SA Brewing Holdings Ltd v Baxt

[1989] FCA 398

Re: S.A. BREWING HOLDINGS LIMITED; JOSEPH IAN NORMAN WINTER; IAN ROSS WILSON;
THE SOUTH AUSTRALIAN BREWING COMPANY LIMITED; GLENN WILLIAM WHEATLAND and
J. GADSDEN AUSTRALIA LIMITED
And: ROBERT BAXT and THE TRADE PRACTICES COMMISSION
Re: S.A. BREWING HOLDINGS LIMITED and THE SOUTH AUSTRALIAN BREWING COMPANY
LIMITED
And: ROBERT BAXT; THE TRADE PRACTICES COMMISSION and JAMES GLIDDEN
Nos. SAG61, 101 and 103 of 1988
FED No. 398
Trade Practices
23 FCR 357

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Fisher(1), Wilcox(2) and French(1) JJ.

CATCHWORDS

Trade Practices - s.155 Notices - requiring production of documents in relation to matters "that constitute or may constitute" contraventions of ss.45 and 46 - requirement for notices to set out matters relied upon - basis of requirement in statute and policy - challenge to validity alleging no contraventions disclosed - investigative process - notices not to be treated like pleadings - s.45 notices - "matter" said to involve acquisition of assets - whether contravention possible if exemption under s.45(7) - part exemption only - balance of agreement as alleged in notice can stand as contravention of s.45 - s.46 - market for draught and packaged beer - threatened termination of contract to acquire cans - whether constitutes "taking advantage of" power in beer market - "market" - "power" - "taking advantage of" - factual assessment necessary - analysis on basis of notice inappropriate save in obvious case - notice on face of it discloses matter which may constitute contravention.

Trade Practices Act 1974 s.155, s.45, s.46

Restrictive Trade Practices Act 1971 s.42

Trade Practices Amendment Act 1977

Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978) 20 ALR 129

Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co. Ltd (1989) 83 ALR 577

Riley McKay Pty Ltd v Bannerman (1977) 31 FLR 129

Melbourne Home of Ford Pty Ltd v Trade Practices Commission (No. 3) (1980) 47 FLR 163

Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1979) 36 FLR 450

W.A. Pines Pty Ltd v Bannerman (1980) 41 FLR 179

Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368

Davenport v Trade Practices Commission (1983) 70 FLR 123

Federal Commissioner of Taxation v Australian and New Zealand Banking Group Limited (1979) 143 CLR 499

Snow v Keating (1978) 19 ALR 373

Bannerman v Mildura Fruit Juices Pty Ltd (1984) 55 ALR 367

MacLean v Shell Chemical (Australia) Pty Ltd (1984) ATPR 40-462

HEARING

ADELAIDE

#DATE 27:7:1989

Counsel for the Applicant: Mr D. Bennett, QC,

Mr J. Mansfield QC and Mr M. Bielecki

Solicitors for the Applicant: Finlaysons

Counsel for the First Mr A. Chernov QC
Second Respondents: and Mr Jopling

Solicitors for the First and Australian Government
Second Respondents: Solicitor

Counsel for the Third Mr J. Fitzpatrick
Respondent:

Solicitors for the Third Mollison Litchfield Respondent:

ORDER

The appeal in No. SAG 101 of 1988 be dismissed.

The appeal in No. SAG 103 of 1988 be dismissed.

The appellants pay the respondents' costs of the appeals in each case.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Section 155 of the Trade Practices Act 1974 provides the Trade Practices Commission with a powerful investigative tool. It authorises the Commission or its Chairman, by written notice, to require the furnishing of information, the production of documents and the giving of sworn testimony in furtherance of inquiries into suspected contraventions of the Act. The issues joined in this appeal raise for consideration the operation and effect of the requirement that such a notice should disclose on its face the basis upon which the power to issue it is exercised.

Factual Background

1. On 11 and 15 November 1988 the Chairman of the Commission issued notices under s.155 to S.A. Brewing Holdings Limited (SABH), its subsidiary The South Australian Brewing Company Limited (SAB) and J. Gadsden Australia Limited. Notices were also issued to the Chairman of Directors of SABH and to the Managing Directors of both SABH and SAB. A further notice issued on 13 December 1988 to James Glidden, a former managing director of SABH.

2. The notices of 11 and 15 November fell into two categories. All required their recipients to produce documents. The first category comprised notices, four of which were dated 11 November and one, directed to SABH's Managing Director, was dated 15 November. They sought the production of documents "relating to matters that constitute or may constitute contraventions of section 45 of the Trade Practices Act 1974". The second category comprised six notices dated 15 November 1988 and directed to all of the appellants. They sought production of documents "relating to a matter that constitutes or may constitute a contravention of section 46 of the Trade Practices Act 1974". The notice dated 13 December 1988 directed to Mr Glidden required him to appear before the Commission to give oral evidence relating to various matters which were specified.

3. The appellants, being the recipients of the notices other than Glidden, then commenced proceedings in this Court (SAG 101 of 1988) seeking declarations that the notices are invalid, orders in the nature of certiorari quashing them and orders of review under the Administrative Decisions (Judicial Review) Act 1977. Separate proceedings (SAG 103 of 1988) were instituted by SABH and SAB in relation to the notice issued to Glidden, who was named as a respondent in that application.

