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

[1988] HCATrans 136

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

DAWSON J

Wire(2)

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 29 JUNE 1988, AT 12.19 AM

Copyright in the High Court of Australia

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MR D.P. DRUMMOND, QC: If the Court pleases, I appear with

my learned friend, MR D.R. GORE, ·QC, for the

appellant. (instructed by Hawthorn Cuppaidge &

Badgery)

MR A.M. GLEESON, QC: May it please the Court, I appear

MR P.A. KEANE, for the respondents. (instructed	with my learned friends, MR J. BYRNE, gc and
by Chambers McNab Tully & Wilson)

MR A.H. GOLDBERG, QC:  May it please the Court, I appear

with my learned friend, MR D. SHAVIN, to seek

leave, Your Honours, to intervene on behalf of

the Trade Practices Commission. (instructed

by the Australian Government Solicitor)

I am in a position, if Your Honours wish -

we have prepared a written submission in support

of our application which I can hand to the Court

now and we do not wish to add anything further

to that unless the Court wishes to raise any

matter with us in relation to our application.

MASON CJ: No.	It would be convenient for the Court to receive the written application.
MR GOLDBERG:	We would hand up six copies, Your Honour.
MASON CJ:	Can I inquire whether your application for leave

to intervene is opposed?

MR DRUMMOND:	We do not oppose it, if the Court pleases.
MR GLEESON:	We do oppose it, Your Honours.
MASON CJ:	I take it therefore it tends to support your

opponent, Mr Gleeson?

MR GLEESON:  I am not sure about that, Your Honours, but

we hardly think they would have come along and

supported us.

MR GOLDBERG:  We are acting in the public interest, of

course, Your Honours.

MR GLEESON: It was not from that that I drew the inference

that I just mentioned, Your Honours.

MASON CJ:	Mr Goldberg, I have not studied your written
submission in detail, I have merely glanced through
it and I take it that other members of the Court
have done the same. Do I take it that the document
really comprehends all that you would wish to
put to the Court if you were granted leave to
intervene?

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MR GOLDBERG:	Yes, Your Honour, unless there are matters to which the Court would wish to draw to our
attention.  Our point is a short one, Your Honour.
The point we make in relation to what I will
call loosely, "market definition by reference to supply-side substitution", is a matter which
is of significance to the Commission in the
interpretation of section 46 in Part IV generally.
It does not appear to have been put the way we
have put it by the parties below although I cannot
be sure.  I only read from the transcript and
the judgments and it is simply not a matter that
occupied the Full Court.  We are concerned,
Your Honours, that if this matter is not brought to
the attention of the Court so that the other
parties as well can have an opportunity to address
it, the Commission would lose the opportunity,
which it regards as important, to put this matter
of principle before the Court in this important
case.

MASON CJ:  Yes, I follow that. Thank you, Mr Goldberg.

MR GOLDBERG: If the Court pleases.

MASON CJ:  We might hear what you have to say at this stage,

Mr Gleeson?

MR GLEESON:  Yes. I direct Your Honour's attention to

the key part of the reasoning in this document

in paragraph 10 at page 4. I have only seen

it a couple of minutes ago myself but as I appreciate
it my learned friend, Mr Goldberg, is right to

say that this puts a matter and, if we may say

so, a matter of fact on a different basis from

the basis on which the case has ever been put

by the applicant or the appellant to either of

the courts below.

There is no evidence and there is no finding

of fact by either the judge at first instance

or in the Federal Court to support the proposition

of fact which is put in the Trade Practices Commission's
submission and which is central to its argument.

It seems that the Trade Practices Commission would agree with the contention of BHP that it

is quite inappropriate to seek to analyse the

present problem by asking whether there is a

market for Y-bar. It seems that the Trade Practices

Commission would agree with the submissions put

to the learned trial judge, but only partly accepted

by him, that the relevant markets for consideration

in the analysis of this problem are the markets

for steel and steel products as the primary market,

and the market for rural fencing materials as

the secondary market.

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But what the Trade Practices Commission

desires to argue as a proposition of fact is

a point that is not supported by the evidence;

it will certainly require a detailed examination

of the evidence, and that is the proposition

put in paragraph 10 of this submission that,

in some way, BHP's decision, to consume itself

all the Y-bar which it produces, is an exercise

of its power in the market for steel and steel

products.

One way - I do not say the only way - in

which the case for Queensland Wire Industries

was put before Mr Justice Pincus, and as I understand
it although I was not there, was put in the Full
Court of the Federal Court, was that the primary
market in the present case ought to be regarded
as a market for Y-bar and the secondary market

ought to be regarded as a market for rural fencing

materials and that what should be said is that

BHP is a monopolist in the market for Y-bar;

that it exercises its power in relation to that

market by refusing to supply Y-bar to the applicant

and that that has the relevant purpose and effect

in relation to the secondary market or the market

for rural fencing product.

That argument was rejected by the Full

Court of the Federal Court. As a matter of fact

there was a great deal of evidence before

Mr Justice Pincus from two economists,

Dr Williams and Dr Norman, one of whom asserted

and the other of whom denied that there could

be such a thing as the market for Y-bar. The

way Mr Justice Pincus dealt with the issue of

supply-side substitutability appears in volume 4

of the appeal book where His Honour rejected

the proposition that BHP put on this issue which

seems to be the same as the proposition that the Trade Practices Commission now wishes to put.

His Honour dealt with this matter where

he refers to Dr Norman's evidence on page 620.
He had earlier referred, on page 613, to the

markets that were all alleged as the relevant
markets by the applicant and there set out in

the middle of page 613. He then says, on the

bottom of page 613:

In opening BHP's case, counsel said that

its principal contention would be that

the markets to be considered were, firstly,
that for the supply of steel and steel

products in Australia, and, secondly, for

the supply of rural fencing materials in

Australia.

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That proposition was supported by the evidence of

an economist that we called, Dr Norman, and his

evidence is referred to at page 620.

MASON CJ: Mr Gleeson, if I can interrupt you, the Court

has to adjourn at this time.	We will resume
at 2.15.	I was going to ask you, before we adjourn,

what is the significance of section 163A(3)?

MR GLEESON:  It does not apply to the present case, Your Honour,

because there was no claim for a declaration.

If you look at the pleadings or the application

in the present case, it was simply an application

for damages and an injunction. It deals with

a rather different situation where a person,

perhaps a member of the public, comes along to

the Court and seeks a declaration as to the meaning

and effect of a provision of the TRADE PRACTICES ACT.

There was no application for declaratory relief

in the present case; there was simply an application
for damages and an injunction and, of course,

it goes without saying, there was no attempt

by the Trade Practices Commission to intervene

in either of the courts below.

MASON CJ:  Thank you. We will adjourn at this stage and

we will resume at 2.15.

AT 12.31 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.30 PM:

MASON CJ: Yes, Mr Gleeson. I was going to suggest to

you that it may be convenient to stand this application

for leave to intervene down until the conclusion

of the appellant's argument. At that stage the

Court will, I think, more appreciate the issues

that are involved and you can renew your opposition

at that time.

MR GLEESON: If Your Honour pleases.

MASON CJ: Yes, Mr Drummond.

MR DRUMMOND:  Thank you, Your Honour. If Your Honour pleases,

I hand up our submissions.

MASON CJ:  Yes.

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Wire(2)

MR DRUMMOND: If the Court pleases, the case involves

a consideration of section 46 of the Act in the
form in which it currently stands since the 1986

amendments and in the form in which it stood

following the 1977 amendments given that our

damages claim straddles the intervening period.

We will also hand up a collection of the

legislation, that is the section in the form

contains a headnote different from

in which it stood initially in 1974 and as amended. book which

that in the 1986 amending Act. So we have inserted

in the print of the current provision from Miller's

book the headnote, "Misuse of Power" which appears

in the 1986 amending legislation.	We hand those
documents up.

The only difference of any significance

for the purposes of this case, between section 46(1)

in which it now stands and the form in which it stood

prior to the 1986 amendments is that a lower or

lesser --degree of market power will suffice to

attract section 46 to a corporation under the

current provision than was the case under the
provision as amended in 1977. Nothing, in our
submission, turns on that distinction in the

power" and we ask the Court to take that as a

legislation so far as this case is concerned.

reference to the degree of market power that
is required by ·each of the provisions in question:

the 1977 provision and the current 1986 provision.

That is what we mean by "dominant power".

If I could go to our outline. The trial

judge held that the appellant had proved every
element of its claim save that it had not proved
that BHP took advantage within the meaning of

that term, as His Honour read it, of its power

dominant power in. in two markets which His Honour found BHP had The Full Court, however, decided the case

on a quite different ground: namely, that it was necessary for the appellant to prove that

there was a market for Y-bar and there was no

such market. The trial judge~ indeed, had said

that the definition of 'market did not loom very

large in the case. He said that at page 619

of the record for the reason that it must have

seemed difficult for anyone to so describe any

market in which BHP could have anything other

than dominant power. At any event, the Full Court

decided that on the "no Y-bar" basis.

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Wire(2)

In our submission that was an error on the

Full Court's part to think that it was necessary

for the appellant to succeed to prove the existence

of a Y-bar market. Our alternative submission

is that if the Full Court was nevertheless right

in thinking that, it was wrong in not finding

the existence of such a market.

The critical passage in the judgment of

the Full Court appears at page 674. At the top
of the page Their Honours say:

As we have said, the evidence showed

there was a market for the star picket

fencing and that BHP acted with the purpose
of preventing QWI competing with it in
that market. BHP did so by denying to

QWI the "feed" for manufacture of star

picket fencing, namely Y-bar.

Then they continue:

The question for the purposes of section 46

then becomes whether, in so denying supply,

BHP was taking advantage of power in relation to a market in the Y-bar.

Now, Their Honours appear to have seen that as the

critical issue because of the proposition they advanced

on the previous page, a little bit above half-way

down, where they set up the example of:

corporation X may take advantage of a

substantial degree of power in market A

(in which corporation Y does not compete)

for the purpose of preventing corporation

Y competing with it in market B.

That seems to be the origin of the proposition

at the top of page 15 and it is that proposition

that the Full Court were at pains to answer and

conclude with the finding there was no Y-bar

market therefore the appellant should fail.

But that approach is erroneous because the example

that the Full Court gave at page 673 and which they

followed through and held there was no Y-bar

market in relation to it - page 674, was really

irrelevant so long as the trial judge's findings

as to the existence of two markets in which he

held BHP had dominant power stood unreversed.

His Honour accepted the suggestion made by BHP

at the end of the appellant's case at trial that

the relevant markets for the purposes of deciding
the case were not the various markets that the

appellant had pleaded, but two different markets;

BIT6/7/SR	7	29/6/88
Wire(2)

firstly, a market for the supply of steel and

steel products in Australia and secondly, a market

for the supply of rural fencing materials in

Australia. That appears at page 620 in His Honour

Mr Justice Pincus' judgment. It is really necessary

to go back to bottom of page 613, the very last

few words on that page read as follows:

In opening B.H.P. 's case, counsel said

that its principal contention would be
that the markets to be considered were,

firstly, that for the supply of steel and

steel products ..... and, secondly, for the

supply of rural fencing.

