Stationers Supply P/L v The Victorian Authorised Newsagents Association Ltd

[1993] FCA 552

STATIONERS SUPPLY PTY LTD v. THE VICTORIAN AUTHORISED NEWSAGENTS ASSOCIATION
LIMITED; NEWSPOWER (VICTORIA) PTY LTD; VICSTAT PTY LTD (trading as Victorian
Newsagent Supplies); BRIAN GEOFFREY O'MALLEY; JOHN RUSSELL REITH and HENRY
JUSTIN SLOANE
No. VG256 of 1991
FED No. 552
Number of pages - 27
Trade Practices
(1993) ATPR 41-255
(1993) 44 FCR 35

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Ryan J(1)

CATCHWORDS

Trade Practices - Restrictive trade practices - promotional and marketing arrangements for wholesale supply of stationery products - identification of relevant market - contracts, arrangements or understandings - whether agreement for exclusive provision of newsagents' supplies under a particular brand name contravenes ss45 and 47 - sufficiency of evidence to establish purpose or likely effect of arrangements - exclusive dealing.

Trade Practices Act 1974 (Cth) ss 4D; 4E; 4F; 45; 47; 75B.

ASX Operations Pty Ltd v Pont Data Aust Pty Ltd (1990) 97 ALR 513 applied.

Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238 referred to.

Dowling v Dalgety Australia Ltd and Ors (1992) ATPR 41-165 applied.

Hughes v West Australian Cricket Association (1986) 69 ALR 660 referred to.

Re Ku-Ring-Gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134 referred to.

Queensland Wire Industries Pty Ltd v BHP (1989) 167 CLR 177 referred to.

Queensland Co-Operative Milling Association Ltd (1976) 25 FLR 169 referred to.

SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) 32 ALR 365 applied.

Trade Practices Commission v Australian Meat Holdings (1988) 83 ALR 299 applied.

Trade Practices Commission v Legion Cabs (Trading) Co-Operative Society Ltd (1978) 35 FLR 372 referred to.

Trade Practices Commission v TNT Management (1985) 6 FCR 1 applied.

HEARING

MELBOURNE

#DATE 13:8:1993

Counsel for the applicant: Mr C A Sweeney QC and Mr N Mukhtar

Solicitor for the applicant: Minter Ellison Morris Fletcher

Counsel for the first, second, Mr P Mandie QC
fourth, fifth and sixth respondents: Mr D J O'Callaghan

Solicitor for the first, second,
fourth, fifth and sixth respondents: Arthur Robinson and Hedderwick

Counsel for the third respondent: Mr D J Martin

Solicitor for the third respondent: Lucas Baron

ORDER

THE COURT ORDERS:

1. That the application be dismissed.

2. That the applicant pay the respondents' costs including any reserved costs such costs to be taxed.

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

JUDGE1

RYAN J The application before the Court has been brought by Stationers Supply Pty Ltd ("Stationers Supply") which seeks injunctive relief and damages against the six respondents as a result of what it claims are breaches of ss.45 and 47 of the Trade Practices Act 1974 (Cth) ("the Act").

1. The grounds upon which the application is brought are set out in the further amended statement of claim as amended by leave granted on 13 and 17 December 1991. The breaches of the Act that are said to arise involve arrangements made by the first respondent the Victorian Authorised Newsagency Association Ltd ("VANA"), the second respondent Newspower (Victoria) Pty Ltd ("Newspower Victoria") and the third respondent Vicstat Pty Ltd ("VNS"). The fourth to sixth respondents ("the directors") were at all relevant times directors of Newspower Victoria and members of the management committee of that company.

2. Briefly described, these proceedings concern promotional activities conducted by the first three respondents in the wholesale stationery market. VANA is the peak industry body of newsagents in Victoria and is responsible for promoting the interests of its members. Newspower Victoria is a wholly owned subsidiary of VANA and has undertaken promotional and marketing activities. To that end Newspower Victoria has entered into arrangements with VNS and individual newsagents for the purpose of establishing a product line of stationery known as "Newspower". Those arrangements extend to the use of "Newspower" as a brand of stationery and as a name for the marketing group comprising those newsagents who wish to come within it for the purpose of advertising and promotion. It is said by the applicant that the arrangements to appoint VNS as the preferred wholesaler of "Newspower" products and the arrangements between Newspower Victoria and individual newsagents by which those newsagents adopt the "Newspower" banner contravene the Act.