4. On 7 April 1989 Von Doussa J. dismissed the applicationswhich were heard together. This appeal is brought against His Honour's judgment.
   Text of the Notices

5. The notices relating to alleged contraventions of s.45 of the Trade Practices Act were in common form. The notice issued to SAB exemplifies the text:
   

"TRADE PRACTICES ACT 1974

NOTICE UNDER SECTION 155

TO: SOUTH AUSTRALIAN BREWING COMPANY LIMITED 107 Port Road

THEBARTON SOUTH AUSTRALIA 5031 WHEREAS I, ROBERT BAXT, Chairman of the TRADE PRACTICES COMMISSION ("the Commission") have reason to believe that SOUTH AUSTRALIAN BREWING COMPANY LIMITED ("SAB") is capable of producing documents relating to matters that constitute or may constitute contraventions of section 45 of the Trade Practices Act 1974 ("the Act"); namely:

(a) At some time unknown to the Commission but estimated to be between 1 July 1985 and 1 September 1988 SAB and S.A. Brewing Holdings Limited ("SAB Holdings") made a contract or arrangement with Carlton and United Breweries Limited ("CUB") or a related corporation of CUB or arrived at an understanding with CUB or a related corporation of CUB containing a provision under which, by a series of acts or things within the contemplation of the parties, including the entry by CUB, SAB and SAB Holdings into an agreement of a type which was entered into by each of CUB, SAB and SAB Holdings on 1 September 1988 and has been described therein as a "Production Agreement", a position was to be established in which the production facilities of SAB at its Southwark Brewery and the disposition of those production facilities at that Brewery would be under the control of CUB or a related corporation of CUB and that this contract, arrangement or understanding may have had the purpose or may have had or have been likely to have had the effect of substantially lessening competition in any wholesale and/or retail market for both draught and packaged beer in the State of South Australia or in Australia; and

(b) that between the time of the making of the contract, arrangement or understanding referred to in paragraph (a) hereof and the present, CUB or a related corporation of CUB, SAB and SAB Holdings have each given effect to that contract, arrangement or understanding by, amongst other things, entering into the "Production Agreement" referred to in paragraph (a) hereof:

NOW, I, ROBERT BAXT, Chairman of the Commission, HEREBY REQUIRE SAB TO

produce documents specified in the Schedule to this Notice in the possession, power or control of SAB to the Commission at its office at 13 Grenfell Street, Adelaide, South Australia, on or before 4 pm, Monday, 21 November 1988."

There follows a requirement to identify documents formerly in the possession, custody or control of the recipient and various definitions of terms used in the notice, which are not relevant for present purposes. Appended to the Notice is a schedule setting out the various classes of documents whose production is required.

1. The notices in relation to the alleged s.46 contraventions were also in a standard form as between the various recipients. In the case of SAB, the notice provided:
   

"TRADE PRACTICES ACT 1974

NOTICE UNDER SECTION 155

TO: SOUTH AUSTRALIAN BREWING COMPANY LIMITED 107 Port Road

THEBARTON SOUTH AUSTRALIA 5031 WHEREAS I, ROBERT BAXT, Chairman of the TRADE PRACTICES COMMISSION ("the Commission"), have reason to believe that SOUTH AUSTRALIAN BREWING COMPANY LIMITED ("SAB") is capable of producing documents relating to a matter that constitutes or may constitute a contravention of section 46 of the Trade Practices Act 1974 ("the Act") namely: At some time unknown to the Commission but estimated to be between 3 December 1986 and 24 March 1987 Carlton and United Breweries Limited ("CUB") having a substantial degree of power in the markets for draught beer and packaged beer in New South Wales, and, or Victoria and, or, Australia took advantage of that power by terminating or threatening to terminate a contract or agreement between CUB and J. Gadsden Australia Limited, a related corporation of S A Brewing Holdings Limited ("SAB Holdings") under which beer cans were supplied to CUB, for the purpose of deterring or preventing Payless Superbarn (NSW) Proprietary Limited and, or, Payless Superbarn

(Vic.) Proprietary Limited (both these corporations hereinafter collectively referred to as the "Payless companies") from selling under selling under (sic) brand names of the Payless companies packaged beer produced by SAB, another related corporation of SAB Holdings, in the markets for packaged beer in New South Wales and, or, Victoria and, or, Australia; NOW I, ROBERT BAXT, Chairman of the Commission, pursuant to paragraph 155(1)(b) of the Act, HEREBY REQUIRE SAB TO

produce documents specified in the Schedule to this Notice in the possession, power, or control of SAB to the Commission at its office at 13 Grenfell Street, Adelaide, in South Australia, on or before 4.00 pm on, Wednesday, 30 November 1988."

The form of the notice thereafter in terms of definitions and the attachment of a schedule is similar to that used in the s.45 notices.

1. The notice issued to Glidden, which is the subject of the proceedings in SAG 103 of 1988, set out the matters described in the ss.45 and 46 notices already reproduced and there is no need to reproduce its text here.
   The Pleadings

2. By their statement of claim, accompanying the originating application in 101 of 1988, the appellants alleged that each of the notices relying upon a suspected contravention of s.45 was unauthorised, invalid and of no effect because, among other things:
   

"(2) The matters specified in each of the notices if proved would not constitute contraventions of section 45 of the Act;

(3) The matters specified in each of the notices are matters in relation to a contract, arrangement or understanding. Insofar as such contract, arrangement or understanding concerns directly or indirectly the acquisition of assets, section 45 of the Act has no application to any such matters by virtue of the operation of section 45 sub-section (7) of the Act;"

The s.46 notices were also impugned on grounds which included the following:

"(2) The matters specified in each of the notices if proved would not constitute a contravention of section 46 of the Act;

(3) The matters specified do not constitute an exercise of power in a market for draught and packaged beer as alleged."

1. In SAG 103 of 1988, the notice issued to Glidden which relied upon suspected contraventions of both ss.45 and 46 of the Act, was attacked upon grounds similar to those raised in relation to the notices in SAG 101 of 1988. The evidence at trial comprised affidavits exhibiting copies of the notices and a copy of the Production Agreement referred to in the s.45 notices. Some reference to its terms is necessary.
   The Production Agreement

2. The parties to the agreement are said to be CUB, SAB and SABH. It opens with recitals to the effect that at Thebarton in South Australia, SAB, a wholly owned subsidiary of SABH, owns and operates the Southwark Brewery which has "a manufacturing capacity not presently fully utilised by SAB". It is further recited that CUB requires additional brewery facilities for the manufacture of beer to supply its markets and has agreed to grant a licence to SAB to manufacture and package beer for CUB at the Brewery on terms and conditions set out in the agreement.