Then at page 619, His Honour took up the topic

of identifying relevant markets. At page 620,

he considered those two markets advanced by BHP

and about two-thirds of the way down, although

he clearly preferred, because of his view of

the way the economist's theory of substituitability
of competing goods would produce unlikely results,

His Honour clearly preferred the relevant market to be the market for rural fencing in Australia.

He nevertheless found that there were the two

markets that BHP contended were the relevant

markets. As appears from that passage, commencing

about 10 lines from the bottom:

It appears to me that the second view

propounded on behalf of B.H.P. -

that is the fencing market

better accords with commercial ideas .....

But on either view the applicant must

succeed on the first issue.

My learned friend asked me to read the preceding

sentence, I will do that.	At the middle of the
page, His Honour said:
It is only if one adopts the wider
notion of substitutability just rejected
that it is possible to accept B.H.P. 's
first contention as to the market - that
it is that for steel and steel products
in Australia. It appears to me that the
second view propounded on behalf of B.H.P., that the market is one for the supply of
rural fencing materials in this country,
better accords with commercial ideas of
the meaning of the word "market".  But
on either view the applicant must succeed on the first issue raised by section 46; B.H.P. was, as I find, at all times material
to this suit, in a position substantially

BlT6/8/SR	8	29/6/88
Wire(2)

to control each of those markets and

had a substantial degree of power in each

of those markets.

ND

It is our submission that

so long as that finding that there were those

two markets in which BHP had dominant power stood
unreversed, it was simply irrelevant for the

Full Court to embark upon the task of examining

the existence or no of a Y-bar market. The Full

Court should have faced the prospect of dealing

with that particular finding by His Honour before

ever it could become necessary for any attention
to be given to a Y-bar market.

Section 46(1) simply requires proof that - I am reading from the current print:

A corporation that has a substantial degree

of power in a market shall not take advantage

of that power -

that is, the power in that market -

for -

a number of purposes, including, in subsection (l)(b) -

preventing the entry of a person into that

or any other market;

and as is.apparent from the judgment, His Honour

found that it was that particular provision that

was infringed in so far as the respondent BHP
had exercised the dominant power it had in the

two markets I have mentioned for the purpose of preventing the appellant entering a third market that he called the star picket market.

We, with respect, adopt also, in this regard,

what is said in paragraph 8 of the Trade Practices

Commission submission in support of their application

for intervention about section 46 not requiring

that the trade in the product, the subject of
the impugned conduct, to itself constitute a

market. That, in our submission, is a correct

reading of section 46(1).

The only findings of market dominance that

His Honour Mr Justice Pincus made were in relation

to those two wide supply markets, if I can so term them. As we mentioned at paragraph 5 of our outline the only other market in respect

of which Mr Justice Pincus made any findings

was what he called the star picket market.

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Wire(2)

It was a relevant market because that was the

one in relation to which he said BHP's conduct

had been aimed at excluding us from entry. We

should say that, in relation this third market

called by Mr Justice Pincus at page 647 of the

record, the "start picket market" in the third

line, the Full Court used a slightly different

terminology. They referred to the market for

"star picket rural fencing". That appears at

pages 671 and also at page 673. But as is apparent

from that passage at 671, a little over half-

way down, Their Honours were accepting

Mr Justice Pincus' finding in relation to the

star picket market.

His Honour held that BHP refused the supply of Y-bar to QWI for the purpose (at least)

of preventing QWI from competing with it

in the market for star picket rural fencing.

Nothing, in our submission, turns on this slight

difference in terminology between the finding

made by Mr Justice Pincus and the way the Full

Court referred to his finding. Now, we have

already submitted that the Full Court did not
advert to the findings made by His Honour as
to the existence of these two wider supply markets,
the market for steel products and the market
for fencing materials. In our submission, that
issue remains to be determined since those findings

of fact cannot be suggested to have been reversed

by the Full Court and so long as those standings

find, irrespective of ·whether or not there is

a market for Y-bar, the appellant must succeed

subject only to proving that there was a taking

of advantage of power in either of those wider

markets by BHP in refusing to supply Y-bar to

the appellant.

Now, in paragraph 7 of our outline we refer

to one other element, as it were, of section 46(1),

that an applicant must prove in order

to succeed. In paragraph 7 we say that section 46(1)

requires that the power of which the defendant

corporation, that is, the one with dominant power,

takes advantage, must be power in the same market

in which the corporation possesses that dominant

power. That follows from the reference in the

opening two lines of section 46(1):

A corporation that has a substantial degree

of power in a market ·shall not take advantage

of -

and we emphasize the word "that power". So there

must be a taking of advantage of power in the

market in which it has the dominant power, that

BlT6/10/MB	10	29/6/88
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is, there must be a taking of advantage of a

dominant power. Now, it is true to say that

Mr Justice Pincus did not, in express words,

find that the refusal to supply the appellant

with Y-bar amounted to an exercise by BHP of

its dominant power in either of these two wider

markets, the market for steel products or the

market for rural fencing materials.

(Continued on page 12)

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MR DRUMMOND (continuing):  He made a number of findings which,

in our submission, are tantamount to an express

finding to that effect. Can we take the Court,

firstly, to page 644 of the record, at the very
bottom of the page. After finding the existence

of the proscribed purpose His Honour continued:

The applicant has in the end satisfied me of

the presence of all elements of its claim
except taking advantage, in the sense in which

I have construed that concept.

Secondly, His Honour found - and this appears at

page 608 where he really made a sqort summary at

the outset of his judgment of the essential facts

as he viewed them. His Honour found, at page 608
about 10 lines or so from the bottom:

The applicant competes with BHP principally

in Queensland and northern New South Wales -

and we emphasize what follows -

in the rural fencing market.

The second of those wider markets he,subsequently,

expressly found.

That competition -

that is, the appellant's competition in the rural

fencing market in Queensland and New South Wales -

is, however, made significantly more

difficult by the applicant's inability to gain

access to the "Y-bar" -

that, in our submission, is tantamount to an express

finding that the refusal of Y-bar was an exercise

of the dominant power that he found BHP had in each

of those two wider markets.

His Honour, also, at page 621, made a similar

finding although in relation to star pickets rather

than Y-bar. At page 621, His Honour accepted certain

submissions advanced on behalf of the present appellant.

About a third of the way down he referred to my

submission that:

there are great advantages accruing to BHP as

a participant in the rural fencing market -

the second of those wide markets -

by virtue of its being the sole domestic

supplier of star pickets.

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Wire(2)

Those advantages, said Mr Drummond, extend well beyond being relatively free from price

competition in selling star pickets.	I accept
these submissions.

And then His Honour went on to indicate some of the
ways in which those advantages extended beyond mere
price competition in the sale of star pickets as
including, as he put it in the next few lines:

BHP's unique ability to supply to distributors the full range of steel fencing products.

He says that against the background of the evidence

that BHP was the sole manufacturer and supplier of

star pickets. That too, in our submission, supports

our proposition that His Honour made ample findings

to demonstrate that he was satisfied that the refusal

of Y-bar amounted to an exercise of the dominant

power that BHP had in either the steel products market

in Australia or the rural fencing materials market

in Australia.

We would also submit, in support of this

proposition, that because BHP is the sole domestic source of Y-bar feed that is required to make star
pickets, and because star pickets are the essential

component in the posts which are an important

componen 4 in turn, in rural fencing materials, the

fact that it is the sole source of Y-bar feed is

one of the factors that contributes to its possessing
dominant power in the rural fencing materials market in

Australia.

There is a passage at page 623 where His Honour

refers to a statement by a BHP officer to just that

effect. His Honour says, about the fourth line from

the top:

Again, on 26 April 1983 the national sales manager,

Mr Parker, wrote to another executive with respect

to a proposal by Smorgon to produce Y-bar.

He explained AWI's fear:

"AWI are very concerned to the extent that Y-Bar

as a product, although of low margin, provides

a basic connection for substantial wire sales."

So that, in our submission, the refusal by BHP to

supply this feed to a competitor of BHPs competing

in the rural fencing market, as the appellant was,

who wants to manufacture star picket posts to enhance

its ability to compete with BHP in the fencing materials
market is, as His Honour clearly, in our submission,
recognized and accepted, an exercise by BHP of its

power in the rural fencing materials market itself.

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Wire(2)

The Trade Practices Commission make a submission

in paragraph 7 to the effect that the Full Court's
conclusion as to the necessity for proof by the
appellant of a Y-bar market and the absence of there
being any market for Y-bar is that BHP's conduct,
in refusing to supply, did not occur in any market.

We would not really agree quite with the way that

proposition is put and would prefer to put the

argument on that aspect of the case in the way we

have; that there were findings by Mr Justice Pincus

that amount to a conclusion that the refusal of

Y-bar was conduct engaged in by BHP in the wider

markets - in one or both of the wider markets that we have referred to - that the Full Court did not simply deal with the conclusions of the trial judge

in that particular respect rather than, as the Trade

Practices Commission puts it by - or silently they have reversed those clear conclusions that we submit

Mr Justice Pincus came to. So we prefer to put it

in the way we have and I think that is one of the

few areas that we do not agree with the submissions

advanced by the Trade Practices Commission on.

TOOHEY J:	Mr Drummond, how did the Full Court come to
identify the relevant market as the market in Y-bar
rather than either of the two markets that Justice Pincus had found to exist?
MR DRUMMOND:	Your Honour, what happened was we pleaded in

our pleadings that one of the relevant markets was
the market in Y-bar and, indeed, we led a deal of

evidence to try to convince Mr Justice Pincus that

there was a market in Y-bar.	The two economists
gave evidence on that very issue.	Mr Justice Pincus
did not find that there was a market in Y-bar.	He
made the findings as to the two wider markets, as

were referred t~ in which BHP are a dominant powe~

he found that they refused us Y-bar for the purpose

of excluding us from a third market, different

from the Y-bar market - the star picket market -

and it was on that basis - we were content to accept

those findings, on that basis we went to the Full

Court to challenge his finding against us on the

"take advantage" point and the notice of appeal filed

in the Full Court reveals that that was so. We made

no attempt to seek a finding from the Full Court

if there was a Y-bar market.

But in the course of argument in the Full Court, the existence or no of a Y-bar market was certainly

raised and we did advance argument that the Full

Court could be satisfied if it were relevant that

there was a Y-bar market although, as our notice

of appeal to the Full Cour~ indicates, the only issue

that we really took to the Full Court was the

"take advantage" ruling. We were content to accept

the three markets that Mr Justice Pincus had found.

BlT7/3/ND	14
Wire(2)

So that it is for those reasons that we

submit that the Full Court was in error in thinking

that it was an answer to our claim to hold that it

was necessary for us to prove the existence of a

Y-bar market without at all dealing with the market

findings that the trial judge had made. If we are

wrong on that basic submission, our alternative

submission is that if proof of a Y-bar market was

necessary then the Full Court reached the wrong

conclusion on that issue.

