other

doctrine sounding in tort, have generally been

upderstood to impose only the latter. That is

ihconsistent with section 46 in a respect identified

by Mr Justice Pincus at pae;e 611 where he referred

to section 46(6) which exculpates from the reach

of section 46 conduct, the subject of an authorization,

which conduct can involve the refusal to supply goods.

BIT7/1/JM	113	30/6/88
Wire(2)

So, our section is not confined plainly in its

operation to striking down positive acts

only.

If I could take the Court just to one other

passage in the OLYMPIA case, 797 F 2d 370,

at page 379. In our submission, this

case is merely an example of one line of antitrust

doctrine current in the United States. There is
another opposing line and it is for that sort of
reason that we take the approach here that the

American authorites are of very limited relevance

indeed. At 379, towards the bottom of the right-hand

column, this passage appears:

Most businessmen don't like their

competitors, or for that matter competition.

They want to make as much money as possible

and getting a monopoly is one way of making

a lot of money. That is fine, however, so

long as they do not use methods calculated

to make consumers worse off in the long run.

The idea being that the antitrust legislation in

the US is directed to fostering consumer benefits

or economic efficiency.

A different line of authority revealed by a decision

subsequent to OLYMPIA, a decision of FISHMAN V WIRTZ,

( 1 9 8 6 ) 51 ATTR 838, is also current in the United

States. If I could take the Court to page 844, bottom

right-hand column, the majority, in the last three

lines say - after dealing - I should go back to the

bottom of the left-hand column. They set out the

various arguments dealing with what is the policy of
the antitrust legislation and at the bottom of that
right-hand column on page 844, they say:

The antitrust laws are concerned with the competitive process, and their application

-does not depend in each particular case upon

the ultimate demonstrable consumer effect. A

healthy and unimpaired competitive process is

presumed to be in the consumer interest.

In direct conflict with what Mr Justice Posner says in the OLYMPIA EQUIPMENT LEASING COMPANY case.

It is our submission that given the provisions of section 46(1) the view expressed by the majority

in FISHMAN V WIRTZ more accords than the Posner view

~ith the policy of our legislation which is not designed

so much to fostering directly ideas of economic

efficiency or consumer welfare, rather is it directed

to protecting competition, or rather, protecting

competitors or potential competitors when one has

a look at the purposes that are proscribed as the

kind of purposes that section 46 will catch.

BIT7/2/JM	114	30/6/88
Wire(2)

The final .matter that I will deal with arises

out of the submissions by my learned friend that

paragraph 10 of the Trade Practices Connnission

submission makes assumptions that there are no

findings of fact, no facts found, no evidence, indeed,

to support the proposition advanced in paragraph 10

which we have already indicated we adop~ that BHP. can

refuse Y-bar because it is not constrained by anyone

else and it knows that no other company will supply

it. There are a number of findings and, indeed,

passages in the evidence coming from BHP which support

that proposition advanced by the Trade Practices

Connnission. Firstly, at page 624 in Mr Justice Pincus'

judgment, in the last paragraph on the page,he says -

this is in the section dealing with advantage of being

a sole supplier.	At the bottom of page 624, His Honour
says:

In the end, it is not really very clear by what means B.H.P. has managed to preserve its

monopoly for such a long period of time.

And then, over the paee, in the third line:

Whatever be the reason, the evidence suggests

that B.H.P. has successfully discouraged

competition in fence post supply

One of the reasons why things may not have been very

clear appears from page 609, about line 6, where

His Honour refers to what he calls "a matter of

special importance", the absence from the witness

box of people on BHP's pay~oll who were involved

in the important decisions that gave rise to this

litigation, who were available but were not called

as a witness.

Secondly, there is a finding by Mr Justice Pincus

sunnnarized at page 661 in the Full Court judgment,

in the second last paragraph:

At all material times BHP has been the only manufacturer of Y-bar in Australia.

Y-bar has not been imported into Australia in

any significant quantities.