3. Clause 2 of the agreement provides for CUB to grant to SAB a licence to manufacture and package CUB products at the Brewery on certain terms and conditions. The term of the licence is initially for a period expiring on 31 December 1991 and commencing with the completion of a manual devised by CUB and containing process, product specifications and other manufacturing and packaging information. CUB has an option to extend the term for 5 years (cl.3.0). All CUB products manufactured and packaged pursuant to the licence are to be sold by SAB to CUB at prices determined twice yearly by SAB in accordance with methods specified in the Second Schedule (cl.4.0). SAB is not entitled to assign the licence or grant any sub-licence (cl.5.0) and there is provision restricting disclosure of information confidential to each of the parties (cls. 6.1 and 6.2). Clause 7 provides for estimates of monthly requirements by CUB (7.1) and the furnishing of written orders (cls. 7.2 and 7.3). There is a ceiling on the amount of product SAB is obliged to supply in any four week period (7.5 and Third Schedule) and CUB must order a prescribed minimum quantity of product or in default pay SAB an amount calculated as a percentage of the price applicable to the shortfall in various product categories (7.6 and Fourth Schedule). There is no obligation on CUB to begin placing orders in relation to any product until it has approved in writing:
   

"7.8.1 The brewing and packaging facilities to be used for the manufacture of that CUB product; 7.8.2 The site and procedures for maintaining the Yeast; 7.8.3 That CUB product as brewed by SAB; 7.8.4 That CUB product as packaged by SAB;"

The approvals (subject to cl.11.0) shall not be unreasonably withheld. Clause 7.4 of the agreement to which express reference is made in the grounds of appeal provides:

"During the period commencing on the date upon which the relevant approvals have been given pursuant to clause 7.8 and ending upon the termination of this Agreement CUB shall order from SAB not less than the minimum annual quantities of CUB products specified by container type in the Fourth Schedule hereto (and if the parties agree to a maximum annual quantity then not more than any maximum annual quantities which may be agreed by the parties hereto from time to time) and subject to clauses 7.5 and 7.10 SAB shall supply CUB with CUB products in accordance with such orders."

Clause 8 requires the CUB products to be manufactured only in accordance with and subject to the provisions of that clause and the manual and under the supervision of one of SAB's senior brewers approved in writing by CUB (8.1 and 8.3).

1. Clause 11 requires SAB to modify, upgrade and improve its manufacturing and packaging facilities at the Brewery to the extent necessary to enable it to manufacture CUB products to the standard, quality, flavour, appearance and character of those products as manufactured by CUB. There is a ceiling on capital expenditure at a nominated figure or such greater amount as may be agreed during the initial term. The parties are to consult to develop an agreed programme for such capital expenditure.

2. Clause 14 provides for termination of the agreement on the occurrence of various events.

3. Clause 15 deals with various consequences of termination of the agreement. Clause 16 requires that if during its term SABH or related companies decide to dispose of any interest in a substantial part of the SAB Brewing Business or Assets to a person or unrelated company not a party to the agreement, then SABH shall give notice thereof to CUB (16.1). Sub-clauses 16.2 and 16.3 provide for acquisition by CUB as follows:
   

"16.2 Upon giving that notice Holdings shall be entitled (unless prohibited by law) for a period of 30 days thereafter to require CUB or its nominee to purchase the entire legal and beneficial interest held by Holdings and or related companies in the SAB Brewing Business (which shall be free from encumbrances) at a price determined in accordance with clause 16.5;

16.3 If Holdings does not exercise its entitlement pursuant to clause 16.2, or is prohibited by law from doing so, CUB shall for a further period of 30 days have a first right of refusal to acquire for itself or its nominee the SAB Brewing Business (which shall be free from encumbrances) from Holdings and or related companies at a price determined in accordance with clause 16.5."

Only after the expiry of the CUB election period can SABH or related companies dispose of any interest in the Business or Assets (16.4). The price payable by CUB is calculated in accordance with the provisions of cl.16.5. Clause 17 makes provision for the parties to enter into a Joint Venture Agreement as follows:

"At the time at which the cumulative total of CUB Products ordered by CUB in accordance with clause 7.2 and which SAB is obliged to accept pursuant to clause 7.4 becomes greater than 110 million litres CUB shall be entitled to demand performance of and compliance with the terms of the Joint Venture Agreement by notice in writing to Holdings and CUB and Holdings shall thereupon become bound by the terms of the Joint Venture Agreement which shall be deemed to have been executed by CUB and Holdings at that time and, without limiting the foregoing, CUB may request Holdings to execute the Joint Venture Agreement and Holdings forthwith shall execute the Joint Venture Agreement. CUB is hereby irrevocably appointed to execute the Joint Venture Agreement as Attorney under Power for Holdings in the event that Holdings fails to execute the same."

1. Clause 27 provides:
   

"This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supercedes and extinguishes all prior agreements and understandings between the parties with respect to the matters covered hereby and all representations or warranties previously given."

1. The Joint Venture Agreement provides for a joint venture between SABH and CUB for the manufacturing and packaging of beer and other beverages. By cl.18 it sets out contingencies under which CUB would be entitled to acquire the SAB business from SABH.
   The Statutory Framework

2. Section 155 of the Trade Practices Act 1974 provides in the relevant parts:
   

"155(1) Where the Commission, the Chairman or the Deputy Chairman has reason to believe that a person is capable of furnishing information, producing documents or giving evidence relating to a matter that constitutes, or may constitute, a contravention of this Act; or is relevant to the making of a decision by the Commission under sub-section 93(3), a member of the Commission may, by notice in writing served on that person, require that person -

(a) to furnish to the Commission, by writing signed by that person, or in the case of a body corporate, by a competent officer of the body corporate, within the time and in the manner specified in the notice, any such information;

(b) to produce to the Commission, or to a person specified in the notice acting on its behalf, in accordance with the notice, any such documents;

Other subsections of s.155 make provision for a power of entry onto premises and the inspection and copying of documents (sub-s.(2)), the taking of evidence on oath (sub-s.(3)), notices in respect of agreements, particulars of which had been furnished under s.42 of the Restrictive Trade Practices Act 1971 (sub-s.(4), obligations to comply with notices and give reasonable assistance to officers entering premises. Penalties for non-compliance are also specified (sub-ss.5, 6 and 6A). Sub-section (7) provides that self incrimination is no excuse for failure to comply with a notice but that answers provided under the section are not admissible in evidence in certain criminal proceedings.