3. It is said of the directors that they have been knowingly concerned in breaches of the Act and should be considered to be persons involved in the contraventions pursuant to s.75(B). In order to fix the Directors with liability, it is necessary for the applicant to establish a principal breach by one or more of the first three respondents with which the directors have been knowingly concerned. Accordingly, the issue of the directors' liability will not arise unless and until a principal breach has been established.

THE PLEADINGS
5. The pleadings of the applicant are focused upon two separate agreements or arrangements. The first is the appointment of VNS as the preferred warehouse. In paragraph 6A of the further amended statement of claim the applicant pleads the following facts in relation to that agreement:

"6A In pursuance of the Newspower Group enterprise, Newspower Victoria and V.A.N.A.-

(a) appointed Vicstat as the 'preferred warehouse' and exclusive supplier of stationery products to members of the Newspower Group enterprise;

(b) agreed with Vicstat that Vicstat would obtain and supply for resale, stationery products to be sold under advertised promotions or to be sold as stock lines for sale by newsagents on a regular basis;

(c) agreed with Vicstat that Newspower Victoria would use its best endeavours to promote sales of stationery products through Vicstat; and

(d) give Vicstat the exclusive right to use the name 'Newspower'."

1. The second agreement or arrangement is said to arise from the relationship between Newspower (Victoria) and the individual newsagents.

2. Paragraph 7 of the further amended statement of claim, is in these terms:
   

"In the course of and for the purposes of promoting membership in the Newspower Group enterprise, Newspower Victoria has made agreements with numerous newsagents in Victoria who became advertising members, obliging those members amongst other things -

(a) to pay a joining fee and other periodical fees towards advertising and promotional activities and other services;

(b) to actively support all promotions conducted by Newspower Victoria and comply with its company policy;

(c) to purchase all promotional stationery goods from Vicstat, Newspower Victoria's exclusive wholesaler in Victoria at agreed promotional prices and ensure that such goods are maintained in stock for the relevant promotional periods; and

(d) to resign if the member failed to follow the spirit and letter of its membership obligations.

PARTICULARS

The objects of the Newspower Group enterprise together with the description of services offered to subscribing members and obligations on members have been stated in various documents disseminated by V.A.N.A. and Newspower Victoria since 1990 as part of its publicity drive for membership, together with other media and trade launches. Those documents include -

(i) a Newspower membership agreement;

(ii) a Newspower 'authorisation' together with document entitled 'Newspower What we Expect from Each Other';

(iii) publicity documentation entitled 'The Balance of Power is About to Change....in Your Favour' together with supporting material;

(iv) a document entitled 'Newspower - Note to all V.A.N.A. members';

(v) a document entitled 'Newspower....Alert to all Members';

(vi) a document entitled 'To all Newspower Members....V.N.S./Newspower Tender';

(vii) a document entitled 'Newspower What it Stands For';

(viii) a letter dated 13 November 1990 from Newspower Victoria to Stationers Supply;

(ix) a document entitled 'Newspaper Presentation - Newspower';

(x) a news bulletin issued and dated 20 December 1990 entitled 'To V.A.N.A. and Newspower Members';

(xi) a document entitled 'Newspower...Status Report...May 1991'."

1. Further obligations and restrictions are recited in paragraph 10 of the further amended statement of claim and these allegations read:
   

"10. Pursuant to the agreements made by Newspower Victoria with newsagents throughout Victoria who have become advertising members of the Newspower Group enterprise as alleged in paragraph 7 hereof -

(a) such newsagents are obliged to buy promotional stationery from Vicstat to the exclusion of or in priority to other wholesalers;

(b) newsagents are prevented, hindered or restricted from purchasing non commercial stationery from other wholesale suppliers previously in competition with Vicstat, such as Stationers Supply or further or alternatively, are prevented, hindered or restricted from purchasing 'Headline' brand stationery supplies from the applicant."