We agree with the succinct propositions put

1n paragraph 19 of the Trade Practices Commission
on this point but we would like to put a few

submissions of our own. As is apparent from

page 674 the Full Court proceeded on the basis that

for there to be a market in Y-bar - and this appears

about the middle of the page - there had to be actual

dealings in Y-bar between at least one buyer and

one arms-length seller. And that appears from a

little above half-way down on page 674.

Their Honours, at that point, said that: "Was

there, in the sense of the authorities to which we

have referred, a trade or traffic between buyers

and sellers or, indeed, between any buyer and arms-

length seller of Y-bar as an article seller of

Y-bar as an article of commerce?" The authorities

they had referred to are TRADE PRACTICES COMMISSION

V ANSETT TRANSPORT INDUSTRIES, on the previous page,

and OUTBOARD MARINE V RECAR INVESTMENTS.

They did advert, after referring to those two

cases, to an economist's definition given by, in

fact, the two economist witnesses who were called,

in an article that was published which reflects the

concept of substitutability of goods at an age

market definition that is found in section 4E of
the Act introduced into the Act by the 1977 amendments.

That section does not purport to be an exhaustive

definition but it says that: For the purposes of this Act, "market" means	a market in Australia and, when used in
relation to any goods or services, includes
a market for those goods or services and other
goods or services that are substitutable for, or otherwise competitive with, the first-
mentioned goods or services.

The section gives recognition to the discussion of

what is involved in the concept of a market in the

Trade Practices Commission decision in RE QUEENSLAND

CO-OPERATIVE MILLING ASSOCIATION LIMITED which was

decided in March 1976 before section 4E was inserted

in the Act.

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It is a statement which appears in the report

of that decision in 25 FLR 169, at page 190, which

is repeatedly referred to in numerous Federal Court

cases where the issue of market definition has

arisen. If we could take the Court to that

page 190 in 25 FLR, what the Commission there

said in the second paragraph:

Before giving our reasons we should explain

our understanding of the market concept, and

of the relationship between "markets" and

"sub-markets". We take the concept of a market

to be basically a very simple idea. A market

is an area of close competition between firms

or, putting it a little differently, the field
of rivalry between them. (If there is no close

competition there is of course a monopolistic market.) Within the bounds of a market there

is substitution - substitution between one

product and another, and between one source

of supply and another, in response to changing

prices. So a market is the field of actual

and potential transactions between buyers and

sellers amongst whom there can be strong

substitution, at least in the long run, if given

a sufficient price incentive.

However, in relation to that particular statement

as to how "market" should be defined for the purposes

of the Act, one of the decisions specifically referred

to by the Full Court, the TRADE PRACTICES COMMISSION

V ANSETT TRANSPORT INDUSTRIES, at page 673 of the

record, has something further to say about it. That

decision is reported in 32 FLR 305, and the passage

referred to by the Full Court at page 673 appears

at pages 311 and 312 of the report of the ANSETT

TRANSPORT INDUSTRIES case. Page 311 sets out the

passage from which I have read an extract from the

QUEENSLAND MILLING ASSOCIATION case and, if I can

move on to page 312, in Mr Justice Northrop's decision

in the second r.aragraP.h he makes the point that the

definition of 'market' in section 4E, focusing on

substitutability that competing goods is a criterion

for "market" definition is not an exhaustive definition,

it:  .

does not limit the concept of a market when
that.word is used in relation to any goods or

services -

There was an earlier decision of the Federal Court,

prior to section 4E being inserted in the Act in

1977 in which statements were made as to what is

involved in a market,which the Full Court appears
to have picked up in suggesting that an actual trade

was necessary in Y-bar before there could be a market

for Y-bar. That decision is TOP PERFORMANCE MOTORS

BlT7/5/ND	16
Wire(2)

PTY LTD V IRA BERK (QUEENSLAND) PTY LTD,

24 FLR 286, and the passage appears in the judgment

of Mr Justice Joske at page 289, a judgment with
which the other members expressed agreement although

they did,on some issues, give additional reasons of

their own. At about line 7, His Honour says:

In my opinion whether there is a market

and what that market consists of and what area

it covers must be a question of fact in any

particular case. In determining this question

of fact it must be borne in mind that market

means trade or traffic, especially as regards

a particular commodity and thats 46 is aimed

at preventing the control of a market for goods

as provided by that section.

That appears to be the notion reflected in the Full

Court's approach which seems to proceed on the basis

there has to be an actual trade - an actual trade

that is in Y-bar before there can be a market for

Y-bar.

Bu 4 in adopting that approach, our submission

1s that the Full Court was in error in so far as,

firstly, it ignored the evidence of the economists.

There was evidence and this is a case in which there hasbeen no challenge. There was no challenge in the

Full Court to any findings by the trial judge except

one particular finding that appears to have no

relevance to the present proceedings and there has

been no challenge anywhere to the findings by the

judge. So it is against that background that we

will be referring to some evidence here, and a little

late½ in the course of our submissions.

But there was evidence that the appellant had been trying to buy Y-bar to make fence posts from

BHP and AWI since 1981; that appears in the evidence

of Mr Dart, the General Manager of the appellant,

at page 108 of the record. It commences in the

second-last answer and runs on over the next couple

of pages with the history of requests, extending from the beginning of 1981 and running through into 1984,

for supply of Y-bar. Mr Justice Pincus found that

QWI was genuine in its desire to obtain Y-bar in order to make posts; that finding appears at

page 631 of the record, about eight or nine lines

from the bottom. He refers to Mr Dart's evidence

that they wanted Y-bar, not posts, but:

No doubt it would in reality be satisfied if

it were sold fence posts cheaply ..... I am

satisfied -

it lS -

BlT7/6/ND	17
Wire(2)

quite genuine in its desire to set up in

business manufacturing fence posts, using

BHP Y-bar as feed, to compete more effectively

with BHP.

And the way the Full Court read that, in our

submission, at page 664, is quite correct. At

page 664, about eight lines from the bottom, the

Full Court referred to that finding and added a

sentence to the effect that:

It has never been the intention of QWI to

become a "distributor" of any Y-bar which it

acquired, by reselling it to third parties.

So there were clear findings that QWI, the appellant,

had been seeking to buy Y-bar from BHP and AWI since

about 1981 for the bona fide purpose of manufacturing
fence posts to enable it to compete better in the
market for rural fencing materials. There was also
evidence from Mr Forster, a senior marketing executive

of BHP, that if BHP were ordered to supply Y-bar

to QWI it was likely there would be other people

wanting access to Y-bar also and there was likely to be a vigorous trade in Y-bar; that appears at

page 380 of the record.

At that page Mr Forster referred to Boral

Cyclone having sought access to Y-bar over a number of years, a request which had always been rejected,
and then he said that if BHP were ordered to supply

Y-bar to the appellant it would supply, in effect,

all corners.

WILSON J: Mr Drummond, is the burden of these submissions

to establish that there was a market in Y-bar?

MR DRUMMOND:  Yes, Your Honour. This is our alternative sul:mission.

WILSON J:  I thought you were saying that it did not matter

whether there was or there was not.

MR DRUMMOND:  Our first submission was it was irrelevant as

to whether or not there was a Y-bar market.

WILSON J:	Yes, that is what I thought.
MR DRUMMOND:	We have now gone to an alternative position to the effect that if it should be necessary, despite
our primary proposition, to show that there was a
market for Y-bar, the Full Court went wrong in holding
there was no market.
WILSON J:	I can appreciate, if you are now taking up that

submission, that there was an eager buyer but you
cannot have a market without a willing seller, can

you, or a person who is prepared to sell?

BlT7/7/ND	18
Wire(2)
MR DRUMMOND:	Your Honour, we would submit that the evidence

from both the economists was to the effect that if

there were a genuine buyer, and a producer of the

product, then the refusal of the producer to supply

did not prevent there being a market in the

economist's sense of the term, for a product.

WILSON J:  Even though the producer was producing the product

for its own purposes and not for sale?

MR DRUMMOND:  That is so, Your Honour. There was quite a deal

of cross-examination and evidence - evidence and

cross-examination of the economist witnesses on that

point and there is, really, a close degree of

agreement between Mr Williams, our economist, and

Dr Norman, the BHP economis 4 on the point. We would

also submit that in an acceptable ordinary meaning

of the term you can have a market even though there

are no actual transactions so long as there is a

product and someone wanting to buy the product.

If I could just take Your Honours to some of

that, particularly, firstly, to the evidence of the

economists?

DEANE J:	Does the product have to exist? I mean, is there a marke 4 in your sense, for the uninvented cure of
cancer?
MR DRUMMOND:	Your Honour, it would be hard to say there is

a market for something that may be just a gleam in

the eye of an inventor but there does not need to

be a product in vendable form, in the ordinary
meaning of the term "market", in our submission,
for there to be a market. It is common to talk about

people investigating whether to import goods they

do not have available for sale at the moment or to

make goods that they do not have available for sale

at the moment. It is common in that context to talk

about whether there is a market for the particular

goods. And, indeed, that particular usage of the term was referred to at page 228 by Mr Williams.	In a passage, a little above half-way down,he says
that there could be a market even though there is
no buying and selling. This was some questioning by His Honour and His Honour then said:

Whereas the businessman would say, "There's

no market. It has gone"?

And Mr Williams said:

I am not sure about that. May I give an

example?

And he refers to the new invention.	And then he
says:

BlT7/8/ND	19	29/6/88
Wire(2)

The product has not been sold, no trade

is occurring, but there is a potential for

trade to occur. So the businessman and the

economist would say that there is a market

for that particular product.

His Honour said:

He just means there is a demand for it. That

is all he means.

But we would nevertheless submit that what was said

there accurately describes not only the way an

economist can regard a market - or do regard
"market" - but also an ordinary understanding of

the term in common speech. There is no need for

an actual trade in a commodity for there to be a

market for that commodity.

We should also take Your Honours to another

passage in Mr Williams' evidence a little earlier

at page 223, a little above half-way down where,

again in response to some questioning by

His Honour - - -

DEANE J:	But one problem that is involved in all this talk
about what economists say is that it may have very
little to do with answering the question where there is a matter of construction of the Act, a reference to a corporation having a substantial
degree of power in a market is to be construed as
meaning "would have a substantial degree of power
in a theoretical market if the market did, in fact,
exist".
MR DRUMMOND:	We accept what Your Honour says, at least in

so far as that was a consideration that concerned

the trial judge and he looked at some of the

conclusions that applying economic theory could lead

one to in saying what amounts to a market and came

section 4E and about which the economists talk, in	these notions of substitutability, referred to in to the conclusion that, really, one had to look at
the way a practical businessman would apply notions of substitutability. So he certainly did not accept that the economists' technical use of the term
"market" was what was meant in the Act. But it is
nevertheless of relevance that the economists on
both sides did agree to a very substantial extent
that a potentiality for trade was enough to constitute a market and there are reasons why, in
our submission, the Act itself could well be seen to look at just such a market. ·when a dominant
corporation in one market identifies that a potential
competitor is likely to enter a potential market, which entry may cause it some detriment, then there

BlT7/9/ND	20
Wire(2)

is no reason why the Act would not strike at the

exercise of power in the markets in which the

corporation is dominant to prevent an actual trade

arising in that potential market.

