Rural Press Ltd & Ors v Australian Competition and Consumer Commission

[2003] HCATrans 292

[2003] HCATrans 292

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A197 of 2003

B e t w e e n -

RURAL PRESS LIMITED

First Appellant

BRIDGE PRINTING OFFICE PTY LIMITED

Second Appellant

IAN LAW

Third Appellant

TREVOR McAULIFFE

Fourth Appellant

and

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

First Respondent

WAIKERIE PRINTING HOUSE PTY LIMITED

Second Respondent

PAUL TAYLOR

Third Respondent

Office of the Registry
  Adelaide  No A203 of 2003

B e t w e e n -

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Appellant

and

RURAL PRESS LIMITED

First Respondent

BRIDGE PRINTING OFFICE PTY LIMITED

Second Respondent

IAN LAW

Third Respondent

TREVOR McAULIFFE

Fourth Respondent

WAIKERIE PRINTING HOUSE PTY LIMITED

Fifth Respondent

PAUL TAYLOR

Sixth Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON THURSDAY, 14 AUGUST 2003, AT 9.31 AM

(Continued from 13/8/03)

Copyright in the High Court of Australia

__________________

GLEESON CJ:   Yes, Mr Young.

MR YOUNG:   May I commence by taking the Court to Melway 205 CLR 1. I want to go to some passages commencing at pages 22 and 23.

HAYNE J:   With a view to demonstrating what?

MR YOUNG:   That the Full Court erred by applying a test other than that stipulated in Melway, and other than that which they themselves enunciated, and ultimately, your Honour, I want to compare and contrast the critical reasons given by the trial judge in relation to taking advantage with those of the Full Court.  In Melway the Court held that the question raised by the expression, “taking advantage”, in section 46(1), “is a question of fact”.  That is paragraph 69 in the joint judgment of the Chief Justice, Justices Gummow, Hayne and Callinan.

The precise way in which the Court approached the application of that phrase appears at pages 22 and 23 in the joint judgment.  After quoting the key passages in the reasoning from Queensland Wire, the joint judgment said this at paragraph 50:

A majority of the Court considered that the way to test whether BHP was taking advantage of its power was to ask how it would have been likely to behave in a competitive market . . . The important thing was that, once it was concluded that in a competitive market BHP would have been constrained to supply QWI, and that BHP’s ability to refuse to supply resulted from the absence of such constraint, it followed that, in refusing to supply (for an anti‑competitive purpose), BHP was taking advantage of its market power.

Now, that is something of a distillation of what the members of the Court have said in QWI.  Each member of the Court in QWI expressed that test in a slightly different form of words ‑ ‑ ‑

GUMMOW J:   Now, we have it expressed in one form of words, and that is what controls.

MR YOUNG:   Yes, your Honour.

GUMMOW J:   It is the whole purpose of what has been written in Melway.

MR YOUNG:   Can I add this?  The Court in Melway also said ‑ ‑ ‑

GUMMOW J:   We do not get taken back into history.

MR YOUNG:   No, your Honour.  I am not trying to.  The Court in Melway also said that whilst this was one way of testing whether there was a connection with market power, it was not the only way.  For instance, Justice Deane was said to have inferred a connection with market power directly by inference from the facts without postulating the counterfactual.  In the same case, Melway, Justice  Kirby said it can be useful but not always essential to pose that question of what would be the likely course of conduct in a competitive market situation.

So it is not as if it were comprehensive, but I did want to draw attention to what the members of the Court in QWI, at page 22, had said.  At about point 2 on the page, the question was put this way by the Chief Justice and Justice Wilson:

It is only by virtue of its control of the market and the absence of other suppliers that BHP can afford, in a commercial sense, to withhold Y‑bar from the appellant.  If BHP lacked that market power . . . it is highly unlikely –

et cetera.  Now, Justice Dawson’s approach was similar, but Justice Toohey’s was slightly different.  Paragraph 49 at page 22:

“The only reason why BHP is able to withhold Y‑bar . . . is that it has no other competitor in the steel product market who can supply Y‑bar.

So that looked to the commercial rationale for the impugned conduct.  It must be added that Justice Deane did something similar, in a passage not referred to in Melway – I am referring to Justice Deane in QWI where at 167 CLR 195, point 5, his Honour said this:

The explanation of BHP’s effective refusal to supply . . .  is that there is no other local producer or wholesaler of Y‑bar and BHP desires to prevent QWI from manufacturing and selling star picket fencing posts -

Now, against that background, can I go to what the trial judge did in this case, commencing with his ultimate conclusion at page 1208 line 4.  His Honour concluded as follows:

But for the existence of that market power, in my judgment Rural Press and Bridge would not have acted in the way in which they did.  The credibility of the threats contained in the communications existed or was enhanced by reason of the market power in the Murray Bridge newspaper market – 

and the explanation for that conclusion is really expanded upon in paragraphs 131 and 132, commencing at the previous page.  We draw particular attention to lines 18 to 22, in paragraph 131:

Those factors had significance – 

“those factors” being the presence of certain attributes in the Murray Bridge market – 

by reason of the relevant market power . . . That market power rendered it a matter of marginal cost only to fulfil that threat.  The threats were made only because that market power existed, and they were made to maintain and preserve that market power.  The threats made had significance because of that fact.