1. Section 45 prohibits contracts, arrangements or understandings between persons who are competitive with each other and which restrict the supply or acquisition of goods or services to or from particular persons or classes of person and in particular circumstances or on particular conditions. Such restrictions, known as exclusionary provisions, are more precisely defined in s.4D of the Act. The section also strikes at contracts, arrangements or understandings which have the purpose or would be likely to have the effect of substantially lessening competition. Sub-section 45(1) concerns and renders unenforceable contracts made before the Trade Practices Amendment Act 1977. Sub-section 45(2) provides:
   

"45(2) A corporation shall not -

(a) make a contract or arrangement, or arrive at an understanding, if -

(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or

(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision -

(i) is an exclusionary provision; or

(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition."

Competition is defined in sub-s.45(3) as follows:

"(3) For the purposes of this section and section 45A, "competition", in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding or any body corporate related to such a corporation, supplies or acquires or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services."

And by sub-s.(7), contracts, arrangements or understandings for the acquisition of any shares in the capital or assets of another body corporate are excluded from the ambit of s.45.

"(7) This section does not apply to or in relation to a contract, arrangement or understanding in so far as the contract, arrangement or understanding provides, or to or in relation to a proposed contract, arrangement or understanding in so far as the proposed contract, arrangement or understanding would provide, directly or indirectly for the acquisition of any shares in the capital, or any assets, of a body corporate."

1. Section 46 provides in the relevant parts:
   

"46(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of -

(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;

(b) preventing the entry of a person in to that or any other market; or

(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.

(2) (provides for putative aggregation of power of related corporations)

(3) In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the Court shall have regard to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of -

(a) competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(b) persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market.

(4) In this section -

(a) a reference to power is a reference to market power;

(b) a reference to a market is a reference to a market for goods or services; and

(c) a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

(7) (Purpose may be inferred from conduct or other relevant circumstances.)

For completeness, reference should also be made to the opening words of sub-s.46(1) as it stood prior to the 1986 amendment:

"46(1) A corporation that is in a position substantially to control a market for goods or services shall not take advantage of the power in relation to that market that it has by virtue of being in that position for the purpose of . . . "

The section then went on to set out proscribed purposes in terms substantially similar to those in the present sub-s.46(1).

1. Current relevant definition provisions are as follows:
   

"4(4) In this Act -

.

.

.

(b) A reference to the acquisition of assets of a body corporate shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such assets but does not include a reference to an acquisition by way of charge only or an acquisition in the ordinary course of business." "4E. 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."

Trial Judge's Reasons for Judgment

1. His Honour accepted that to amount to a valid exercise of power, a notice issued under s.155 must convey with reasonable clarity to its recipient what information must be furnished and what documents produced. To that end it must identify the 'matter', that is a body of facts which constitutes or may constitute a contravention of the Act. A sufficient identification would not require the court to resort to speculation or draw on improbable circumstances to uphold the validity of the notice.

2. The s.45 notices had to be read with the Production Agreement and construed accordingly. The contract, arrangement or understanding alleged, while not constituted by the Production Agreement, found expression in it. His Honour held that the validity of the notices should be judged against the terms of that agreement. It was not contested, and the Court accepted, that the reference in the notices to "disposition of . . . production facilities" referred to their disposal. He rejected the submission that clause 16 of the Production Agreement and clause 18 of the Joint Venture Agreement granted options to purchase assets of SAB, which were asset acquisitions and excluded by sub-s.45(7) from the operation of s.45. This rejection rested upon the proposition that the agreements contained no provision under which CUB had acquired a legal or equitable interest in the assets of SAB or SABH.

3. The right granted by clause 16 he said, was a right of refusal. Clause 18.2 of the Joint Venture Agreement could be characterised as an option, but bound nobody because it was nothing but an element of an anticipated agreement. Thus, his Honour concluded that sub-s.45(7) had no application to the present case. In any event, his Honour pointed out that sub-s.45(7) only exempts contracts, arrangements or understandings from the operation of s.45 "in so far as" it provides for a relevant acquisition. His Honour went on in general terms to hold that the matter set out in the s.45 notices was capable of amounting to a contravention of the section. In so doing he accepted the respondent's submissions that control by CUB over SAB's production facilities may arise by the combination of rights granted to CUB under the Agreement. Such rights arise in relation to the minimum specified production of CUB products at specified standards, the manner of production, supply of information to CUB and rights of entry.

4. It could not be said, as a proposition of law, that either of the matters (a) or (b) in the s.45 notices failed to disclose a body of facts which may constitute a contravention of the section.

5. In relation to s.46, the appellants submitted to his Honour that the notices disclosed no contravention. The relevant power under s.46(4)(c) is power in relation to a market and the contravenor must take advantage of that power in that market. CUB, it was said, could take advantage of its power in the market for draught and packaged beer by acting in its capacity as a supplier of beer. The contravention alleged in the notice involved exercise of power in the can market. His Honour rejected the argument, noting the rejection of what he characterised as similar contentions in Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978) 20 ALR 129. Nor was there anything in the judgment of the High Court in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co. Ltd (1989) 83 ALR 577 to the contrary and no such limitation had been previously identified. His Honour concluded his reasons for judgment by saying:
   

"In the instant case whether or not the alleged termination or threat to terminate a contract or agreement between CUB and Gadsden was an exercise of power held by CUB in one of the specified beer market (sic) is a factual question, the answer to which is likely to require consideration of many facets of the operation of the specified beer markets, and the positions occupied by CUB and Gadsden in relation to those markets. That being so, it cannot be said that as a matter of law, the s.46 notices do not allege facts which may constitute a contravention of s.46."