DEANE J: All I was really suggesting to you is that the economists can be no help at all as to whether "has in" excludes a construction which means not

"has in" but "would have in" or "can prevent".

MR DRUMMOND:  Yes, I think we have to accept that.

DEANE J:  And that is the problem of construction. I am not

suggesting it is an insoluble problem but that is

the problem of construction. It seems to me to

lie in section 46(1) and that is your starting point

must be that BHP has, in the present tense, a

substantial degree of power in an identified market.

(Continued on page 22)

BlT7/1O/ND	21
Wire(2)

MR DRUMMOND:  Yes, Your Honour. We have dealt with certain

markets, those wider markets and, we would submit,

that there can be no issue but that those markets

exist and that BHP has power in those markets.

The more difficult problem in the context Your Honour

has raised the question is whether we can say the

same on the assumption that it is for us to show

that a Y-bar market exists. If we could just give

Your Honours a reference though to what Dr Norman

had to say on this same point. It appears at page 456

over on to page 457 where he was directed to what

Mr Williams had to say about potentiality for

transactions being sufficient to constitute a

market. At 456, a little over half-way down, he

agreed with the proposition that the fact that
there was no actual transaction did not mean there
was no market but he was not prepared to accept

without reservation the further proposition that

there could be a market if there was no actual

transaction. He explained the reason for his qualification that there may be potential for

trade but it may never, in fact, ever be able

to ripen into actual trade for what could be called

reasons peculiar to potential participants.	He
gave an example about a market for transport

brokerage that was contended for on one occasion,

although there were no actual transactions of

such brokerage which could never exist because

further investigation showed that no such market

would be conn:nercially viable. But that is really

a different proposition from that advanced by

Mr Williams that potential for trade can, in general,

amount to a market and Dr Norman did express a

considerable measure of agreement with that general

proposition.

The dictionary meanings of the term "market"

also lend, in our submission, some support for the

proposition that the term in ordinary speech can

mean something other than an area of a actual
trafficking in goods or services.	We will hand up

copies of the relevant pages from, firstly, the

Macquarie Dictionary and then the Shorter Oxford

Dictionary.

MASON CJ:	Thank you.
MR DRUMMOND:	We have highlighted the relevant definitions.

The Macquarie Dictionary gives as a meaning for
"market" ;'demand for a commodity" and the Shorter

Oxford gives as one of its meanings "opportunity of buying or selling". It is also necessary,

in our submission, to keep in mind that Y-bar is

a product in perfectly saleable form. There was

much cross-examination of Mr Williams about whether

there could be a market for moulten glass

BlT8/l/MB	22
Wire(2)

that was going through a bottle makers factory and
the economist indicated that it was possible for

an economist to accept that there could be such
a market for such an odd item. But that is really a long way removed from Y-bar. Y-bar is a product

in perfectly saleable form. It has, in fact, being

sold by BHP in the past to related companies. That

appears at page 632 of the record. BHP did not

refuse to sell Y-bar to the appellant. It, instead,

made an offer to sell Y-bar to the appellant; it made

two offers on different occasions to sell Y-bar
to the appellant but it pitched the prices at such

a level that it knew that if the appellant bought

the Y-bar at those prices it would not be able to
manufacture posts which you could sell at a

competitive price with BHP.

BHP only admitted that that was the acknowledged

level of the prices at which it indicated it was

prepared to offer to sell Y-bar to the appellant

when it put in its defence. But back in 1984 when

the appellant was seeking access to Y-bar it did

receive what were, in form, offers to sell this

particular product. So, we submit, that is another

indication that Y-bar is not some special conunodity

that really cannot sensibly be looked at as something

other than part of a flowing ongoing production

process, like moulten glass in a bottle maker's

factory, it is quite different.

TOOHEY J: Are the expressions "Y-bar" and "feed", as used in

this context,synonymous?

MR DRUMMOND:  Well, no. We cannot really say they are

synonymous for all purposes because "feed" connotes something rather like moulton glass passing through

a glass maker's factory. But the sole use of Y-bar

is as feed to make posts, so in that sense it can

be referred to as feed but it should not be seen

by using the term "feed" in relation to Y-bar were

in any way suggesting that it cannot be readily

made the subject of a sale as a separate conunodity

by itself.

TOOHEY J: 

That seems to be in the way that the Full Court

used it on page 674 at line 4 when it speaks of
"denying to" your client:

the "feed" for manufacture of star picket

fencing, namely Y-bar.

MR DRUMMOND:	Yes.
TOOHEY J: Well, can I just ask you this:	if one bought a

quantity of Y-bar, presumably you would end up

with a number of lengths, would you?

MR DRUMMOND:	Yes, Your Honour.
BlT8/2/MB	23
Wire(2)
TOOHEY J:	I mean, is it produced in particular lengths or as required?
MR DRUMMOND:	It comes out of the rolling mill in long

lengths. I cannot remember the exact length but

certainly much longer than the six foot or shorter

lengths into which posts are made.

TOOHEY J:	And by definition it is in a Y-shape?
MR DRUMMOND:	Yes, Your Honour.

TOOHEY J: Presumably then it has to be cut to the requisite

length- a point put on the end of the picket, holes

put at the top to take the wires and then some sort

of galvanizing or painting treatment?

MR DRUMMOND: That is exactly the sequence. There was evidence

that that was the sequence that was followed in

the BHP post making plant here in Brisbane when they

got the bundles of Y-bar up from Newcastle.

At page 467 in Mr Harte's evidence there is a

reference to the Y-bar coming up in 8.3 metre

lengths and it is then cut up into - 467, 468, over

on the top of page 468 there is reference to it being cut up into the requisite lengths for

posts.

There is nothing odd about looking at something

such as Y-bar which can only be used for one purpose,
namely, manufacture into posts as a saleable commodity
so far as BHP is concerned because the evidence

was that a large part of BHP's business was in

selling the products of its rolling mills which

could just as equally be called intermediate products

as Y-bar to other independent processes for processing

into various end products. A large part of this

business comprises of that. Yet, Y-bar was unique

as His Honour found in one respect. It was the

only intermediate product of the BHP rolling mills

might in one sense be referred to as "feed" really which was not readily sold. So the fact that it	does not in any way mean that it cannot also be
regarded as a perfectly ordinary kind of commodity
that BHP deals in since such a large part of its
business is selling intermediate products to
processors.

I should also, in submitting that Y-bar is

a product in saleable form, refer the Court to the

evidence that BHP has been prepared to sell Y-bar

to both the appellant and to Boral Cyclone if
it considers that to be the best way to retain

its share of the rural fencing market. That

appears from a memorandum from an AWI officer

to a BHP officer appearing at page 485 in

volume 3. This is a memorandum that was sent

round about the time BHP became concerned at the

BlT8/3/MB	24
Wire(2)

possibility of Y-bar or fence posts being imported

from overseas. It is exhibit 11 and is the answer

of AWI to an interrogatory. The author was the

national sales manager for AWI and it was sent

to a Mr Gallagher who was the commercial bar

products manager of BHP. The memorandum is annexure J

to the interrogatory and it appears at page 487.

It opens by saying that the purpose of the memorandum

is to identify:

strategic options available to BHP.

In paragraph l(b) there is reference to:

Boral/Cyclone have indicated a very strong

desire to enter the fence post market.

Their preferred position -

was to buy posts not to make them. At page 488

under the heading:

3. Strategic Options for BHP

are listed as including supplying:

Y Bar with a commercial offer to any

manufacturer of posts.

Supply Y Bar and/or fence posts to -

limited people including Boral Cyclone and so on.

And then at page 490 the recommendations include,

firstly, a recomzq.endation that:

If the objective of BHP is to maximise market

share of Y Bar in the long term without
consideration for AWI's rural wire position

then -

that first option of general supply of Y-bar to

all manufacturers should be adopted. So Y-bar is

nothing like moulten glass. BHP has been prepared,

when that might be the appropriate course to

best preserve its share of the fencing market, to sell Y-Bar. It never came to that because the competition from the imported posts did not,

in fact, materialize.	But it is significant, that
is the way that BHP sees Y-bar.	If we could move

on to a separate point from that to the effect

that the potential for trade in Y-bar is sufficient
to justify a conclusion that there is a market
for Y-bar.

Mr Williams, our economist, dealt with the

question of whether there was a market for Y-bar
by looking at substitutional possibilities for Y-bar,

that is, by having regard to the section 4E

considerations. At pages 219 to 221 of the record

BlT8/4/MB	25	29/6/88
Wire(2)

certain assumptions were put to him and he agreed

that on those assumptions there could be said to

be a market for Y-bar. At the bottom of page 219

over on to 220, on to the top of 221, he agreed

that on the various assumptions put there including

the assumption that there was no close substitute

for Y-bar there could be said to be a market for

the supply of Y-bar to manufacturers in Australia

for use in the making of fence posts.

Now, those assumptions were generally proved.

The only one that was contentious was whether there was any close substitute for Y-bar on the demand side. The evidence was that the only use - well,

Y-bar was only used in making star pickets, there

were virtually no imported alternatives and virtually

no domestically produced alternatives. As to the

substitution or possibilities on the supply side

Mr Williams gave evidence that such possibilities
would only exist if another manufacturer or manufacturers

had the capacity to produce Y-bar without any

substantial further investment. That is at 221,

223 through to 225 he dealt with that particular

topic.

There was some .evidence given about what was

involved for any other persons who might have

rolling mills apart from BHP to convert to the

manufacture of Y-bar. That appears in the evidence

of a BHP engineer, Mr Dixon, at pages 355 to 358.

He said that at a cost of $140,000, about half

of which would have to be replaced every two or

three years, a BHP rolling mill that does not

in fact at the moment produce Y-bar could be

equipped to produce it. Dr Norman, the BHP

economist, gave some evidence critical of

Mr William's evidence in this area on the ground

that he had not adequately taken into account

possibilities of other manufacturers, that is,

coming in and making Y-bar, that is, he had not

adequately taken into account the possibility of

supply-side. substitution.

The evidence was that the only other steel

manufacturer with a rolling mill in Australia

was Smorgans Consolidated Industries. The evidence

was also, as found by His Honour, that it produced

only three per cent of Australia's steel requirements

compared with BHP's 85 per cent: that is at 615,

616. There was also evidence that it had no

excess steel making capacity and competed with BHP

only in the production of reinforcing rod and

merchant bar. That appears in an affidavit

sworn by a BHP officer, Mr Laver, exhibit 75 at

page 582. In particular there was no evidence

to identify what the costs were likely to be to Smorgans, in fact, changing over from the

reinforcing rod and merchant bar they produced

BlTS/5/MB	26
Wire(2)

to produce Y-bar but there was evidence that

Smorgans have never, in fact, made Y-bar. That

was a finding made at page 625 by the trial judge.