A little bit further down, at the foot of 1207:

It was the private and conditional nature of the communications, in conjunction with the fact that Waikerie Printing had something to give, that is the withdrawal of the River News from the Mannum area, which involved taking advantage of the market power which existed in the Murray Bridge newspaper market where that market power included the financial and physical resources –

Now, in our respectful submission, that is an orthodox application of Melway.  The terminology also of QWI, used by each of the judges, can be applied exactly to these facts, with the result postulated by Justice Mansfield.  For instance, the phraseology of Chief Justice Mason and Justice Wilson could be applied as follows.  Only by virtue of the control of the Murray Bridge market is it that Rural Press could afford in a commercial sense to make the threat, that is to say, that they would enter into the Riverland market unless Waikerie withdrew from the Murray Bridge market, and the threat was designed to achieve that segmentation and division of markets.

GLEESON CJ:   I do not understand.  How did their power in the Murray Bridge market permit or assist them to threaten to enter the Riverland market?

MR YOUNG:   In this sense, if they had competitors in the Murray Bridge market it would not make commercial sense for them to give, as they did by their threat, an implicit undertaking to the other party that, “If you withdraw, we won’t enter Riverland.”  It would be commercially pointless because they would have other competitors in the Murray Bridge market.

Why would they forgo the opportunity to enter Riverland?  They only forwent that opportunity under this arrangement with Waikerie, because what they got in exchange was the preservation of the monopoly in the Murray Bridge market.  So it was in exactly the same sense as BHP in QWI.  They were trying to preserve a monopoly; in BHP’s case by only offering to supply at exorbitant prices that were unrealistic, in this case by threatening to enter Riverland unless they got the quid pro quo of a withdrawal that preserved their monopoly.

GLEESON CJ:   Did the taking advantage of their market power consist in the threat to enter Riverland or the withdrawal of the threat to enter Riverland?

MR YOUNG:   It is both.  That is the point we made at the outset.

GLEESON CJ:   Let us take them one by one.  How did threatening to enter Riverland involve an exercise of market power in Murray Bridge

MR YOUNG:   It did not by itself, but that was not the conduct in question.  The conduct in question was the pact.

GLEESON CJ:   The withdrawal of the threat?

MR YOUNG:   No, it was the threat to enter unless Waikerie, in exchange, withdrew.  That is what I meant by “pact”.

HAYNE J:   All that argument is premised on the assumption that there would be no commercial reason to make such a pact unless they were either monopolist or powerful?

MR YOUNG:   Yes, your Honour.

HAYNE J:   Why is the premise valid?  Why should not someone in a highly intensely competitive market say to someone who is about to enter, “Keep out of this.  There are six who are cutting each other’s throats.  We don’t want a seventh.  Go away, and what’s more, we are financially strong enough to do great damage to you in your market”?

MR YOUNG:   Your Honour postulates different conduct from the case here, and I can accept in your Honour’s example that there may be no infringement of section 46 in that example.  That is because nothing is given in exchange.

HAYNE J:   The example was, “Keep out or we’ll come into your market and we’re strong enough.  We have got a long enough pocket to really do you damage in your market”.  So there is a pact.  Now, why no breach of 46 there?

MR YOUNG:   No.  Your Honour has changed the facts on me, with respect.  I did not understand the first example to contain that additional limb and that is how I answered it.  If your Honour adds that limb, my answer would be to the opposite effect.

HAYNE J:   What, breach?

MR YOUNG:   There would be a contravention because there is a connection with the existence of market power in Murray Bridge.  There is no commercial rationale for offering the pact but to preserve the monopoly.  It would not make sense if there were other competitors already in Murray Bridge to say, “We will give up the opportunity of entering Riverland if you stay out.”  What advantage would be gained?  What is one more competitor if there are already six, in your Honour’s example.  The advantage gained by the conduct is the preservation of the monopoly and that, in our respectful submission, is a sufficient connection.  To use Justice Toohey’s words in QWI, “The only reason for making the threat of proposing the arrangement was to preserve the monopoly”.  They were exactly the words he used in BHP v QWI.  Now, can I illustrate it by reference to Safeway as well?

GUMMOW J:   Is that some finding of fact by Justice Toohey?

MR YOUNG:   Yes, it is a finding of fact by Justice Toohey, but it is always a finding of fact.  That is why I started the proposition that the question whether there has been a taking advantage of power is a question of fact, and ultimately it reduces really to no more than this.  Is there a connection between the purposive conduct and the existence of market power?

GUMMOW J:   One of the troubles with the judgments in QWI is that they are read as ascending from some conclusions of fact of particular circumstances to some new principle of law, applicable generally in section 46 cases, which is not right, really.

MR YOUNG:   Your Honour, the issue, really, is this.  You have some wide words, “taking advantage”.  They exist in the section to ensure that the purposive conduct has a connection with market power.  The language in QWI is simply a way of testing whether a sufficient connection exists.

GLEESON CJ:   A sufficient connection of a certain kind, namely, taking advantage of it, not setting out to protect it?

MR YOUNG:   Your Honour, “taking advantage”, we would say, are words of deliberately wide meaning, designed to catch a number of different kinds of connection.