1. Reference should also be made to sub-paragraph 14(a) of the statement of claim which pleads a breach of s.45(2) of the Act. That paragraph is in these terms:
   

"Further, in the conduct of the Newspower Group enterprise and in requiring advertising members of the Newspower Group enterprise to purchase promotional stationery products from Vicstat exclusively or in priority to other wholesalers -

(a) Newspower Victoria and/or Vicstat and/or VANA has prevented, hindered or restricted newsagents from purchasing stationery from alternative suppliers in the wholesale non commercial stationery market or alternatively the market for the provision of newsagents' supplies (such as Stationers Supply) and has thereby substantially lessened competition in that market or has imposed conditions with the purpose or provisions having the likely effect of lessening competition in the wholesale non commercial stationery market, or alternatively the market for the provision of newsagents' supplies in contravention of section 45(2) of the Trade Practices Act 1974."

1. Sub-paragraphs (b), (c), and (d) respectively allege that VANA, VNS and the Directors were knowingly concerned in the breaches referred to in sub-paragraph (a) and are thus liable pursuant to s.75B of the Act.

2. The written submissions made on behalf of the applicant do not rely solely on the two arrangements just identified. Reliance is also placed on the general marketing and promotional arrangements made between VANA, Newspower Victoria and VNS. It was contended by all the respondents that the applicant's case as finally put differed significantly from what was pleaded. There is considerable force in that contention. The pleadings, however, were wide enough to allow the applicant to make the submissions which it did. Nevertheless, the shifting of ground that occurred in the course of final submission, testified to the evidentiary difficulties which the applicant encountered in the course of the hearing.

3. It is pleaded by the applicant that one or more of Newspower Victoria, VNS, VANA have prevented, hindered or prevented newsagents from purchasing stationery from suppliers other than VNS and have thereby substantially lessened competition in a market. This, the applicant contends, is in breach of s.45(2) of the Act. It is further pleaded that VANA and Newspower Victoria have made arrangements or given effect to arrangements which contain an exclusionary provision in breach of s.45(2)(a)(i). Those arrangements, so it is said, prohibit or hinder the acquisition or the supply of "Headline" or "Logo" brand promotional goods.

4. The relevant parts of s.45 are:
   

"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.

(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. ...

(6) The making of a contract, arrangement or understanding does not constitute a contravention of this section by reason that the contract, arrangement or understanding contains a provision the giving effect to which would, or would but for the operation of sub-section 47(10) or 88(8) or section 93, constitute a contravention of section 47 and this section does not apply to or in relation to the giving effect to a provision of a contract, arrangement or understanding by way of -

(a) engaging in conduct that contravenes, or would but for the operation of sub-section 47(10) or 88(8) or section 93 contravene, section 47; or

(b) doing an act by reason of a breach or threatened breach of a condition referred to in sub-section 47(2), (4), (6) or (8), being an act done by a person at a time when -

(i) an authorization under sub-section 88(8) is in force in relation to conduct engaged in by that person on that condition; or

(ii) by reason of sub-section 93(7) conduct engaged in by that person on that condition is not to be taken to have the effect of substantially lessening competition within the meaning of section 47.

(8) This section does not apply to or in relation to a contract, arrangement or understanding, or a proposed contract, arrangement or understanding, the only parties to which are or would be bodies corporate that are related to each other."

1. VANA and VNS are said to have a principal liability for the breach of s.45(2) and also a derivative liability, with the directors, pursuant to s.75(B) of the Act.

2. It is also necessary to refer to s.4D which reads as follows:
   

"4D. (1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if -

(a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any two or more of whom are competitive with each other; and

(b) the provision has the purpose of preventing, restricting or limiting -

(i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or

(ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions,

by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.

(2) A person shall be deemed to be competitive with another person for the purposes of sub-section (1) if, and only if, the first-mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates."

1. The applicant also pleads that Newspower Victoria has engaged in exclusive dealing in contravention of s.47(6) in that it has offered to provide promotional services to certain newsagents on the condition that those newsagents purchase promotional material from VNS exclusively or in priority to other wholesalers.

2. Further, it is pleaded that, in breach of s.47(4), VNS acquired the right to use the name "Newspower" and its attendant commercial advantages on the condition that the same right, benefit or privilege would not be provided to the applicant. Finally, the applicant pleads a contravention of s.47(7) on the ground that, as part of the terms on which it was appointed as the preferred warehouse for VANA and Newspower Victoria, VNS requires non-advertising members of the Newspower group to pay a premium for Newspower promotional goods and refuses those non-advertising members a discount or allowance because they have not agreed to become advertising members.