DEANE J:  Was there evidence of the extent to which BHP

and others distinguished between the product Y-bar

and the star picket products? In other words,

in BHP books, for example, was Y-bar treated as

a separate product as distinct from what was produced

at the next stage?

MR DRUMMOND:  Yes, Your Honour, in this sense: Y-bar was

actually sold to AWI in the form of a legal sale

with invoicing and the like and Mr Forster gave

some evidence. Mr Forster, the BHP marketing man,

gave some evidence that the margin that was produced

by the sale of Y-bar - and the only sales were from

BHP to AWI was, I think, of the order of $80 a tonne.

DEANE J:	And what was the relationship between BHP and AWI?
MR DRUMMOND:	The latter was a wholly-owned subsidiary of

BHP but, nevertheless, the way they dealt with each other was for transactions in the form of invoice sales.

DEANE J:  So there was an actual internal market, as it were - - -

MR DRUMMOND: That is so, Your Honour.

DEANE J:  - - - with controlled seller and controlled buyer,

and it was treated as a separate product in that

market?

MR DRUMMOND:  I have referred, I think, to the totality

of the evidence on that point, :. but , I would

submit, that from that evidence it would appear

fair to reach that conclusion.

DEANE J:  The ownership changed from one company to another?

MR DRUMMOND:  Mr Forster specifically mentioned that the

form of the transaction, or the way in which AWI

obtained Y-bar was in the form of a legal sale

by BHP to AWI. So it would appear to be inescapable

that the conclusion was that legal ownership actually changed. My learned junior reminds

me that in addition to the evidence of Mr Forster,
although it is not included in the record - and

we can give the Court a reference to the exhibit

number a little later - a large number of invoices

from BHP to AWI in respect of sales of Y-bar were

tendered as part of our damages claim.

DEANE J: Well, I do not want to divert you.

B1T8/6/MB	27	MR DRUMMOND, QC 29/6/88
Wire ( 2)

MR DRUMMOND:  I am just concerned that I cannot put my

finger on the evidence of Mr Forster where he

talks about the movement of Y-bar to AWI from BHP

being in the form of a legal sale. But I will

give Your Honour a reference to that when I can

locate it.	I will come to it, I am sure, in the
course of further submissions.	Given the evidence

about Smorgans very small size, the fact that it appeared to be fully employed making reinforcing

rod and merchant bar and, particularly, the fact

that it had never made Y-bar, it is our submission -

DEANE J: While I am interrupting you, was there any evidence

as to whether the executives of BHP and the

executives of AWI would, for example, discuss at

what price product was to be invoiced to the

subsidiary, the basis on which the subsidiary would

then - - -

MR DRUMMOND:  No, Your Honour, there was no evidence on

that. I am not sure if this will be of any assistance

to Your Honour: there was, however, some evidence

of connnunications between BHP and AWI about the

price at which AWI offered to sell Y-bar to us,

the appellant. A BHP officer wrote a memorandum

to AWI in which he expressed concerned that the

price was an unrealistic price and AWI should

consider its position and offer a realistic price.

That particular exhibit appears in volume 3 at

page 481. The exhibit connnences at page 479.	It
is a handwritten note of a discussion between
Mr Gallagher, the BHP connnercial bar oroducts
manager and the rural marketing manager of AWI,

Mr Tocher. A handwritten note of that discussion

appears at page 481. It is a little difficult

to read. It was written on 1 March 1984 at the

time AWI gave a letter to the appellant indicating

it was prepared to sell Y-bar to the appellant at

a price which it nominated in their letter which

it, subsequently, in the pleadings admitted to be

an excessively high price.

Mr Gallagher, in his memorandum, refers to:

Several telephone discussions with Rex Harris

re "unrealistic price" and QWI's strong

reaction to it - reconnnended to R.H. that

he review price as QWI not going to go away.

Suggest to R.T. -

Mr Tocher -

he tell QWI to negotiate further with AWI

re price.

A few pages further down Mr Gallagher says:

BlT8/7/MB	28
Wire(2)

I would strongly put to AWI the dangers

of not offering QWI realistic price.

However AWI believe can justify $573 (I hope they can).

And then he finishes up by saying that Harris

should do something re price. There is some

cross-examination at 389 but it does not deal

with the question of the form of the transactions

between BHP and AWI so I will not refer to that

at this stage. Given those various factors,

including the evidence relating to Smorgans and

that it had never made Y-bar, the evidence

indicated that there were no real substitutional

possibilities on either the demand or the supply

size in relation to Y-bar. That being so it is

right, in our submission, to say that there is a

discrete market for the commodity, Y-bar, itself

rather than a market for products of a merchant bar

mill, which include Y-bar, which was, in fact,

a market that Dr Norman suggested might exist

at page 464, 465, although BHP itself never took

up that suggestion by Dr Norman and contented itself

with advancing the two markets I have already

referred to.

MASON CJ: There have been sales of Y-bar though by BHP and

AWI to other people, have there not, from time

to time in small quantities?

MR DRUMMOND:  The evidence indicated that BHP or AWI - I am

not sure which - had sold Y-bar to a wholly-owned

subsidiary in New Zealand and to a company in which

BHP had once had a substantial share holding in

New Guinea. That was the limit, really, of the evidence of sales of Y-bar, although there was

evidence many years ago, back in the early 70s,

of some sales of Y-bar to some unspecified purchasers

for use as framing for nursery sheds. But that

was the only evidence of actual sales, although I

willingness to sell. have taken the Court to the evidence dealing with That passage I have just referred Your Honour

the Chief Justice to appears at the top of page 632.

Now, we have a second alternative submission if it

is necessary for the appellant to prove that there

was a market for Y-bar and, that is, if there can
only be a market in Y-bar, if there are actual sales,

then the evidence indicated that such a market

existed. We have already referred to the fact that

BHP does sell Y-bar to AWI in the form of a legal

sale. It is true that the economists regarded

corporations, related as BHP and AWI are,. as a single

firm for the purpose of economic analysis. But

in legal terms they are nevertheless separate legal

identities and the transactions of sale that occurred

BlT8/8/MB	29
Wire(2)

were legal transactions of purchase and sale, so

that if an actual trade is required to be shown

there is sufficient evident to justify a finding

because of the way BHP and AWI deal with Y-bar.

DEANE J:  I do not understand that. What does a single

firm for the purpose of economic analysis mean?

Do they regard father and son as a single entity

for economic analysis?

MR DRUMMOND:	If they are carrying on business in a related certainly regard them as a single entity. Perhaps
way. If their business are related they would I should take Your Honour to page 264.
DEANE J:	Well, do they regard a captive market as a single

entity for economic analysis?

MR DRUMMOND: That was not explored, Your Honour, and I would

think there could be differences depending upon

the identity of the purchaser in the captive market.

Mr Williams would certainly regard the purchases

made by AWI as purchases made, presumably, by

a captive market and, in effect, really, he probably

would not even regard them as purchases at all,
he would treat them as internal transactions of

no economic significance within the one economic

unit comprising BHP and its wholly-owned

subsidiaries. That evidence was given at page 264.

Although no issue was made of it by us

in the sense that it was disputed, we did not

concede the point. There is some reference to

the way that no challenge was made to that evidence

in Mr Justice Pincus' judgment .at 608 and page 672

but we, nevertheless, submit that there is

a sufficient foundation in those transactions to

justify a conclusion that there was an actual

trade in Y-bar, if it be necessary to prove that,

to prove a Y-bar market if such a market itself

be essential to the appellant's success.

(Continued on page 31)

BlT8/9/MB	30
Wire(2)
MR DRUMMOND (continuing):	So that if it be necessary to

prove that a Y-bar exists and our submissions

that such a market does exist are accepted, it

must inevitably follow that section 46 was

infringed by BHP's refusal to supply Y-bar. It

was found to have refused to supply Y-bar for

the purpose of excluding the appellant from the

fence post market. If there is a market for

Y-bar since BHP is the sole producer of Y-bar,

it must have complete monopoly power in such a

Y-bar market so that all the requisite elements

of a section 46 claim must be found if it is

necessary to show the Y-bar market exists and it

does, in fact, on the evidence, exist.

If we could turn now - the passage I had in

mind in Mr - I said Mr Forster's evidence - it is

not Mr Forster, it is Mr Sampson - appears at

page 341. Mr Sampson was the finance manager of

the BHP Wire Products Division, although he was

employed by AWI. At page 341, in the middle of

the page, he is asked:

Well, now, the Y-bar - the actual mechanics -

or the legal technicalities involved in giving

Y-bar to AWI involved a sale by BHP to AWI?

And he answered:

Legally speaking, yes.

The next question but one:

The procedure followed is for BHP to raise

invoices - - - ? ---Yes.

- - - in the ordinary fashion;	the same sort
of invoices it would raise for	supplies of
other materials to independent	purchasers?---
I assume so.

That was the evidence I had in mind on that particular

point, Your Honour.

If I could turn now to the second matter, the

take advantage issue which, we submit, is really the
critical issue in this particular appeal.

Mr Justice Pincus concluded, at page 637, that the

words "take advantage" in section 46 have the
meaning suggested by Donald & Reydon in their book

on Trade Practices Law, at page 224 of that book.

He held, at page 640, a little over half-way down,

after reviewing some of the cases:

That the Australian cases tend to support

the view that there is no taking advantage

unless there is a misuse of power.

BlT9/l/SH	31	29/6/88
Wire(2)

He repeated that conclusion at page 646, at about the sixth or seventh line:

Whether BHP's use of its market power is

a misuse is a question on which different

minds may well disagree. The central point which

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.

Now, if I could go to paragraph 11 of our outline

of submissions, we there set out what we submit

is the proper construction of section 46 so far

as attention needs to be given to the element of

of taking advantage of power. We accept that

section 46 read as a whole requires or involves a

misuse of market power. but we submit that if

one has a use or exercise of market power by a dominant corporation for one of the proscribed

purposes, then the proscribed purpose found gives

the conduct the necessary element of misuse.

We submit in paragraph 12 that the expression

"shall not take advantage of that power for the

purpose of" is a composite expression and that,

while that is the correct way to read it and while

the aspect of misuse that must exist before a

section 46 infringement can be found, is to be

identified in the purpose with which the conduct

or its power _is used. It also has to be

kept in mind that misuse is not established unless

there is a nexus between the use of a power and

the proscribed purpose that may be found. If we

could go to section 46 in the form in which it

originally stood in 1974 in that bundle of material

we have handed up, it is apparent that no element

of purpose, no requirement of purpose, is contained

in the 1974 legislation. It simply proscribed a
corporation with dominant power from taking 'advantage

of the power in relation to" the market in which it

was dominant:

(a) to eliminate ..... a competitor ..... ;

(b) to prevent the entry of a person into

the market -

it was dominant in or any other market or -

(c) to deter or prevent a person from

engaging in competitive behaviour.