GLEESON CJ:   But it does not mean having any kind of connection with?

MR YOUNG:   No, it does not mean having any kind of connection with, but it simply means there must be a connection in the relevant sense that anti‑competitive conduct for those purposes would not be likely to be engaged in but for the existence of market power.  That is one way in which it has been put.  The other way it has been put is direct inference from the purpose, and that could have been done here.  The court could have directly inferred, “Your purpose is to preserve your monopoly, therefore, you are making these conditional threats.  That is a sufficient connection.”  There is nothing in the words “taking advantage” that says you cannot take advantage by a threat or by an offer at exorbitant prices, or by something stopping short of concrete actions.  You can take advantage of power by threats, we would say, and there is nothing in the words “taking advantage” to preclude that proposition, just as, in an appropriate case, cutting prices might be a way of taking advantage.

The cases use various words or factors to indicate what sort of connection is sufficient.  A good example is Justice French in Natwest v Boral.  He spoke of a causal connection which would be established simply by the fact that market power insulated the actor from the consequences of what he has done.  One might question the word “causal” connection because “connection” does not seem to be cause and effect, but insulation from the ordinary disciplines of competitive market we would say would be a sufficient connection.  Here, of course, Bridge and Rural Press were insulated from the consequences that would flow in a competitive market and make…..because it preserved their monopoly.  If they had other competitors, the consequences of giving an undertaking not to expand in the Riverland would have been quite different.

CALLINAN J:   Mr Young, what was the basis for the factual finding that this could be done at only marginal cost anyway?  That was the finding at first instance.

MR YOUNG:   Yes.  There was a considerable amount of evidence about the facilities available.

CALLINAN J:   They had excess capacity in their printing presses and they had a structure that enabled them to do it.

MR YOUNG:   Yes, and a distribution network.

CALLINAN J:   Yes, but that does not mean that it is just simply marginal cost.  When judges get into areas of cost and economics, sometimes they draw inferences that are different from the realities of the marketplace.

MR YOUNG:   Yes.

CALLINAN J:   I could tell you all sorts of ways that they might have incurred cost beyond marginal cost.

MR YOUNG:   Yes, but accepting your Honour’s point for the moment, but there is a point that is valid that his Honour was making, that is to say that the state of the marketplace in Murray Bridge, the facilities that they had available to them as a virtual monopolist prior to the intervention of Waikerie, did mean that they could implement this threat at a much lower cost and much lower risk than anyone else.

CALLINAN J:   Perhaps, but what is wrong with what the Full Court said in the last two sentences at paragraph 143 on page 1319?  That is the passage in which the Full Court said that anybody could have done this, it was not something that was confined to Rural Press.

MR YOUNG:   I am grateful to your Honour for taking me to the Full Court because that is where I immediately wanted to go.  Your Honour said paragraph 143.

CALLINAN J:   Paragraph 143.  It is on page 1319, the last two sentences.

MR YOUNG:   Your Honour, that may be so, but it does not deny the connection with Rural Press’s market power in this case in relation to the ‑ ‑ ‑

CALLINAN J:   But market power is defined, really, by the trial judge as excess printing capacity.

MR YOUNG:   No, your Honour.

CALLINAN J:   Well, what else does it come down to in fact?

MR YOUNG:   Market power was defined conventionally by the trial judge ‑ ‑ ‑

CALLINAN J:   No, but on the facts of this case, how did his Honour define it?  I thought he defined it very much in terms of excess printing ‑ ‑ ‑

MR YOUNG:   At page 1202 in the trial judge’s judgment, his Honour dealt with the conventional definition of market power.  He dealt with barriers to entry at 1203 and he dealt with the availability of access to printing resources and the like at 1204.  But there was no dispute, as paragraph 122 at 1204 indicates, but that Rural Press and Bridge had a substantial degree of power in the Murray Bridge market.  So his Honour’s findings do not attribute market power solely to the availability of the printing resources it had and, therefore, it would an error, your Honour, to go to the Full Court and proceed on the assumption that the sole basis for Rural Press’s market power was their access to printing resources.

CALLINAN J:   I did not say that.  I said that that seemed to be the most substantial aspect of it.  His Honour also referred to their structure and the fact that they had a strong balance sheet.

MR YOUNG:   No.  Your Honour, can I go to another passage in the Full Court’s judgment where they centrally address the question of taking advantage.  It is at page 1321, commencing at paragraph 149.  This is where, in our submission, the reasoning goes wrong.

Firstly, at paragraph 149 they quote the passage from the primary judge’s reasons at paragraph 128, but it is clear that they misapprehended.  The judge used that expression “might have been able”, but when he applied it, it is clear he applied a test of commercial likelihood.  What the Full Court then proceeded to do was, in paragraph 150, to apply a quite different test. 

I invite the Court to compare paragraph 139 at page 1317, where the Full Court itself states the test that says the authorities require it to apply.  It is to ask how it would have been likely to behave in a competitive market, the test of commercial likelihood.  In paragraph 150 they apply a test, not of commercial likelihood, but of physical possibility.  They answer the question by saying in paragraph 150:

Plainly yes . . . ample financial and physical resources . . . regardless of the market power –

and then they say this:

They may have been motivated by a desire to maintain that market power in making the threat, but they were not taking advantage of that market power in so doing.  Even if there had been a perfectly competitive market . . . Rural Press and Bridge Printing could have threatened to launch (and could have actually launched) the foray into the Riverland market.