Grounds of Appeal

1. The applicants in each of the applications appeal against his Honour's judgment on the basis first that he should have found that CUB did acquire an interest in the assets of SAB or SABH pursuant to the Production Agreement (Ground 2), that clause 16 of that Agreement and 18 of the Joint Venture Agreement granted options to purchase (Ground 3) and that he had failed to consider the effect of clauses 7(4) and 17 of the Production Agreement (Ground 4). He failed, it was said, to properly take into account sub-s.4(4) of the Act and the effect of sub-ss.50(4) and (5) in its proper interpretation (Ground 5). Further, his Honour erred in finding that s.45(7) did not apply to a right of refusal (Ground 6) and misconstrued the sub-section by finding that the words "directly or indirectly" qualified the notion of "acquisition" and not the word "provides" (Ground 7). The broader finding that control over production facilities relevant to a contravention of s.45 might arise from the combination of rights granted to CUB under the agreement, is attacked as erroneous (Ground 8(1)) as is the finding that the respondent's submission correctly expressed a reasonable construction of the description of the s.45 matter read with the Agreement (Ground 8(2)). The trial judge also failed, it was said, to take into account the fact that SAB would continue to own and operate the production facilities for its own brand beers (Ground 9), and should have found that there was no basis on which CUB's rights could constitute control of the facilities or that the facilities would be under its control except in a manner to which sub-s.45(7) applied (Ground 10).

2. As to the s.46 notices, his Honour is said to have erred in holding that the term "market" in para.46(4)(c) of the Act should not be so construed as to impose a limitation on the operation of the words "take advantage of" in sub-s.46(1) (Ground 11). He erred in his interpretation of the Queensland Wire case in failing to take into account that BHP's conduct was found to have occurred in a market included in the market for steel and steel products in which BHP had dominance (Ground 12). And he erred, it was said, in finding that no limitation is imposed by s.46 on where or how an exercise of power must take place to constitute a contravention of the section (Ground 13). His Honour further erred in failing to find that to take advantage of a power in a market for one of many foods and beverages packed in cans, by acting in the market for cans, was an improbable circumstance which could not support the s.46 notices (Ground 14). Finally, it was said, that his Honour erred in finding that the alleged threat to terminate a contract or agreement between CUB and Gadsten could be an exercise of power held by CUB in a specified beer market (Ground 15).
   Notice of Contention

3. The first and second respondents filed a notice of contention at the hearing of the appeal to the effect that the Learned Trial Judge erred in finding:
   

"(a) that the validity of the "section 45 matters" in the notice should be judged against the terms of the Production Agreement alone;

(b) that for the provisions of the contract, arrangement or understanding referred to in the description of the "section 45 matters" in the notice to embrace more than the terms of the Production Agreement would require the Court to draw on improbable circumstances to uphold the validity of the notice."

The Approach to Section 155

1. The powers conferred by s.155 must be exercised in aid of the legitimate statutory functions of the Commission. An early statement on the manner of their exercise said that a notice issued under the section must specify the information sought with sufficient clarity to enable its recipient to know what is required - Riley McKay Pty Ltd v Bannerman (1977) 31 FLR 129 (Bowen CJ). That was subject to the qualification that such notices are to be "reasonably, not preciously, construed" and that the terms used in them will ordinarily take their meaning "from the commercial circumstances in which the notices are given." - Melbourne Home of Ford Pty Ltd v Trade Practices Commission (No.3) (1980) 47 FLR 163, 175-176 (Full Court). The judgment in the latter case proceeded on the assumption that a notice will specify a "matter" of the kind contemplated by the section. No express constructional basis was advanced for that assumption. That absence of exposition may be explained by the fact that, as a matter of practice since the enactment of s.155, the Commission has set out the "matter" relied upon in its notices. The meaning of the term "matter" was however, the subject of discussion in Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1979) 36 FLR 450, 474 (Franki and Northrop JJ) and W.A. Pines Pty Ltd v Bannerman (1980) 41 FLR 175 (Full Court). It is on those authorities to be construed in its ordinary sense of an "affair or thing" and refers to a body of facts which constitute or may constitute a contravention.

2. The proposition that the specification of a relevant "matter" is a condition of the validity of a s.155 notice was made explicit by the Full Court in Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368 at 374:
   

". . . the notice must disclose that the Commissioner is entitled to require that the recipient furnish the information or produce the documents which the notice describes."

And at 375 their Honours said that that entitlement would not be shown "unless it appears from the notice that the information or documents sought are information or documents 'relating' to one or more 'matters' of a kind described in the subsection." It is clear from what follows in that judgment that the description of the relevant "matter" must go beyond a mere assertion that it constitutes or may constitute a contravention of some identified section. The notice must disclose the necessary relationship between the information sought and the matter in respect of which it is sought. This requires a sufficient description of the "matter" to enable the relationship to be discerned. We shall refer to this for convenience as the "entitlement disclosure condition".

1. As with the requirement that the notice be clear in its terms, this will not support an over-technical or hypercritical approach to its construction - Pyneboard Pty Ltd v Trade Practices Commission (supra) at 376. And it is fundamental, that given the investigative nature of the power under consideration, there is no requirement that the notice 'plead' all the facts necessary to constitute a contravention or possible contravention. The words "may constitute" enable a court to judge from the material in the notice whether, if other facts which may or may not have occurred come to light, the whole body of facts would constitute a contravention - Davenport v Trade Practices Commission (1983) 70 FLR 123, 130-131 (Northrop J.). In doing so however, it is not necessary for the Court to determine whether a contravention has occurred or will occur, nor will it idly speculate or draw on improbable circumstances to uphold the validity of a notice - ibid at 132.