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Wire(2)

Now, that provision was seen by the

textbook writers to be ambiguous in the sense

the to - in each of the subparagraphs - to
eliminate, to prevent, to deter, could mean

'for the purpose of'' or it could mean "with the

result that". If one goes to one of the 1974

textbooks on the subject, Trade Practices and

Consumer Protection by Taperell and others, these

difficulties are discussed. I will hand up the

pages containing the extracts that I want to refer

to from Taperell's work. At paragraph 412 - this
book was published in 1974. Paragraph 412 which
opens the discussion of "taking advantage of power"

opens with the proposition that:

It is the taking advantage of the power

flowing from a position of market control

that constitutes the essence of the offence

under s 46, although this must produce the

results described in sub-ss46(l)(a), (b) or

( C) •

And there is reference to - this notion raised troublesome

problems. At the bottom of that page there is reference

to a statement by the Attorney-General of the day in the debate on the legislation which mentions a theme

running through the area of anti-monopoly legislation

that legislation does not strike at monopolies as

such or what could be called fair competitive

behaviour by monopolists. It is only a narrower area
than that that is aimed at. At the bottom of the

next page there is reference to a difficulty identified

by an author dealing with the American law:

These cases illustrate, as Neale observes, "the difficulty that antitrust law has in

setting bounds to the use of the market power

of large concerns without going to the other extreme and making it next to impossible for

such concerns to conduct their business at

once effectively and lawfully".

Then, at page 415, in the third line, the author

suggests that:

A literal reading of the section would

suggest that it may have a wider operation

than was intended. The reference to the

use of power flowing from market control may

not limit the reach of the provision.

And, in the discussion that follows, there is reference to the difficulties that the section raises in so far as

it may, on one view, strike down the use of market

power that produces the various results listed in

the subsection without anything more being required.

BlT9/3/SH	33	29/6/88
Wire(2)

In paragraph 426, the authors suggest,	about
the middle of that paragraph:

It seems inevitable that the operation of

the section will be read down: -

to overcome these difficulties. I continue:

It may be that some requirement of "abuse"

will be read into the provision in order to

exclude from its prohibition acts occurring

"in the ordinary course of business" - - -

MASON CJ: Well, it is not much good referring us to oracular

pronouncements of that kind, is it? I mean, they

are speculations as to what courts might do.

MR DRUMMOND: That is so, Your Honour, but they identify the

fact that the legislation in its original form,

because it did not contain any requirement of

proof of a particular purpose, presented difficulties

that it could operate over a much wider field than it

was really intended to operate in. That leads to a

discussion of the first case on the legislation which

identified that if a corporation acted with a

legitimate purpose then it could not infringe the

section as it stood and it is our submission that

these considerations which are repeated in Donald

key importance, were discussing only the 1974

& Heydon's work, in that passage that

legislation. They were not discussing the 1977
legislation and that is where His Honour fell into

error in saying that, in looking at the expression

"taking advantage" in our current legislation, or

at least in the form it has been in since 1977 when

"p~rpose" has been required, you need to find some

element of abuse or predatoriness or unfairness

additional to proof of a proscribed purpose.	We
submit that that explains the reason that
Mr Justice Pincus says that the element of taking

advantage must itself carry with it some, or

involve proof, of some element of unfairness. He

was looking at a discussion - he accepted a passage

in the textbook by Donald & Reydon that, on close

reading - - -

MASON CJ: Yes, I follow the use you are putting if you are

endeavouring to explain how it was that His Honour

fell into error.

MR DRUMMOND:  Yes, Your Honour. If one, then, goes to - as I

have submitted, the 1977 legislation brings into

the Act the requirement of purpose and change

significant - the requirements for proof of an

infringement of section 46 and, if one goes to the

book referred to by Mr Justice Pincus in that key

BlT9/4/SH	34	MR DRUMMOND, QC	29/6/88
Wire( 2)

passage of his judgment and we will take the Court

to a later section. I will hand up, firstly,

pages 229 to 230. At page 229, the authors deal

with the topic of purpose found in the 1977 Act.

They say in the fourth line of that sectionl

The words "for the purpose of" are

closely linked to the issues arising out of

"taking advantage". The original 1974 Act

did not contain those words. Taking advantage

of power "to" achieve the consequences listed

ins. 46(1) (a)-(c) was proscribed. But

there was no reference to "purpose". Doubt

was widely expressed as to whether it was

enough that the consequences listed should
be achieved, or whether the defendant had to

have some motive or purpose of achieving them.

An Opposition amendment to the latter effect

was rejectedl::ecause of the difficulty of

proving specific intent against a corporation. It is also true that such a requirement can be

the basis of an extreme narrowing of the

application of legislation. On the other

hand, s. 46(1), particularly as expanded

bys. 46(3), is likely to apply to a large

number of firms in Australia; for in some

markets there are few firms, and each may be

said to be in a position of substantially

controlling the market or part of it. This

consequence was thought to be oppressive;

hence the present wording.

And then, at page 230, the authors make some

suggestions as to what changes have been effected

by the 1977 amendments. In the second complete

paragraph commencing with the words:

The change between 1974 and 1977 -

the authors continue:

The change between 1974 and 1977 from

"to" to "for the purpose of" has two

consequences, perhaps unforeseen. First,

"to" suggested that there must be elimination
of competitors. Now there need not be such
elimination; the possession of the purpose

to eliminate is enough.

Even though, obviously, that purpose is not achieved.

Secondly, a change of words may affect the meaning of "take advantage". Formerly it was

necessary to construe these words as involving

abusive or predatory tactics in order to make

s. 46 not applicable to an unduly huge range

of Australian firms. Now that the predatory

element is partly covered by the words of

purpose, what work does "take advantage" do?

BlT9/5/SH	35	29/6/88
Wire(2)

May not these words mean simply "exercise" or "use" in order to avoid redundancy with respect to "for the purpose of"?

And that is exactly the construction that we contend that section 46(1) now has in view of the introduction

of the requirement of purpose. The authors, in that

passage at page 230, identify why it is no longer

necessary, given that purpose is an infringement

of the section, to construe the expression "take

advantage" as itself involving some notion of

misuse or unfairness.

Now, what His Honour Mr Justice Pincus did was

refer not to that discussion but to the discussion

at pages 221 and 223 and I will hand up that section

of the work to the Court. At page 223, this passage
about six or seven lines from the bottom of the page

in the section dealing with "take advantage":

Here the reason for success is something

extraneous to the efficiency which produces

market power. But where it is the efficiency,

and the power it produces, which causes one

of the listed consequences, the section may

be infringed, at least on one view.

They are there dealmg with the notion that an efficient,

powerful firm acts in such a way that one of the

consequences,elimination of competition and the like,
referred to in the section, occurs and the authors
suggest that there may be an infringement in those

circumstances. The reference to one of the listed

consequences seems pretty clearly to be a reference
to the 1974 provision because,if one looks at it and

compares it with the 1977 provision, there is no

reference at all in the 1977 provision to any

consequences being involved in an infringement of

section 46. As the authors recognize in that

passage at page 230,that I have already referred

the Court to, you do not need to have any consequence

at all as long as you have a purpose, even an unfulfilled

purpose. If it is a purpose by a dominant corporation

that involves the exercise of power and produces no

consequence, the 1977 provision is infringed. To

return to this passage at page 223, there are other

indications that the authors are pretty clearly

referring to the 1974 proviston, not the 1977

provision. I continue:

One way of avoiding this result is to construe "take advantage of" to mean something

more than "use". On this view, the argument

would be that if Parliament had intended to

penalise all successful firms which grew

beyond a certain size, it could have done so

simply by omitting the words "take advantage

BlT9/6/SH	36	29/6/88
Wire(2)

of the power in relation to that market

that it has by virtue of being in that

position". Since the words are inserted,

they must do some work, and must refer to

something more than causing or achieving

a result. They must refer to abuse of

position, to something unusual-

to the proper construction of the expression

et cetera. This is exactly the passage which guide

"take advantage" and, once again, if one looks at
the authors' suggestion that one omits the words

"take advantage of the power in relation to that

market that it has by virtue of being in that position"

that makes sense in relation to the 1974 provision

because the 1974 provision can operate with the

deletion of those terms. It makes no sense,

however, if you omit those words in the quite

differently drafted 1977 provision. So that, in short, our submission is that the authors,

although they correctly identified the import of

the 1977 changes when they were dealing with the

section on "purpose", in that earlier section on

'taking advantage", appear to have been looking at
the 1974 provision pretty clearly. The inference

seems to be that it was written prior to the

1977 amendments and not changed - the work was
published in 1978 - yet it was that earlier

section which seems pretty clearly to be directed

to looking at how one should give the 1974 provision

a sensible operation so as not to prohibit fair

competition that Mr Justice Pincus picked up and

used as indicating how the expression "take advantage"

in the current provision should be interpreted to

require, in itself, some element of unfairness.

A third indication that the authors in that

passage that Mr Justice Pincus relied on did not

have in mind the 1977 provision is that there is

simply no reference at all to the concept of

proscribed purpose and one would have thought that,

if they did have in mind the 1977 legislation, there

would have been some discussion of that topic there.

The decision of the Chief Justice of the Federal Court in VICTORIAN EGG BOARD V PARKWOOD

EGGS PTY LTD, in our submission, lends support for our contention that section 46(1) of the current

provision by a composite expression 'shall not take

advantage of that power for the purpose of" strikes

at the misuse of market power that is constituted by

the exercise or use of market power for a proscribed

purpose, with the element of misuse coming from the finding

of proscribed purpose. That decision appears in

20 ALR 129 and the facts of the case in which, I

BlT9/7/SH	37	29/6/88
Wire(2)

think, Your Honour Mr Justice Deane was the

primary judge, were that the Egg Board had
completely dominant, almost complete monopolistic

power in the Victorian market for eggs. Its only

competitor was a company, Bartters, which brought

some eggs in from interstate and sold them over the

board's opposition, into Victoria. Parkwood was

related to Bartters. It was a major participant

in the market for eggs in the ACT. The board

decided that it would move into the ACT market

and sell eggs at a new low price, a price at which

Parkwood would not cover its costs. There was

also evidence that the actions of the board in

seeking to do that in the ACT egg market were aimed

against Bartters by damaging its related company,

Parkwood,because of Bartters competing with them in

the Victorian market.

Now, at page 137, lines 25 to 50 - I should say that the third member of the Court died before

judgment was given and the only two judgments,

accordingly, are by the Chief Justice and

Mr Justice Brennan but the Chief Justice, at

page 137, lines 25 to 50, dealt with the evidence

relating to the mode of pricing that the Board

adopted for the eggs it intended to sell into the

ACT and concluded, at about line 48:

In this case the price set by the Board

could properly be called predatory in this

sense notwithstanding that it was proposing

to sell at a higher price than that which it

received for sales on the export market.