Now, nobody would deny that.  Of course they could.  That is not really the question.  The question is whether they are likely to have undertaken that in the absence of market power in the circumstances of this case.  In any event, it is only looking at part of the impugned conduct.  If you apply a test of “could”, you will always get the answer “yes”.  Of course, anybody could do anything in this sort of area.  Anybody could reduce price, anybody could refuse to supply, anybody could enter.  It is a meaningless question.  But, unconsciously it would seem, because of the formulation of the primary judge they have taken in 149, the Full Court has not adhered to the test they themselves stipulated at 139; they have moved away from it.  But we then make a more telling point, we hope.  It is the next sentence:

Had there been a perfectly competitive market in the Murray Bridge newspaper market, they may have lacked the motivation to make the threat, but they could have acted in precisely the same way.

The first part of that sentence comes close to addressing the real question of connection with market power.  The second part, “they could have in acted in precisely the same way”, does not.  When they use the expression “motivation”, in our respectful submission, what they are pointing to is the fact that there is no commercial or business rationale for the conditional threats that were made other than to preserve the monopoly.  Such conditional threats, the implicit offer not to enter Riverland if you stay out, would not have made any sense at all in a competitive market because there would have been other competitors already there. 

So motivation is really another way of saying, absent market power, this conduct would have been irrational.  They could not have afforded to do it in a commercial sense, to quote from Chief Justice Mason and Justice Wilson in QWI, or, to adopt Justice Toohey’s approach, the reason they engaged in this conduct of proposing this market division arrangement through conditional threats was to preserve their monopoly power in the Murray Bridge market. 

In our respectful submission, in this critical passage where they answer the question, the Full Court’s reasons do not address the right question and they really pinpoint what is the key issue.  This was conduct without a commercial rationale that would not be engaged in in a competitive market.

I want to take the Court to Safeway because that issue was picked up in Safeway.  Before the Court entered I had copies of the relevant pages of Safeway handed to your Honours’ tipstaves.

GLEESON CJ:   Did you tell us yesterday that this is coming to this Court?

MR YOUNG:   I am sorry, your Honour.

GLEESON CJ:   Did you tell us yesterday that there is an application for special leave to appeal in Safeway?

MR YOUNG:   Yes, special leave applications have been filed by both parties.

GLEESON CJ:   Thank you.

MR YOUNG:   It is reported in 198 ALR 657. We have only copied the relevant section for the Court. It is a very lengthy judgment. The passage commences at page 722 and runs to 724.

GLEESON CJ:   You say this is inconsistent with Rural Press?

MR YOUNG:   With the Full Court, yes.

GLEESON CJ:   I only noticed that Justice Sackville was a party to both decisions.

MR YOUNG:   Yes, your Honour.  It supports the approach we are urging.  The trial judge, Justice Goldberg, had found no taking advantage of market power.  The relevant conduct is succinctly described in paragraph [326] from the trial judgment:

Safeway imposing a term of trade on the three plant bakers to the effect that if they sold cheap bread to independent stores who retailed it at a price less than the price charged by Safeway . . . Safeway would delete the respective plant bakers’ produces from the Safeway store whose bread sales were affected –

In some cases that was just a threat, in other cases it was implemented.  Now, the trial judge said there was no taking advantage.  His finding is set out at [327].  At [328] another passage of the trial judge’s reasoning is set out where his Honour the trial judge came to the conclusion that Safeway would not have acted any differently in a competitive market.  That approach is rejected by Justices Heerey and Sackville in [329] and they basically adopt the approach that Justice Toohey did in Queensland Wire:

In our view, this analysis ignores the question of why Safeway engaged in the impugned conduct.  This is not the same question as to whether one or more of the statutorily proscribed purposes existed . . . it is necessary to look at not only what the firm did, by why the firm did it.  That is why a business rationale for the conduct, independent of the question of market power, is relevant.

And Melway and Boral is cited.  At the top of the next page, 724, line 2, their Honours concluded:

A firm without market power would not have pursued a policy of deletion because to do so would have produced harm for itself without any countervailing benefit.  A firm without market power would commercially be compelled to stock the full range of products in order to satisfy the consumer demand.  The only consequence of the deletion would be in the adverse reaction of customers, of which there was ample evidence.

Again, at line 15 there is a sentence to similar effect and then it sums up at paragraph [333], starting at line 32:

In determining whether a corporation has taken advantage of its market power it is enough that the corporation’s conduct has been “materially facilitated” by the existence of its power . . . Its reason for doing so was to induce the plant baker to cease supplying discounted bread to an independent retailer in competition with a Safeway supermarket.  As we have explained, there would have been no purpose in Safeway acting in this manner in a competitive market.  On the contrary, had Safeway done so it would have inflicted economic harm on itself for no gain.  Safeway’s conduct in the four instances was therefore materially facilitated by the existence of its market power even though that same conduct would not have been “absolutely impossible” without that power.