2. It was in the Pyneboard case that there first appeared some discussion of the basis for the entitlement disclosure condition in relation to s.155. There the Court made reference to passages from the judgments of Gibbs ACJ and Mason J. in Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499 which related to notices issued under the analagous s.264 of the Income Tax Assessment Act 1936. Gibbs ACJ at 525 first prescribed as a condition of validity of such a notice that it describe with clarity the class of documents to be produced. He then went on:
   

"However the notice must in my opinion go further: it must show the person to whom it is addressed that any document which he is required to produce is one whose production the Commissioner is entitled to require . . . the power is confined to giving a requirement of a particular kind - a requirement to produce documents relating to the income or assessment of some person - and a notice requiring the production of documents not so related is beyond the scope of the power."

So expressed, the condition is based upon the language of s.264. And in Snow v Keating (1978) 19 ALR 373, referred to with approval by Gibbs ACJ, Burt CJ made explicit its statutory foundation:

"The power which is given can only be exercised by "notice in writing" and to be within par (b) of sub-s (1) the Commissioner has been granted the power in that way to "require any person . . . to attend and give evidence . . . concerning his or any other person's income or assessment". Those words are words of limitation upon the power which is given, and more particularly upon the means whereby the power which is given can be exercised. A notice requiring a person to appear and give evidence without identifying a subject matter within the sub-section with which the evidence to be given is to be concerned is not a notice within the sub-section;" (at p 375)

In Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (supra) at 538, Mason J. enunciated a broader argument for the requirement:

"Because the exercise of the power casts onerous obligations on the recipient of a notice, and because the recipient (not being the taxpayer) is only justified, vis-a-vis the taxpayer, in producing the taxpayer's documents without his consent in response to a valid demand, it is for the Commissioner so to formulate his notice that this limitation on his authority is drawn to the attention of the recipient."

A statutory basis for the entitlement disclosure condition under s.155 was propounded by Davies J. in Bannerman v Mildura Fruit Juices Pty Ltd (1984) 55 ALR 367 at 375-376 where, after referring to Snow v Keating (supra) and Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (supra), he said:

"Section 155 of the Trade Practices Act 1974 (Cth) must be given effect in like manner. Not only does the section provide a penalty for breach of the obligation imposed upon the recipient of the notice, but s 155(1) in terms does not empower the Chairman to require the recipient of the notice to provide any information whatever or any document whatever but only "such information" and "such documents", that is to say, information and documents "relating to a matter that constitutes, or may constitute, a contravention of this Act"."

That approach was not addressed in the joint judgment of Bowen CJ. and Neaves J. Their Honours simply reaffirmed the condition and pointed out that the identification of the matter provides for the recipient of the notice a point of reference by which to judge whether it validly requires the specified information to be furnished or the specified documents to be produced. Agreeing, as we do with their Honours' view of the utility and desirability of the requirement, it finds its roots and ultimate justification in a proper construction of s.155(1) as enunciated by Davies J. And on that basis it emerges as an aspect of the statutory power able to be discerned in the words of the statute.

1. Neither the constructional nor policy supports for the entitlement disclosure condition requires that a notice plead a contravention or suspected contravention. It is fundamental that the proper progress of legitimate investigation be not disrupted by what may amount to demurrer or strike out motions on the terms of the notice. Where, however, the 'matter' referred to in the notice is incapable, after allowing for undiscovered facts, of amounting to a contravention, then the issue of the notice is not a valid exercise of power. As Brennan J. said in W.A. Pines Pty. Ltd. v. Bannerman (supra) at p 179:
   

"The character of the matter is determined objectively, and if it could be shown that a contravention would not be constituted by a concatenation of facts which exist or have existed and facts which might reasonably be suspected to exist or to be about to exist or to have existed, there would be no 'matter' relating to which a person could furnish information etc., as provided for by sub-s.155(1)."

The entitlement disclosure condition is an emanation of the statutory language empowering the Chairman only to serve a notice requiring the furnishing of such information, the production of such documents or the giving of such evidence as relates to a matter which constitutes or may constitute a contravention. The power so conferred is also conditional upon the Chairman having reason to believe and believing that the recipient is capable of providing the requisite assistance:

"In substance the condition of the Chairman's power is his having reason to believe and believing that the person to whom the notice is to be given can provide assistance in the investigation which the Commission has in hand," (W.A Pines Pty. Ltd. v. Bannerman (supra) per Brennan J. at p 180.)

The necessary belief must relate to the capacity of the person on whom the notice is served to furnish, produce or give the information, document or evidence sought. There is no statutory requirement that the Chairman believe that there has been or may be a contravention. (ibid. per Lockhart J. at p 189.) The question for determination is ultimately an objective one - is the matter identified in the notice capable, after allowing for undiscovered facts, of amounting to a contravention?

The Section 45 Notices

1. In order to succeed on the issues raised in the first seven grounds of appeal which rely ultimately upon the operation of sub-s.45(7) of the Act, the appellants must establish two principal propositions. The first is that the matter set out in the s.45 notices describes a contract, arrangement or understanding containing provisions relating to the acquisition of assets in a corporation. The second is that the matter having been so characterised cannot constitute a contravention of s.45.

2. In our opinion, this aspect of the appeal can be determined upon a consideration of the second proposition. Sub-section 45(7) excludes from the application of s.45 any existing or proposed contract, arrangement or understanding "in so far as" it does or would provide directly or indirectly for the acquisition of any shares in the capital or in the assets of a body corporate. Its purpose is to define a boundary between the fields of operation of ss.45 and 50. This is not to say that all provisions thereby excluded from the operation of s.45 will attract the application of s.50. But it is the latter section which primarily regulates anti-competitive acquisitions and those acquisitions it does not touch will not be caught by s.45. Consistently with the purpose of defining boundaries between the two provisions the words "in so far as" in sub-s.45(7) preserve the application of s.45 to the relevant contract, arrangement or understanding if it can stand with the excluded provisions severed and still amount to a contravention. There may be cases where no severance is possible and the exclusion of the acquisition provision effectively excludes the entire transaction from the application of s.45. The learned trial judge took the view that severance was possible in relation to the matter defined in the s.45 notices and said:
   

"In my view the notices would be valid insofar as they allege a contract, arrangement or undertaking (sic) containing a provision under which a position was to be established in which the production facilities of SAB at its Southwark Brewery would be under the control of CUB or a related corporation of CUB. I consider the additional allegation of the establishment of a position in which the disposition of those production facilities would be under the control of CUB or a related corporation of CUB, could be severed from the balance of the "matter"."