And then, over the page, His Honour explained the

significance of the conclusion he reached that the board was engaged in predatory pricing, at lines 5

to 20. He said:

requisite purpose from other evidence,	It may be that where one can infer the
price cutting may be predatory in the
sense referred to and a "taking advantage"
of power derived from the substantial control of a market, notwithstanding that it is not
below marginal or average variable cost and does not result in a loss being incurred.
In this case, however, it is meaningless to talk of the Board selling at a loss.

And he referred to the position it had as a compulsory

acquirer of eggs in the Victorian market. Skipping

about three or four lines, he continued:

Its costs are unrelated to the costs of the ordinary egg producer selling in the wholesale

market.

BlT9/8/SH	38	29/6/88
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So, having discussed the predatory pricing in which the board engaeed, he then went on, at

line 15:

Accordingly I consider that its intended

pricing practice in the Australian Capital

Territory, could, upon the evidence, properly

be held to be for a purpose proscribed by

s. 46(1).

So, he held that predatory pricing was not taking advantage. Predatory pricing provided evidence of

a proscribed purpose. Then, he continued:

That being so -

that is, having found the proscribed purpose -

it is my view that its intended actions would

be a "taking advantage" of its power. There

is a close relationship between "taking

advantage" of its power, and the purpose for

which it is acting.

It already accepted the evidence that the board

had dominant power in the Victorian market and that

its predatory pricing could be seen to be an exercise

of - or, what it intended doing, could be seen to be

an exercise of that power for a proscribed purpose

in relation to the ACT market but the significance

of the judgment, in our submission, is that

His Honour seems to have proceeded on the basis

that,once the proscribed purpose was found, then,

given that there was an exercise of power in the

market in which the board was dominant, the elements

required by the section were proven.

His Honour Mr Justice Pincus, at pages 637 and 638, the bottom of page 637 over on. to 638, referred

to the passages at page 137 in Mr Justice Bowen's

judgment in which he concluded that the pricing

activities of the b~ard could be said to be predatory

and he concluded that, about two-thirds of the way

down:

The reference to "predatory practice"

suggests that a reading of the section as

requiring misuse of power was, in His Honour's

view, at least a possible one.

But, His Honour Mr Justice Pincus did not refer to

the passages on the following page, page 138 of

the PARKWOOD EGGS' decision, where His Honour made

it clear that the significance of a finding of

predatory pricing went not to any issue of taking

advantage but to proof of proscribed purpose and

that, once that was found, and the other element

BlT9/9/SH	39	29/6/88
Wire(2)

of exercise of power is established, the elements

required by the section were complete without any

additional requirement that some notion of

unfairness be found in taking advantage as well as
in the proscribed purpose.

I am not sure when Your Honours propose to adjourn but we would - - -

MASON CJ: Well, if it is not inconvenient to you, Mr Drummond,

we would propose to go on a while.

MR DRUMMOND:  Yes, Your Honour. It is just that I would like

to make available to the Court a summary of the

various Federal Court decisions on section 46. I

do not propose to take the Court to the cases but

we have prepared a rather lengthy summary of all

the section 46 cases and I will make that available

if I may to the members of the Court as a - - -

MASON CJ: It is designed to confuse us, is it?

MR DRUMMOND:  I am sorry, Your Honour?

MASON CJ: Is that designed to confuse us?

MR DRUMMOND:  No, Your Honour. It is just that it does collect

all the cases which may be of some convenience to the

Court and we do make some comments which I will go to

tomorrow in relation to a couple of the cases that are

of some significance to our argument.

MASON CJ: Yes.

WILSON J: What does your intention in that regard have to do

with the hour at which we adjourn this evening?

MR DRUMMOND:  I am sorry, Your Honour, I thought it may be

convenient for the Court to have it this afternoon

rather than tomorrow in case there were any questions

that the Court might wish to put to me since I do not

propose

WILSON J: Yes.

MASON CJ: Yes, well, it would be convenient to present it to

us now, if you have it available and you desire to

present it.

MR DRUMMOND:  Yes, I will do that, if the Court pleases.

BlT9/10/SH	40	29/6/88
Wire(2)

MR DRUMMOND:  In submi~ting th<;1t the element of "take advar:itage'\n the

current section requires only proof of the exercise

of dominant market power without more we do rely
on the ordinary meaning of the expression "to take

advantage" found in the same two dictionaries and

we hand up copies of - I am sorry I will have to

hand up copies of those dictionary provisions

tomorrow.

The Macquarie Dictionary gives as one of the

meanings of the expression "take advantage" - to

make use of. The Shorter Oxford English Dictionary

gives as one meaning of the expression "to take

advantage of a thing" - to use any favourable condition

that it offers.

WILSON J:  How did the dominance of BHP in either of the

two markets that were found relate to the purpose
of forbidding the entry in~ that if a manufacturer
manufactures a product that it proposes to use

for its own purposes in. producing the final product

it can keep that intermediate product for its own

purposes whether it is in a dominant position or

not, can it not?

MR DRUMMOND:  Not if it amounts to an infringement of

section 46 and the way that it infringes section 46

is that by keeping that particular product to itself

it prevents the appellants getting into the fence

post market and impairs its ability to better compete

with BHP in the rural fencing market. It is those

aspects of the consequences and, indeed, the object

of the refusal - - -

WILSON J:  So a corporation that is not in a pqsition of power

in relation to the market can do it but a corporation

that is more successful in its getting hold of

the market cannot.

MR DRUMMOND:	That seems to be the position, Your Honour, and for this reason, no doubt, that the corporation
from a competitor a commodity that the competitor that does not have dominant power and who withholds
needs to better compete with it will be faced with
the situation that because it does not have dominant
power the competitor will be able to get that same
commodity from some other source.  But the very
existence of dominant power means that the competitor cannot get that or is impaired in his ability to
get that commodity from any other source and that
is really what this case is about.  BHP is dominant
in these two markets - steel and rural fencings;
an element of its market power is the fact it is the sole Australian supplier of Y-bar, .an i~portant
component in posts which are, in turn, an important component in- rural fencing and because - - -

BlTlO/1/AC	41	29/6/88
Wire(2)

DAWSON J: Why is it necessar£ly just the failure to supply

Y-bar? Why could you not say just as well it is the failure to supply at cost the completed posts?

MR DRUMMOND: Your Honour, the evidence indicates that the

posts are offered and made available to us - - -

DAWSON J:	Yes, but not at cost.
MR DRUMMOND:	Not at cost - at a price at which other people,

other major distributors can buy those posts from

BHP although certain major distributors, particularly
the big pastoral houses, get an additional rebate

not available to us.

DAWSON J: If you got them at cost you would have no complaint,

would you?

MR DRUMMOND:  That is so, Your Honour.

DAWSON J: Well, why is it not equally that as well as the

failure to supply Y-bar which prevents your entry

into the market or has the purpose of preventing

you entering the market.

MR DRUMMOND:	The difficulty, Your Honour, seems to be this: that if we were to come to Court and say we want
BHP to supply us with posts on a uniquely favourable basis, we would see that as a difficult case to
find a legal foundation for.  We would be saying
to the Court that BHP should give us access to posts on a basis significantly more favourable than it supplies posts· to anyone else it deals
with so that the difficulties in formulating a
legal foundation for such a claim are one reason
why we do not make any complaint about not being
offered, or able to get, posts at cost. But the
position is this, Your Honour: our ability to
compete effectively in the fence post market and
in the rural fencing market is impaired by the
fact that we cannot get cheap posts - that is the
nub of it.

There are two ways we can overcome that impaired

competitiveness; either by getting cheap posts

or by getting Y-bar and making:the•posts ourselves.

Merely because we cannot or do not seek to get

cheap posts is no answer to why we cannot obtain

a competitive position by the second independent

avenue - seeking access to Y-bar. I should say

that there was evidence that, in an exhibit that

was tendered, we did, in fact, ask for cheap posts

at one stage back in the early 8Os and our request

was rejected. We asked to be put on a special

basis and be given posts at a lower price than

was available to distributors and the like - that

BlTlO/2/AC	42	29/6/88
Wire(2)

was rejected. But our essential proposition is

that if our impaired competitiveness is due to

our inability to offer the full range of products

because we lack posts that we can sell competitively

with BHP, the fact that - - -

DAWSON J:  I suppose you would say that you would have to

get the Y-bar at a cost which would enable you
to manufacture posts and have them to sell at a

cost which was competitive with BHP's posts.

MR DRUMMOND:  That is so, Your Honour, yes.

DAWSON J: There does not seem to be a great deal of difference.

MR DRUMMOND:  I am sorry, Your Honour.

DAWSON J: It was a comment, that is all. In other words,

you are really asking.for the Y-bar at a particular

price which achieves the same end as you would

achieve by getting the manufactured posts at cost.

MR DRUMMOND:  Your Honour, that area of the actual cost at

which we would get Y-bar was not resolved at the
trial. His Honour said that the view he would
take if he were to find for.us would be to grant

us a declaration and have further evidence going

to what the form of the relief would be but there

does not seem to be any insuperable problem. problem in the way of identifying an appropriate

basis for formulating remedies both as to injunctive

relief and damages and the evidence indicates that

that was a view that was justified because we had

Mr Gallagher back in 1984 when AWI are offering

us Y~bar at $573 a tonne which they, ultimately,

admit they knew to be an unrealistically high price;

we had Mr Gallagher suggesting to AWI that they

should be offering us Y-bar at a realistic price -

a price, presumably, at which we could be expected

to be able to compete.

Now, if it is possible for a BHP official

to have in mind a realistic price of that kind

then one would have thought the Court would not

have any enormous problem in finding a basis for
fixing such a price if that is what is required

in formulating the ultimate relief.

DAWSON J: Can I just p..1t one further thing to you - no doubt

there is an answer to it, but there is nothing

to stop you entering into the market by manufacturing

Y-bar yourself - - -

MR DRUMMOND:	Yes, there is, Your Honour.
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DAWSON J: - - - but the evidence is that the cost is

prohibitive.

MR DRUMMOND:  We have to establish a rolling mill. The

barriers to entry are enormous.

DAWSON J: Exactly, so that was, of course, a cost that was

borne by BHP and, no doubt, is reflected in the

price they would charge you.

MR DRUMMOND. Yes, that is so. We accept all that but all

I can do is indicate that a-BHP official himself

thought that an excessively high price was being
charged when a realistic price could be set for

us.

DAWSON. J:  Can I just finish that - they are merely tentative

things that are occurring to me. It really seems
that you are saying not that someone should not

take advantage of their position·but that they should take positive steps to put someone else in the same position and they do not seem, perhaps,

to be the same things.

MR DRUMMOND:	I am not sure I quite follow Your Honour's - - -
DAWSON J:	You are really asking for BHP or AWI to do something

in relation to you which would put you in a similar

position to them and you say that unless they do

so they are taking advantage of their position.

MR DRUMMOND:  I am not sure if that is right, Your Honour,

because if we go to them and say we want posts

at cost, what we are saying is, you have incurred

the cost of making these things; we want you to

give them to us at cost and give you no return

at all.

DAWSON J:  I do not want to take up time but are you not

doing more or less the same thing by saying, nYou

have incurred all this cost in setting up the

facilities to manufacture Y-bar and we now want

to take advantage of that so that we are in a

competitive position with you"?