We do not say that you cannot make a threat without market power, just as in any other case the same observation can be made.  Market power is not necessary to do any of the sorts of things that will be thrown up in the section 46 conduct, but it is appropriate to ask the question, what is the commercial rationale for the impugned conduct?  If it has no commercial rationale, assuming a competitive market, and if in a competitive market they would simply be inflicting harm on themselves by accepting a restriction, that is, not to enter Riverland, for no compensating advantage, it simply demonstrates there is, in our submission, a sufficient connection with market power to satisfy the expression “take advantage”.

Now, that is what we want to say about taking advantage in section 46.  Can I return very briefly to some questions the Chief Justice asked me yesterday about particularity.  First, I wanted to draw a contrast, or a comparison, at least, with section 47(4) where the same expression appears.  It appears in numerous places within section 47 but, I guess, the best illustration can be founded on section 47(4).  Section 47(4)(c) refers to a condition that includes reference “to particular persons or classes of persons”, as do other subsections of section 47 itself. 

It has always been understood and accepted that in the context of section 47(4) and other parts of section 47 “particular persons or classes of persons” will catch a geographic area condition.  Section 47(4) would apply to a franchisee who says it will deal in a corporation’s products only on condition that the manufacturer agrees to give it an exclusive geographic territory – that is a vertical arrangement for an exclusive distributor within a vertical territory.  Now, that has always been regarded as falling within section 47 but it only falls within section 47 if the expression “particular persons or classes of persons” is construed as including a definition of class by means of a geographic zone or a geographic line.

GUMMOW J:   Now, 47(4) has been in this form throughout the life of the Act?

MR YOUNG:   It has certainly been in that form since ‑ ‑ ‑

HEYDON J:   Since 1977.

GUMMOW J:   It is a 1977 amendment, is it?

HEYDON J:   Yes.

MR YOUNG:   I think it is a 1977 amendment, yes.  But the consequence of saying that the geographic demarcation cannot satisfy the necessary particularity in 4D would, it seems to us, lead to the conclusion that it could not satisfy it in section 47 either, therefore, the typical exclusive franchise territory arrangements would not fall at all within the concept of exclusive dealing and you would never get to apply a section 47(10) test of substantial lessening of competition.  Now, that would be an unexpected consequence.

Secondly, when the Act was amended to include reference to particular classes in section 4D, the explanatory memorandum spoke simply of identified classes.  In other words, the word “particular” was not intended to do any work in relation to excluding certain classes or formulas because they are not sufficiently particular and allowing others in.  All the word “particular” was intended to do was to ensure that the relevant person or class was one identified by the competitors when they made their arrangement.

In other words, simply to ensure that you did not have somebody saying, “You have got an arrangement.  It restricts supply.  After the event, as it were, we will argue it affects a class” to which those in the combination have never given their attention.  It has to be a class identified at the time of the arrangement, but beyond that it is our submission that the word “particular” does not introduce any rules about class certainty or completeness or size.  Any class identified by the parties to the arrangement satisfies that description, including a geographic class.

What we have just said, we would suggest, is supported by the ordinary dictionary definitions of the word “particular”.  To select several from the OED, definition 2, “pertaining or relating to a set of things”; definition 7, “distinguished in some way amongst others of the kind”; or, definition 1, “belonging to, or affecting, a part, but not the whole of something”.  So “particular”, in our submission, does not introduce any disbarment for a formula that is based upon a geographic zone on the grounds that it lacks particularity.

GUMMOW J:   You fix just upon section 47(4).  The phrase occurs throughout the section.

MR YOUNG:   Yes, it does, your Honour.  I just picked (4) as an example because that is commonly one that is applied to a vertical exclusive distributorship arrangement with a geographic territory, and no reason other than that, but your Honour is right, it is right through section 47.  Can I also refer to Justice Mansfield at 1186, paragraph 80 where he addressed particularity.  The argument is put at line 10 that his Honour is addressing,  the market sharing arrangement lacks particularity.  ASX v Pont Data is quoted. 

The Full Court approached “particular” in the way in which we suggest it should be approached, that is, it simply means identified by the parties to the arrangement, but introduces no special class closing rules or class certainty rules.  His Honour at lines 45 to 50 said this:

It is true that it would be difficult to identify exactly all members of the class at any particular time.  But, whether the arrangement was in respect of the Mannum area, or in respect of those persons in the Mannum area and extending to a line about forty kilometres north of Mannum, that group of persons is an identifiable class.

The last matter I need to address is the relief.  Can I hand to the Court copies of the orders that we would say would be appropriate if our appeal is successful?

GLEESON CJ:   Thank you.

MR YOUNG:   Can I indicate, because it may assist the Court ‑ ‑ ‑

GLEESON CJ:   Have you shown these to Mr Douglas?

MR DOUGLAS:   Yes, your Honour, I have.

GLEESON CJ:   Is there any disagreement, Mr Douglas, about these?

MR DOUGLAS:   In the event that our appeal is unsuccessful, they would seem appropriate ‑ ‑ ‑

GLEESON CJ:   All right.

MR YOUNG:   Yes.  Can I simply indicate that the injunction is no longer sought by way of these orders.  That is gone.  A more particular declaration is sought and ‑ ‑ ‑

GUMMOW J:   What is the impact of your order 4?

MR YOUNG:   The impact of our 4?