Next, to go back to Mr Justice Pincus' judgment at

page 616, there is a finding, just above the middle

of the page, in the last sentence of the second

paragraph:

'	There are significant barriers to the entry of a new domestic rod and bar manufacturer, including the very high cost of setting up
a rod and bar mill.

Then at page 626, about the sixth or seventh line,

after referring to some evidence from Mr Buttfield,

115

BIT?/3/JM	30/6/88
Wire(2)

His Honour concludes by saying:

B.H.P. 's conduct is at least consistent with

its having considerable strength in the rural

fencing market; few vendors would feel free to

tell purchasers how much of a particular

product the latter should buy.

And at 628, in the third line from the top, in the

section dealing with import competition, His Honour

says:

The explanation for absence of competition from

imports before the recent currency realignments

must lie, at least in large part, in the

respondents' market strength.

And then, in the third paragraph, His Honour says:

Although the evidence to which I shall

refer and that just mentioned shows that the

possibility of import competition is a

constraint as far as G.H.P. is concerned, the

hard fact is that there has never been any

substantial importation of star pickets.

B.H.P. has always had the market very largely

to itself.

And, finally, there was the evidence coming from

BHP's own witness, Samson, at page 344, to which

I have referred, to the effect that they do supply

us with wire rod and bulk galvanized wire which we

process into fencing and market L~ competition

with them because those products are available at

competitive prices from overseas.	They do not supply
us with Y-bar.	No such product is available at a

competitive price from overseas. If the Court pleases,

those are our submissions.

MASON CJ: Yes, thank you, Mr Drummond.

MR SHAVIN:  Would the Court permit Goldberg's team to

respond to just one matter that has been raised
by my learned friend,Mr Gleeson,on the Trade Practices

Commission's submission?

MASON CJ: Yes. Well, the Court has it in mind not to give

its actual decision on this application for leave

to intervene, but we will hear what you say on
this point and we will offer Mr Gleeson the opportunity

of responding to it.	What is it you want to put to
t11e Court?

MR SHAVIN:  It is only one point, if Your Honour pleases.

My learned friend, when referring to paragraph 10

of the Trade Practices Commission's submission, commented

that there was no finding of fact that BHP had refused to supply Y-bar because there were no others available

BIT7/4/JM	30/6/88
Wire(2)	116

to supply it and my learned frien~ Mr Drummon~ has
referred the Court to a number of passages in

the judgments both of His Honour Mr Justice Pincus

and in the judgment of the Full Court which support

paragraph 10.

There was only one further matter which we

would seek to draw to the Court's attention and

that is the contents of annexure J.

MASON CJ: Well, you can do so but I should say it is rather

unusual for an intervener to be taking such a close

interest in the evidence of the case, but none the

less, if you would give us the reference to the

passage.

MR SHAVIN:  We seek not so much to comment upon the evidence

as the proposition that underlies it, if Your Honour

pleases. The proposition which the Trade Practices

Commission would seek that the Court consider is

that it is not necessary to have direct evidence

but it is sufficient if there is strong circumstantial

evidence from which inferences can be drawn of the

character described in section 46(7) with respect

to purpose and we would simply draw the Court's
attention to the document at page 487 to page 490

and in particular to (c) on page 490 and the first

sentence of (c) on page 489.

It is our submission that that lays a factual basis from which inferences can be drawn in the

context of the other matters to which our learned
friends have referred with respect to the structure

of the market and the nature of barriers to entry

to it and the existence, or non-existence, of other

suppliers. If the Court pleases.

MASON CJ:  Thank you. Mr Gleeson, do you want to say anything

about that?

MR GLEESON:  Your Honour, I have said everything that I

want to say about that document. In relation to the

application to intervene, I would only submit that

the fact that we find ourselves engaged in a conflict

of the interpretation of a document in respect of

which the trial judge has not made any findings

on that point -

MASON CJ: Strengthens your opposition.

MR GLEESON:  - - - illustrates the point of our opposition, yes.

~

MASON CJ:  The Court will consider its decision in this case.

AT 2.36 PM THE MATTER WAS ADJOURNED: SINE DIE

117

BIT7/5/JM	30/6/88
Wire(2)