MR· DRU.MMOND:  Not at all, with respect, Your Honour. What

we are saying is, we want Y-bar at a realistic

price, that is a price which will yield you a return,

a profit on your investment and which will leave

us in a situation where we have got to organize

ourselves and meet the costs we will incur in
processing the Y-bar into posts to be able to have

posts to compete with you in the fencing market.

The second is really quite a different situation.

WIBSON J:  But can you say that to a corporation , ''We want

to able to buy Y-bar from you at a realistic price",

if t~e corporation ~as manufactured Y-bar purely

for its own production purposes? Does it matter

what dominancy it has in the market?

BlTl0/4/AC 44 29/6/88

Wire(2)

MR DRUMMOND:  That propostion, with respect, Your Honour,

conceals a number of difficulties. If it manufactures

Y-bar purely for its own production purposes because there are some engineering or technical manufacturing

efficiencies obtainable by just making sufficient

Y-bar and using the Y-bar itself in its fence post

production, that is a totally different situation

from what, we submit, is the situation here where
BHP keeps the Y-bar itself not for any technical
engineering purpose - that is clear, because they
make the Y-bar in Newcastle, they send some of

the Y-bar next door to the AWI Newcastle post mill,

for making into posts, but some of the Y-bar they

send from Newcastle to the BHP post plant at Brisbane.

WILSON J:  For posts?

MR DRUMMOND:  To make into posts. So that rather suggests

that there is no technical engineering or manufacturing

efficiency involved in making the Y-bar at Newcastle

and making the posts in an adjacent mill. Indeed,

there was no evidence at all led by BHP to suggest
that there were technical engineering efficiency

reasons which would explain why they kept Y-bar

all to themselves.

(Continued on page 46)

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MR DRUMMOND (continuing): The evidence was all one way. The

reason they keep Y-bar to themselves is, as they said
in one of their solicitor's letters, to preserve their

business of fence post manufacture, in other words, to

keep their monopoly profits.

DAWSON J: It is probably the same answer. It seems to be it

is not a question of, "Why don't you let us compete with

us?" but, really, "Why don't you put us in a position

where we can compete with you?" They seem to be two

different things.

MR DRUMMOND:  Your Honour, what was found against BHP was the

proscribed purpose in section 46(l)(b): preventing a

person from entering a market. There is no requirement

that we have to be able to compete successfully. All the

subsection requires is that the purpose be to prevent

a person from entering a market, and that was found against

them. So, it is an unnecessary additional burden to

impose on us if we are required to pr0ve not only that

we want to enter a market that we have been kept out of

but that if we do enter that market we will make a profit

out of what we want to do.

WILSON J: And Mr Justice Pincus found that purpose satisfied?

MR DRUMMOND:  He found that purpose satisfied, yes. That was the

specific purpose he found. I should also say that we,

of course, already compete with BHP in the rural fencing

market. And it is really, I suppose, the reverse of the

proposition I ha:\~e just been putting to Your Honours in

view of the -

DAWSON J: Well, you then modify the proposition, "Why don't

you let us compete on equal terms?"

MR DRUMMOND: There is no

DAWSON J:  No doubt the error in what I have suggested to

to you will appear as you go on, Mr Drunnnond.

MR DRUMMOND:  We could not accept any notion that we have to

establish that we are going to, in effect, be able to

compete with any level of profit. We are really saying

that the section does not require proof of that; that

a person should not be deprived of the opportunity of

getting into a market and trying his hand in a market

if the reason for his being deprived is the exercise of a

monopoly power against him.	I think that is how we would
prefer to put it.

If we could summarize our submissions on this

point: we would submit that on our interpretation of section 46(1) which involves proof of the exercise of

market power by a dominant corporation for a proscribed

purpose, all those elements were established because

BHP was found to have the requisite degree of power in

the two wider markets. The refusal to supply Y-bar was

an exercise of that power in the markets for rural fencing

BlTll/1/PLC	46	29/6/88
Wire(2)

and it would appear, also, in the market for the supply of steel and steel products. We put that slight qualification on the second market because

although His·Honour did find that BHP expressly

was dominant in both markets he did not refer to
the steel supply market in any further detail

save at the very end of his judgment where he

summarized his findings and again said BHP was

dominant in the relevant markets but he did deal

more elaborately with the position that BHP was

in vis -a -vis us in the fencing market.

Finally, we would submit that the other element

necessary for success was expressly found: that

BHP's purpose in exercising its dominant power

in these two markets by refusing to supply Y-bar

was to prevent the appellant from competing in

the star picket market.

DEANE J:	Why are you saying "exercise" instead of "take
advantage of"?
MR DRUMMOND:	We are content to accept "take advantage",

Your· Honour. We say it means the same thing; that

the ordinary dictionary meaning of "take advantage" -

or an ordinary meaning of "take advantage" is

use or exercise. It does not 1mean anything more

than that, there is no need to give it any further

meaning because the section requires proof of a

proscribed purpose which, itself, gives enough
content to any requirement for a misuse of power·

before there is an infringement.

DEANE J:  We 11, '.-'exercise" has c:11 inference of pas it i ve act ion

which may· not be, necessarily, quite so in the

forefront of "take advantage".

MR DRUMMOND:  There would certainly have to be action of

the description Your Honour has suggested but if one looks

at the history of the legislation where "take

advantage" was the only phrase that could be seized upon to prevent the section being given quite	draconrc operation on one view - draconic operation
in the sense that it could prevent a monopolist
engaging in what I wiil blandly call fair competition
on the basis the section struck down a monopoly
exercising power which produced anti-competitive
results. If one looks at that form in which the
section originally stood, one:can appreciate why in the TOP PERFORMANCE MOTORS 'case the indications
were that some element of misuse had to be, in
effect, read in to "take advantage". But then,
when one goes to the current section and sees the
need for a proscribed purpose which, in itself,
is capable of accommodating any notion of misuse
and thus ensuring that even a monopolist can engage
in fair competition without infringing the section

BlTll/2/AC	47	29/6/88
Wire(2)

it becomes unnecessary to read anything in the
way of a pejorative element into the phrase "take II • h

advantage . There 1s no reason w y you cannot

give "take advantage" the relatively neutral meaning

of use or exercise, although it would'still involve

deliberate conduct, and leave the proscribed purpose

to do the job of ensuring that there will be no

infringement unless misuse of power is involved.

DEANE J:  I will not take time. What I was suggesting to

you was that by using "exercise" in this context

where the focus must be on the Y-bar as a procluct

you may be taking on a heavier 'uurden than is

necessary when what the Act says is "take advantage".

I do not want to go further but it would seem to

me that it might be possible to say that somebody

says, "I do not propose to sell at all". He may

be taking advantage of his position and market

power but he certainly may not be exercising it.

MR DRUMMOND:  I am sorry. I appreciate the distinction

Your Honour has made there. I think it is between

a refusal to take action as opposed to taking of

action, the former able to be accommodated within

~taking advantage~, the latter perhaps not.

DEANE J:	But probably nothing turns on 1 it here, I do not
know ..
MR DRUMMOND:	I would, in any event, submit that "exercise·

of, power" would be pretty apt to cover the kind

of situation Your Honours envisaged althdugh I

accept that "take advantage" might, perhaps, even

be a more appropriate formula for covering that

kind of conduct.

DEANE J: Well, it happens to be the statutory formula.

MR DRUMMOND:  Yes, that 1s so.

MASON CJ:  Mr Drummond, I was going to ask you: you have

a finding in your favour on section 46(l)(b) purpose.

MR DRUMMOND:	Yes, Your ·Honour.
MASON CJ:	Now, the case was alternatively presented on the

footing of a 46(l)(c) purpose, what happened to

that aspect of the case?

MR DRUMMOND: It was litigated in the trial but,·as is obvious,

His Honour did not make any findings on that particular

point.

MASON CJ: It was not rejected - there was just no finding

about it?

MR DRUMMOND: Just no finding on it, Your Honour. And, indeed,

BlTll/3/AC	48	29/6/88
Wire(2)

the position on purpose was that there was really

no contest on that particular issue. His Honour,	at a couple of points, said that although1 ·BHP
did not abandon - - -

MASON. CJ:  The focal point at issue was"taking advantage"

at the trial.

MR DRUMMOND:  And, indeed, the evidence was all one way because

there were numerous internal documents referred
to by His Honour.in the judgment indicating

anti~competitive motivation in denying Y-bar to

us. There was certainly an evidentiary onus on

BHP to satisfy if they were to avoid a finding of purpose. Important witnesses, the authors of the

significant memoranda, were still in the employ

of BHP at the time of the trial but they were not

called. BHP's witnesses were confined to people

who really knew nothing about the critical decisions

to refuse Y-bar to AWI. So that "purpose'; in that

sense, was not litigated as an ordinary issue would

be litigated.

MASON CJ:  Yes.

(Continued on page 50)

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Wire(20

MR DRUMMOND:  My learned junior draws my attention to the

passage at page 644 where His Honour uses a phrase
picked up by the Full Court at line 5 from the

bottom, 5 or 6 from the bottom:

it should be inferred that the purpose of

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

within para.(b) of s.46(1) - prevention

of entry into a market.

If one goes back to that early summation of the

conclusions His Honour reached at page 608; one

needs to read the last 10 lines on 608 where

His Honour refers to the appellant competing with

BHP in the "rural fencing market".

That competition is, however, made significantly

more difficult by -

lack of access to Y-bar. And then in conclusion:

An important advantage of B.H.P. 's star

picket monopoly is that it is able to

offer to its distributors a full range of

rural fencing products. Preservation of

that advantage is one of the reasons for

its refusal.

That does rather look like a 46(1)(c) finding.

MASON CJ:	Yes.
MR DRUMMOND:	Further to what His Honour says at page 608

the same view of the evidence is repeated at

page 631 where His Honour, in line 4 or 5 from

the top, says:

The applicant's view is that its inability

to do so -

that is, to offer fence posts at a price which

competes -

has affected its wire sales and I find this

to be so.

So that seems to be a harking back to what

His Honour has said there about an impeding of

competition in the fencing market flowing from

the refusal. But perhaps the reason why His Honour
confined - well, a possible explanation for why

His Honour confined himself to a finding of a

46(1)(b) prevention of entry purpose with the

preface that, at least, that was the purpose, was

the purpose just was not a burning issue at the

trial.

B1Tl2/l/MB	50
Wire(2)

MASON CJ:  Yes. Mr Drummond, it may be convenient to

adjourn at this stage. How long will the

balance of your argument take?

MR DRUMMOND:  I think I would be a half an hour, Your Honour.

MASON CJ:  Yes. Now, the Court will endeavour to familarize

itself with the memorandum that you handed up earlier

summarizing the Federal Court decisions and I think

you can proceed on the footing that we will have

read that tomorrow morning.

AT 4.45 PM THE MATTER WAS ADJOURNED

UNTIL THURSDAY, 30 JUNE 1988

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