GUMMOW J:   Yes.

MR YOUNG:   That is to reinstate the penalty orders.

GUMMOW J:   I see, yes.

MR YOUNG:   We looked at the penalty judgments and it is clear that it was treated as one piece of conduct to be penalised once, even if there were one or more contraventions.  That is why we say that is appropriate.  If the Court pleases.

GLEESON CJ:   Thank you, Mr Young.  Yes, Mr Douglas.

MR DOUGLAS:   If I could just deal with the 4D aspect of my learned friend’s argument, firstly, in reply.  If one could go firstly to the Full Court’s judgment at page 1302.  My learned friend has drawn attention to that paragraph of the Full Court’s judgment, paragraph 56, which recites the trial judge’s finding to the effect – that is at 1284 – that “the arrangement had the subjective purpose”, et cetera.  I do not need to read it out.  What my learned friend has not read, in our respectful submission, is paragraph 102 of the Full Court’s judgment at 1302 which says:

We have already referred to the relevant paragraphs of the primary judgment.  It is apparent that the primary Judge’s findings were based upon the view that if there were an arrangement for geographic market sharing (or, more particularly, zoning), that would be a breach of s 45(2)(a)(i) because it would deprive persons in that area of services otherwise available to them from one of the participants.  His Honour came to that view because of his reading of the relevant passage from the judgement in ASX Operations v Pont Data –

So that is, in our respectful submission, how the Full Court treats the finding of the trial judge, which is recited at paragraph 56.  It is characterising it as a finding of mixed fact and law based upon an understanding of the law it derived from – that passage of the Full Court’s judgment in ASX Operations v Pont Data.  It is not, strictly speaking, a finding of fact based upon evidence.  That is clear, in our respectful submission, then from the discussion which takes place at paragraph 103 of the judgment which my learned friend has read out to the Court. 

It is not, in our respectful submission, fair to the Full Court to characterise that passage of their Honours’ judgment as seeking to isolate some additional aspect of detriment by reason of the use of the words “targeted” or “aimed at”.  Rather, what the Full Court was seeking to do was to do precisely what Justice Finn had done in the South Sydney Case with whose reasons they generally agreed.  That is apparent from the commencement of paragraph 99 of their judgment at page 1301 and it is also apparent, in our respectful submission, from their ultimate conclusion which is to be found at paragraph 108, where it is said:

In our opinion, the lack of any finding by the primary Judge that the parties agreed upon a particular class at the time the arrangement came into effect, and the lack of any evidence upon which such a finding could have been based, means that no particular class was identified as required by s 4D of the TP Act.  It follows that the primary Judge’s findings of breaches of s 45(2)(a)(i) and s 45(2)(b)(i) of the TP Act had been established cannot be sustained.  In view of this conclusion, it is unnecessary for us to come to a final view as to the argument that there is a lack of particularity in the class of persons identified by the primary Judge by reason of circularity.

When one looks at those reasons, in our respectful submission, the reason why in the Full Court’s consideration of the matter the case failed on that aspect was because there was no purpose, relevantly, to which the conduct could attach.  My learned friend in some answers to questions from the Chief Justice yesterday appeared to embrace the idea that virtually any agreement for geographic market sharing would fall within 4D and you would not have to go to the additional aspect of the Act, the substantially lessening of competition part.

If my learned friend is right about that, there is an example which is given in the Chief Justice’s judgment in Souths about two persons who form a partnership.  One could imagine other circumstances as well.  I mean, for example, participants to a mining, oil and gas joint venture could set up a joint marketing service arrangement by which they agree upon the geographical areas that they will service.  That would seem to be caught.  If there were two solicitors in Mannum and they are the only two solicitors in Mannum and they agree to go into a partnership, but expressly agree that they will not provide family law services as part of a partnership business, that would also seem to be caught by 4D, if my learned friend is right.

There is also an assumption in the argument which has been put to the effect, as we would understand it, that the class of persons can be defined, as has been set out in paragraph 80 of the trial judge’s judgment at page 1186 over onto 1187, where the trial judge says:

There is, in my judgment, a sufficient degree of particularity in the class of persons to be deprived of the services of the River News, to attract the application of s 4D of the Act.  It is true that it would be difficult to identify exactly all members of the class at any particular time.  But whether the arrangement was in respect of the Mannum area, or in respect of those persons in the Mannum area and extending to a line about forty kilometres north of Mannum, that group of persons is an identifiable class.  They were the persons who, by reasons of the alleged arrangement, were to be deprived of the services otherwise available to them from the River News.

But, of course, there may be people in Waikerie or Mannum or, for that matter, Murray Bridge, who may wish to place an advertisement in the River News to be read in Mannum.  So it is impossible, in our respectful submission, to simply restrict the class of persons to the geographical area of Mannum in which the River News was being promoted more aggressively during the relevant period.  In our respectful submission, one simply cannot define the class by reference to the geographical area in which Mr Emmins was promoting the newspaper more successfully. 

My learned friend has referred to section 47 of the Trade Practices Act and the consequences which any decision of this Court may have if the Full Court’s decision were to be upheld, but the point about subsection 47(4) is, firstly, that there is no reference to purpose in that provision and, secondly, subparagraph (d) in that paragraph also refers to:

in particular places or classes of places or in places other than particular places or classes of places.