3. The relevant parts of s.47 are as follows:
   

"(1) Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing. ...

(4) A corporation also engages in the practice of exclusive dealing if the corporation -

(a) acquires, or offers to acquire, goods or services; or

(b) acquires, or offers to acquire, goods or services at a particular price,

on the condition that the person from whom the corporation acquires or offers to acquire the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will not supply goods or services, or goods or services of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods or services, or goods or services of a particular kind or description -

(c) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or

(d) in particular places or classes of places or in places other than particular places or classes of places. ...

(6) A corporation also engages in the practice of exclusive dealing if the corporation -

(a) supplies, or offers to supply, goods or services;

(b) supplies, or offers to supply, goods or services at a particular price; or

(c) gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation,

on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person.

(7) A corporation also engages in the practice of exclusive dealing if the corporation refuses -

(a) to supply goods or services to a person;

(b) to supply goods or services at a particular price to a person; or

(c) to give or allow a discount, allowance, rebate or credit in relation to the supply of goods or services to a person,

for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person.

(10) Sub-section (1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in sub-sections (2), (3), (4) or (5) or paragraphs (8)(a) or (b) or (9)(a), (b) or (c) unless -

(a) the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition; or

(b) the engaging by the corporation in that conduct, and the engaging by the corporation, or by a body corporate related to the corporation, in other conduct of the same or a similar kind, together have or are likely to have the effect of substantially lessening competition."

1. In relation to both ss.45 and 47 the following provisions of the Act are relevant:
   

"4E. For the purposes of this Act, unless the contrary intention appears, "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.

4F. For the purposes of this Act -

(a) a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, or of a covenant or of a proposed covenant, shall be deemed to have had, or to have, a particular purpose if -

(i) the provision was included in the contract, arrangement or understanding or is to be included in the proposed contract, arrangement or understanding, or the covenant was required to be given or the proposed covenant is to be required to be given, as the case may be for that purpose or for purposes that included or include that purpose; and

(II) that purpose was or is a substantial purpose; and

(b) a person shall be deemed to have engaged or to engage in conduct for a particular purpose or a particular reason if -

(i) the person engaged or engages in the conduct for purposes that included or include that purpose or for reasons that included or include that reason, as the case may be; and

(ii) that purpose or reason was or is a substantial purpose or reason."

THE FACTS
20. Evidence was given on behalf of the applicant by Mr Ian Squires. In 1968 his father, Mr Norm Squires, established N. Squires Pty Ltd which traded as Stationers Suppliers, Mr Squires became a director of that company in 1981. On 4 December 1988 Mr Squires, in conjunction with two partners, acquired the business which thereafter has been conducted by the applicant company.

1. The applicant carries on business as a wholesale stationery supplier from a warehouse at 35 Emma Street Collingwood. In the course of the hearing, an inspection was conducted at that warehouse on 10 December 1991. My observations in the course of that inspection, as recorded and provided to the parties, were:
   

"The premises consisted of an off-street parking area at the north end of Emma Street and a warehouse complex with offices and display rooms upstairs. The layout of the warehouse was broadly similar to that of VNS at Mulgrave. Stock was exposed in bays of shelving approximately 2.00 metres high. Goods offered at special prices or the subject of special promotions such as a stocktaking discount or those with a seasonal appeal were given prominence in strategically located bays or gondolas or within the aisles between shelving.

The range and nature of the stock appeared generally to correspond with that available at Mulgrave (the warehouse of VNS). It embraced, as well as traditional newsagents' and stationers' items, batteries, small electrical goods, paper plates, kitchenware, confectionery and other variety lines. The branded stock included well-known Australian and foreign names and the applicant's house brand "Headline". Display cards for promotional use by newsagents prominently displayed the legend "Headline Newsagent". The range of items branded "Headline" appeared somewhat larger that the corresponding ranges of items respectively branded "Logo" and "Newspower" which were observed at Mulgrave.