We agree with his Honour's reasons in this regard. The "matter" was so defined in the s.45 notices that entry into the Production Agreement was but one of a series of acts or things done by virtue of a provision of the contract, arrangement or understanding whereby the production facilities of SAB or their disposition would be under the control of CUB. The Production Agreement itself was far more extensive than cl.16 and its other provisions could not be viewed as merely ancillary to the rights and obligations created by that clause. The investigative character of the process being undertaken must be borne in mind. There is no "resort to improbable circumstances" involved in the proposition that facts yet to be disclosed may show, within the framework of the matter as defined, agreements or understandings antecedent to the Production Agreement and relating to the way in which it would be put into effect. Within the factual framework contemplated by the "matter" in the notices, arrangements or understandings may exist under which no real exercise of the purported option or proposed joint venture agreement was ever contemplated. In our opinion the notices are unable to be attacked on the basis that the Production and Joint Venture Agreements contain provisions that may be characterised as conferring some legal or equitable interest in the assets of SAB or SABH. The question whether the Agreements do have that effect at law was answered by his Honour adversely to the appellants. It is unnecessary for us to resolve the issue, and at this level undesirable, having regard to the fact that it has arisen for determination as an element of the subject matter of an incomplete investigation. The first seven grounds of appeal will therefore fail.

1. The eighth, ninth and tenth grounds relate to the question whether the rights conferred on CUB by the Production Agreement could amount to "control of production facilities" in the sense contemplated by the notices. In this regard we agree with his Honour's reasoning so far as it relates to the provisions of the Production Agreement. Again, even if he were wrong in that construction, the "matter" is so set out in the notice as to cover the case that control of the production facilities is contemplated whether or not conferred by the terms of the agreement. In our opinion the eighth, ninth and tenth grounds of the appeal will also fail.
   The Section 46 Notices

2. The point made by the appellants in relation to these notices is, as their counsel characterised it, a simple one. Where a corporation has a substantial degree of power in a market, the relevant proscription in s.46 prohibits it from taking advantage of that power for the purpose of deterring or preventing a person from engaging in competitive conduct in that or any other market. The matter described in the s.46 notices relates to a taking advantage by CUB of its power in the market for draught and packaged beer in New South Wales and/or Victoria and/or Australia. It is the termination or threatened termination of a contract for the acquisition of cans that was said to have constituted the "taking advantage". But, say the appellants, this conduct, relating as it does to the acquisition of cans, could not on any conceivable facts, amount to a taking advantage of power in the beer market. Therefore, it is said, the matter could not constitute a contravention. The notice, it was submitted, is thus invalid either because the Chairman of the Commission lacked the requisite reason to believe or because the entitlement disclosure condition was not met.

3. In one sentence in his Honour's judgment he, with respect, mis-stated the case for the appellants when he said:
   

"It is argued that the s.46 notice alleges a substantial degree of power in a beer market, but a taking advantage of that power in the can market not the beer market."

The argument in the present case did not involve the contention that the taking advantage of power in one market for the purpose of s.46 cannot find expression as conduct in another. And although there was some discussion of the possible relationship between power in the beer market and power in the can market the question of a second market, a "can market", does not really arise here. The issue is whether certain conduct, the termination or threatened termination of a contract to acquire cans, is capable of amounting to a taking advantage of power in the market for draught and packaged beer. At the forefront and dominating the Court's approach to that issue, is the need to recognise the nature of its inquiry. The question for the Court is whether a notice issued in the course of an incomplete investigative process is valid. That question has to be answered by reference to a statement on the face of the notice that a matter briefly and in a sense provisionally described may constitute a contravention of the Act. This is no occasion for defining the extent or incidents of the markets for draught and packaged beer. There is no evidence to support such an exercise. Nor is it an occasion for assessing the extent or nature of CUB's power in such markets. There is no evidence on that question. Yet there can be no confident answer to the question - can CUB's threatened termination of a can acquisition contract amount to the taking advantage of power in a market for draught and packaged beer? - without some such factual inquiry. It is only if the question being posed virtually answers itself in the negative that the Court could dispose of the issue in proceedings of this kind.

1. The point is illustrated by a consideration of the three terms "market", "substantial power in the market" and "take advantage of". The definition of "market" in s.4E of the Act limits the class of relevant markets to those "in Australia" and requires that when used in relation to goods or services it shall also apply to substituted or competitive goods or services. The process of definition is not thereby exhausted. Geographical, product and functional aspects must all be addressed. Geography is defined in the alternative by the notices themselves and presents no difficulty in the present case. "Draught beer and packaged beer" describes in broad terms a range of products including, no doubt, beer in cans. Function is left undefined. Presumably it includes the sale of canned beer by wholesale. It might arguably include the canning process. In Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (supra), Mason CJ and Wilson J. observed that in the analysis of a s.46 claim defining the market and evaluating the degree of power in that market are part of the same process. Indeed it can be said that defining the market and discerning the content of the power in that market are similarly related processes. Power in relation to a market is defined by sub-s.46(4)(c) to be power in that market as a supplier or acquirer of goods or services. To say that, may be to identify its source. It does not define the things which may be done in its exercise. In Queensland Wire (supra) at 583, Mason CJ and Wilson J. said:
   

"Market power can be defined as the ability of a firm to raise prices above the supply cost without rivals taking away customers in due time, supply cost being the minimum cost an efficient firm would incur in producing the product: see Fuller, "Article 86 EEC: Economic Analysis of the Existence of a Dominant Position", (1979) 4 European Law Reports 423 at 428."