GLEESON CJ:   I thought that one of the things that emerged from the decision in News in most of the judgments was the importance of the fact that what section 4D is dealing with is a compound concept.  I think that expression was used in at least two of the judgments, compound of purpose and object.

MR DOUGLAS:   Yes and that, your Honour, in our respectful submission, underlies the careful words of the Full Court in paragraph 104, where they say at the top of page 1304:

In our opinion, market sharing or zoning of the kind involved in the present case, without more, is not an exclusionary provision, and the primary Judge fell into error in rejecting the appellant’s argument to that effect.

So absent evidence of purpose, a mere agreement for the market sharing or zoning is not one which is caught by 4D.  It may be caught by other provisions of the legislation, as was found in this case, subject to our appeal.

My learned friend also in submissions referred to a number of cases where it is said the results would have been different.  If the decision of the Full Court were to be upheld, we have prepared a schedule of those cases setting out the allegations which were made and the findings which were made in respect of the allegations which were made.  It will be noted that a large number of those cases were dealt with by agreement and they are also cases in which there were a number of other breaches alleged, apart from breaches of the exclusionary provision.  Could I just hand up that schedule to the Court, it may be of some assistance.

GLEESON CJ:   Thank you.

KIRBY J:   What is the point made here, that if there is multiple error, it cannot be corrected?  It does not seem a very attractive proposition for the rule of law.

MR DOUGLAS:   I thought the unattractive proposition was the one by the ACCC, your Honour, but there are a number of cases where the result would have been different if the Full Court’s decision was to be upheld.

KIRBY J:   I think we were given on the special leave application a schedule of the large number of cases affected by this case and I assume that the fault line in the Federal Court persists into those cases and ‑ ‑ ‑

MR DOUGLAS:   I do not recall now, your Honour, whether the cases which are referred to in my learned friend’s submissions here are the same cases which were referred to in the special leave application.

GLEESON CJ:   On that schedule was a case of South Sydney v News Limited, one of the cases that was said to be affected by this case?

MR DOUGLAS:   I am not sure that South Sydney was said to be affected by this case, your Honour.  But it is largely a number of penalty proceedings in the Court which were dealt with by agreement.

Now, so far as section 46 is concerned, my learned friend’s submissions were to the effect of commercial rationale provides a sufficient connection to the use of market power.  But what must be found is the actual use of market power.  My learned friend read to you passages from Melway to the effect that the relevant test was whether the relevant entity would have used its market power.  The ratio of Melway is to be found in paragraph 61 of the judgment and what is there said is that:

the real question was whether, without its market power, Melway could have maintained its distributorship system, or at least that part of it that gave distributors exclusive rights in relation to specified segments of the retail market.

That is the subject of a footnote by us in our submissions in response to my learned friend’s submissions in footnote 25 where we set out the relevant paragraphs.  The only issue before the Full Court in this case was whether Rural Press and Bridge Printing had in fact taken advantage of their power in the Murray Bridge newspaper market for the relevant purpose so as to contravene the relevant provisions of section 46.

GLEESON CJ:   Justice McHugh has expressed a doubt about whether you need something more than using market power but, subject to that qualification, the bare minimum that everybody agrees you need for a contravention of section 46 is a use of market power.

MR DOUGLAS:   Yes, your Honour, and it is not sufficient to say that what commercial rationale could there be for it or that once you see that there is a commercial rationale for the behaviour in question that provides a sufficient connection with the use of market power.  Cases can, of course, be put in a number of different ways.  The ACCC in this case chose to put its case on the basis of the exercise of Murray Bridge market power.  It could, as the Full Court has pointed out in paragraph, I think ‑ if I can just find it in the submissions ‑ well, they did point out that it could have been put in another way and I think that paragraph is collected in our submissions and I will not take the time of the Court to read it out now.  If, for example, they had pleaded a wider market, they might have been able to plead some use of market power in a wider market which, relevantly, may have enabled them to try and sheet that charge home.

The only other matter I want to deal with, your Honours, concerns the question of substantiality.  One argument which we put to the court in relation to that issue was that, inevitably, bearing in mind that they yielded to our threat to enter their market, that the reality of that would have ensured that this minor incursion into the Murray Bridge newspaper market would have been over quickly.  Therefore, the “nipped in the bud” argument addressed by the Full Court is not one which would really prove attractive to this Court.  My learned friend’s answer to that is, firstly, it is speculative, but it is well-based speculation because it is based on what actually happened here because, effectively, as soon as we threatened to go in there, they went out.  They may have procrastinated about it, as the court has found, but it did not take them long to withdraw.

My learned friend made a further submission which sounded attractive ‑ which, coming from him, one would expect – to the effect that such an outcome would be the result of genuine competitive forces, as distinct from the conduct which is alleged against us in these proceedings.  But, in our respectful submission, this is a bootstraps argument.  They have to establish that the effect of our conduct hereby impugned was or was likely to be a substantial lessening of competition.  If that outcome does not eventuate because of our ability to compete in their market, there is no substantial lessening of competition.  Therefore, there is nothing which really can be impugned about our conduct.