The system of assembling orders at the two warehouses also seemed generally similar. At Collingwood newsagents or their employees were seen to pick orders from the stock shelves, place them in trolleys and then proceed to check-out counters. There the items were recorded at a computer terminal and a price arrived at, which was paid by the newsagent or the employee who then backed a vehicle up to a loading door adjacent to the checkout and loaded the goods into it.

The Collingwood warehouse had an inwards goods section at the northern end where bulk goods were broken and orders assembled in response to telephone or facsimile requests and were kept to await collection. An area was set aside on the first floor for mounting presentations of goods and display material for use in special promotions. Orders for those goods and material were placed and filled usually some months before the relevant promotion was to be featured in newsagents' shops."

1. The principal emphasis on the stock carried at the warehouse is on stationery, office supplies, books and cards. The overwhelming proportion, (more than 95%), of customers are individual newsagents who purchase supplies for their newsagencies from the warehouse on a "cash and carry basis". The bulk of the newsagent customers are located in the northern and western suburbs of Melbourne.

2. In addition to the cash and carry business conducted by the applicant, it provides a service by which a newsagent can place an order by facsimile transmission which is then processed by the applicant and an account rendered. Since early 1991 the facsimile service has also included overnight delivery to newsagents on orders to a value of more than $200. A 10% surcharge is charged. The applicant also employs one sales representative who attends upon newsagents, principally in rural Victoria, receives orders and arranges for their dispatch. A 15% surcharge is applicable on this service.

3. Sales by facsimile and by the sales representative comprise less than 5% of the business of the applicant.

4. The applicant sells stationery under several trade names including its own brand "Headline". The "Headline" banner was originally developed in the early 1980's by a co-operative comprising a number of newsagents known as Knox Stationers. During the 1980's the right to use the banner was jointly owned by N Squires Pty Ltd, Knox Stationers and Morwell Stationers. Despite that joint ownership, the activities and promotions undertaken under the banner were controlled by N Squires Pty. Ltd., and, subsequently, the applicant. Since 1989 the applicant has been the exclusive wholesaler of products under the "Headline" banner. By 1991, the applicant was selling approximately 18 lines of stationery products under that banner.

5. The third respondent, VNS, is a company incorporated in Victoria. Its principal activity is as a wholesale supplier of stationery products to newsagents. Mr Andrew Fullagar, a director of that company gave evidence. VNS conducts business from its warehouse situate at 22 Kalimna Avenue, Mulgrave in a fashion generally similar to that of the applicant. The warehouse operates on a "cash and carry basis" with customers largely comprised of newsagents. On 9 December 1991 the Court was convened at the warehouse of VNS and my observations in the course of the ensuing inspection, again as recorded and provided to the parties, were:
   

"The premises consisted of an office and warehouse complex approximately 31,000 square feet in area with extensive off-street parking. A reception and administration office area on the south side gave onto the main warehouse. At the eastern end of the warehouse is an inward goods area where goods in bulk are broken down for distribution to the shelves to which newsagent customers have access. Those shelves occupy approximately 13,000 square feet of floor space and extend from the floor to a height of about 2.00 metres. They contain approximately 10,000 lines of stock, most of which are traditionally sold by newsagents, such as home, school and office stationery, games, books, photograph albums, diaries, calendars, artists' supplies, office supplies, wrapping paper, cardboard boxes and the like. Other ancillary lines include toys, audio and video recording tapes, confectionery and small hardware items. The stock consisted variously of unbranded general items, like various grades and colours of paper and cardboard, items bearing well-known brand names and some items, mainly stationery, like exercise books and lecture pads bearing the "Logo" brand. A smaller number of items of a similar type had a package or other get-up including the "Newspower" brand. The Court observed newsagents or their employees passing along these stock shelves with trolleys into which they placed items in the course of "picking" their own orders. When a full order had been "picked" the newsagent or employee passed through a check-out counter where the items selected were punched into a computerised accounting system for debiting to the account of the relevant newsagent. From the check out counters an exit led to the car park. Adjacent to the check-out counters was a dispatch section where orders received by telephone or facsimile transmission were assembled for dispatch or to await collection by the newsagent. (Each newsagent customer had a designated space for items awaiting collection in a bay of open shelves between the stock shelving and the promotions area).