That statement sets out what is no doubt a fundamental measure of market power. It does not, however, require that the taking advantage of such power is only ever expressed in terms of pricing conduct. Queensland Wire (supra) itself was a case in which the relevant conduct was the refusal to supply certain products to a competitor (cf MacLean v Shell Chemical (Australia) Pty Ltd (1984) ATPR 40-462). As Dawson J. said at 591:

". . . market power has aspects other than influence upon the market price. It may be manifested by practices directed at excluding competition such as exclusive dealing, tying arrangements, predatory pricing or refusal to deal . . . The ability to engage persistently in these practices may be as indictative of market power as the ability to influence prices. Thus Kaysen and Turner define market power as follows:

"A firm possesses market power when it can behave persistently in a manner different from the behaviour that a competitive market would enforce on a firm facing otherwise similar cost and demand conditions." (Kaysen and Turner, Antitrust Policy (1959), p 75)"

There being no pejorative or moral element to be identified in "taking advantage of" market power for the purpose of s.46 - Queensland Wire (supra) - it certainly includes (although it may not be limited to) the concept of "exercising" the power.

1. On the preceding considerations the issue for determination is whether CUB's termination or threatened termination of a can acquisition contract with Gadsden cannot constitute a use of its power in the draught and packaged beer market. We are not satisfied without an assessment of the facts under investigation, that the conduct in question could not be a use of power in the market in question. The size of the can contract and the ease with which CUB is able to bear the cost of changing from one supplier to another may be indicia of and related to its power in the market for draught and packaged beer. These are to some extent speculative matters and may well be subjects for the investigation of which the notices are part. On the face of it, they purport to allege a matter that may constitute a contravention and the Court is unable to exclude that possibility.

2. Having regard to these reasons, it is unnecessary to separately address the notice of contention. The appeals will be dismissed with costs.

JUDGE2

I have had the advantage of reading in draft form the reasons for judgment of Fisher and French JJ. I respectfully agree with everything which their Honours say regarding the proper approach to challenges to the validity of notices issued under s.155 of the Trade Practices Act 1974 and in connection with the notices issued in the present case which refer to possible contraventions of s.45 of the Act.

1. I have, however, a reservation concerning the notices which refer to s.46. It is, of course, fundamental to the application of s.46 that the relevant corporation has taken advantage of its power in a particular market for the purpose of achieving one of the objects specified in paras.(a), (b) and (c) of s.46(1): see Williams v Papersave Pty Ltd (1987) 16 FCR 80. In the present case the relevant notices allege that CUB had at material times a substantial degree of power in the markets for draught beer and packaged beer, within certain geographical areas. For present purposes it must be assumed that this allegation is correct. The notices then allege that CUB took advantage of that power -- that is its power in the beer market -- by terminating or threatening to terminate a contract between itself and Gadsden under which beer cans were supplied to CUB.

2. My difficulty is that I cannot see how a termination of, or a threat to terminate, a contract to purchase cans may be an action which takes advantage of power in the beer market. If the alleged action was taken, and was effective, this must have been because of its impact upon Gadsden's ability to sell cans. Such force as the action may have had derived not from CUB's position as a vendor of beer but from its position as a purchaser of cans. It is presumably true that CUB only purchased cans because it sold beer; but that fact does not make its action in purchasing the cans an activity in the beer market. In buying the cans, it entered the can market. In deciding, or threatening, not to purchase cans from Gadsden it was taking action in the can market. If that action was capable of influencing Gadsden's behaviour, that must have been because CUB had some power in the can market. Gadsden was not a participant in the beer market.

3. Counsel for the respondent argued that it was wrong to analyse the matter in this way, especially at an investigatory stage. They said that such an analysis involves an a priori division of the relevant market or markets before the facts are all known. Counsel suggested that power in the beer market is not limited to the production and disposition of beer, that it could conceivably include power in relation to the supply of raw materials, such as yeast, hops, etc. By way of analogy counsel cited the case of a shoe manufacturer, who has substantial power in the shoe market and whose power may encompass the acquisition of lacing eyes or shoe laces.

1. I have no difficulty with the proposition that power in a particular market may confer upon a person power in a related market. The more closely allied the relevant products, the more this is likely to be so. Without deciding the point, it may even be correct to say that a corporation may have a substantial degree of power in a particular market even though it is not presently a participant in that market. The corporation's activity in a related market may enable it to cast an influential shadow over the subject market. For example, a beer manufacturer which uses bottles exclusively may be able to influence the conduct of participants in the can market by making threats or promises as to its future use of cans. But, as it seems to me, in taking that course, the beer manufacturer would be taking advantage of its power in the can market rather than its power in the beer market. If it were not possible for the beer manufacturer to enter the can market, its threats or promises would be futile, whatever the extent of its beer sales.

2. It may be the position, in the present case, that the activity of CUB in the beer market gave to it considerable power in the can market. The evidence does not reveal what proportion of the cans produced in Australia are used for the packaging of beer; but the verges of Australian country roads suggest that the proportion is substantial. I am prepared to assume that, in Australia, substantial power in the beer market carries with it substantial power in the can market, or, perhaps, in a particular section of the can market. But it seems to me that such power is power in that market, or sub-market, rather than power in the beer market.

3. In reaching these views I do not overlook the undesirability of making an a priori division of the relevant market. It is necessary to remember that all the facts are not yet available. I agree with Fisher and French JJ that the issue is whether the alleged conduct was capable of amounting to a taking advantage of CUB's power in the beer market, not whether it did so in point of fact. But, as their Honours recognise, cases occasionally arise in which, simply as a matter of logic and without the necessity to have all of the facts, it can be said that particular conduct is not capable of constituting a particular contravention. I think that this is one of those cases.

4. The view I have expressed does not necessarily mean that the conduct referred to in the notices is immune from investigation. If the Commission, or its Chairman or Deputy Chairman, formed the opinion that CUB had substantial power in the can market, or in some section of it, fresh notices, so stating but otherwise in similar terms to those the subject of these proceedings, could validly be issued. But I do not think that the existing s.46 notices are valid, and I would have allowed the appeal insofar as it relates to those notices.