The only evidence which my learned friend has been able to point to in relation to, if I could put it that way, real competition is some evidence in relation to advertising.  But as a trial judge and as the Full Court noted, as the trial judge was careful to point out, the lesser advertising rates were in part because of the different circulations.

The Standard has 4,500 papers twice a week; the River News 2,500 papers once a week.  There is no evidence that advertising rates were reduced by the Standard during the whole of the period of this competition.  There is some evidence that my learned friend has pointed to that Ms Price got a bit concerned about one aspect of it, but that is about the only evidence they have been able to point to.

So really, when one looks at, there really is no evidence of any real significance of a substantial lessening of competition.  Those are the matters we would wish to put in reply.

GLEESON CJ:   Thank you, Mr Douglas.  Is there anything else you want to say, Mr Young?

MR YOUNG:   With some trepidation, one thing, your Honour.

GLEESON CJ:   Good.  I mean, I am good about the trepidation.

MR YOUNG:   Justice McHugh’s passage in Boral 195 ALR 609 that your Honour ‑ ‑ ‑

KIRBY J:   Where is that passage?

MR YOUNG:   The passage is at 668, paragraph 279.

GLEESON CJ:   Yes.

MR YOUNG:   We make three points in response to the Chief Justice’s observation based on this passage.  The first is that the word “use” was chosen by the judges in Queensland Wire and then endorsed in Melway, really is a word that was devoid of pejorative or hostile intent connotations.

GLEESON CJ:   Yes, but that was because Justice Pincus at first instance in Queensland Wire had taken a view of “take advantage of” that Justice McHugh has expressed a little sympathy with and what the High Court did in Queensland Wire was to withdraw from the words “take advantage of”, as you rightly say, that pejorative element.

MR YOUNG:   Yes, your Honour.

GLEESON CJ:   But they did not withdraw the requirement of use involved in “taking advantage of”.

MR YOUNG:   Yes, well, your Honour is perfectly right and we accept everything your Honour said, but it is going a step further to say that the High Court has ever said that use is the bare minimum needed to constitute “taking advantage” because that really begs the question as to what is meant by “use”.  If market power is an immunity, or a degree of immunity from the disciplines of competition, there is a real sense in which you need to ask the question, “Is it ever used or to what extent is it used as such?”  QWI is an example.  In what sense did BHP use anything when it simply said ‑ ‑ ‑

GLEESON CJ:   Do not ask me.

MR YOUNG:   Well, all I am endeavouring to do, your Honour, is to take a degree of issue with the proposition that use is some sort of bedrock that is always required.  It depends what is meant by the word “use”.

GLEESON CJ:   There is a difference between taking advantage of your power and protecting your power.

MR YOUNG:   Yes, but there may be no difference between relying on your power for leverage or for impact and that might be a use in a specialised sense.

GLEESON CJ:   Nobody has ever said that all you have to do is find a connection between the conduct and the power.

MR YOUNG:   Well, that was the way in which it was put in Boral itself, that that was really the search for a sufficient connection.

GLEESON CJ:   Sufficient connection.

MR YOUNG:   Yes.

GUMMOW J:   Where is that paragraph ?

MR YOUNG:   I think it is back in the joint judgment at paragraph 120, page 632.

GLEESON CJ:   Yes:

a connection such that the firm whose conduct is in question can be said to be taking advantage of its power.

MR YOUNG:   I pose this question, your Honour.  In Justice French’s view it is taking advantage if you simply rely on your market power, not for what you do, but to insulate you in respect of the consequences that would ordinarily flow.  In other words, you are protected from those consequences by the existence of market power.  He thought that reliance by way of insulation from the ordinary disciplines would be a taking advantage.  Query is that a use in the sense in which your Honours seem to use it when you referred to “use” being a bare minimum.

Can I go back to Justice McHugh’s passage and make one other point.

GLEESON CJ:   What page is that again?

MR YOUNG:   Page 668. 

GLEESON CJ:   Thank you.

MR YOUNG:   His Honour really makes the point that we are making – perhaps he is not headed in the same direction we are headed, but the point he makes in the middle of the passage is that “use” does not capture the full meaning.

GLEESON CJ:   That is what Justice Pincus said.

MR YOUNG:   Yes, that was perhaps directed to that, your Honour, but his Honour goes on – and this is what I wanted to draw attention to – in the last sentence in the paragraph:

Moreover, that conduct must have given the firm with market power some advantage that it would not have had in the absence of its substantial degree of market power.

We have a query about that because that seems to treat the section as if it said “gains some advantage”, rather than “takes advantage”.  His Honour is really saying you combine the conduct with the market power and it produces some advantage.  That seems to be somewhat of an inversion of what the section says, in that simply seeking some way in which the purposive conduct is connected with the market power in the sense that it takes advantage or relies upon the market power.

The third point is, even if “use” is part of the appropriate connotation of “take advantage”, Justice Mansfield’s findings would be satisfied in that regard because his Honour found that it was only the elements within its market power that gave the threat significance and credibility in the circumstances.

GLEESON CJ:   Yes.

MR YOUNG:   They were the points we would wish to make.

GLEESON CJ:   Thank you.  We will reserve our decision in this matter and we will adjourn to reconstitute at 10.45 to commence the special leave applications.

AT 10.34 AM THE MATTERS WERE ADJOURNED