The promotions area occupied about 6,500 square feet at the western end of the warehouse. It contained bulk packages of goods and display material used in special promotions as are mounted at Christmas and to cater for the "back-to-school" demand. A considerable quantity of the bulk material in the "back-to-school" promotions area bore the "Newspower" brand.

Orders for that material are received well in advance and are made up and packed in advance to await collection by the newsagent customer. Access is gained to the promotions area by means of a large roller door. A newsagent customer may combine the collection of "promotions" material with the picking of an order for general stock."

1. VNS supplies stationery under various brand names including "Logo" and "Newspower". The "Logo" banner was initiated in 1989 but before that VNS provided stationery and undertook promotional activities under the "Headline" banner.

2. Mr Fullagar deposed in his affidavit, sworn 16 October 1991, that the "Logo" brand was created as a result of dissatisfaction with the direction of promotional activities under "Headline" and a lack of input into the control of management and promotion of the "Headline" banner afforded to VNS by the applicant.

3. The applicant and VNS are competitors in the wholesale supply of stationery products. The product lines provided by each of them are similar and the evidence establishes that their prices are competitive. The annual turnover of VNS is approximately $15m plus tax and that of the applicant is around $14.5m. The two companies are the major wholesale suppliers of stationery to newsagents in Victoria.

4. In addition to the applicant and VNS there are other wholesale suppliers of stationery. Next in size is Gordon and Gotch Pty Ltd which has an annual turnover of approximately $7m. Its product range is more limited than that of the applicant or VNS. Mr Squires conceded that the applicant also competed, albeit to a much lesser extent, with Sands and McDougall, F.J. House Pty. Ltd. and E.J. Roberts.

PROMOTIONAL ACTIVITIES IN THE STATIONERY MARKET
31. The principal form of business conducted by both the applicant and VNS is the wholesale supply of products to newsagents with an emphasis on purchases of stationery by newsagents. The nature of the business of both the applicant and VNS is largely dictated by the conditions under which newsagencies are conducted in Victoria.

1. In order to establish a newsagency in Victoria it is necessary to obtain an authorization from the Newsagency Council of Victoria Ltd ("the Newsagency Council"). The Newsagency Council is a company incorporated in Victoria and is limited by guarantee. It is composed of the major Victorian newspaper publishers (Herald and Weekly Times Ltd and David Syme Ltd) and the first respondent, VANA.

2. Each authorized newsagency enjoys exclusive territorial rights for the delivery of newspapers. In return for the grant of these rights, newsagents have an obligation to provide services within their exclusive territories according to the terms of agreements entered into between them and the Melbourne daily newspaper publishers. The agreements are not in evidence. However, it is common ground that they impose obligations to deliver newspapers, to stock publications stipulated by the publishers, to participate in promotions, generally to canvass products, and to appoint sufficient numbers of sub-agents.

3. Newsagents are encouraged by the Newsagency Council to join VANA. Mr Brian O'Malley, the fourth respondent, is president of the VANA Board. Mr O'Malley deposed in his affidavit, sworn 16 October 1991, that at that date there were approximately 735 authorized newsagents in Victoria of whom 700 are members of VANA.

4. The structure of the market in which newsagents operate and the regulation by the Newsagency Council has produced an industry in which newsagencies tend to be individual small businesses. The atomised nature of the industry has posed problems for wholesale suppliers and for the newsagencies themselves. Newsagents encounter difficulties in financing bulk purchases of stationery which in turn have prevented them from obtaining the benefits of economies of scale. Wholesale suppliers have found it difficult, in the absence of a unified market focus, effectively to promote their products and have consequently found themselves at a competitive disadvantage with supermarkets and large chain stores which also supply stationery products.

5. Various attempts have been made to overcome the difficulties associated with the individual character of newsagencies. Early attempts took the form of the banding together of some newsagents to form co-operative buying groups such as Knox Stationers and Morwell Stationers of which mention has already been made. More recently, wholesalers have developed generic lines of stationery which form the focus of promotional activities. Newsagents are encouraged to identify themselves with a wholesaler. The newsagents get the benefit of the purchasing power of the wholesaler together with the advantage of promotional activites undertaken by the wholesaler.

6. The use of a promotional banner underpins the relationship between the newsagent and the wholesaler. For example, particular newsagents who undertake promotional activities under the "Headline" banner are referred to as "Headline newsagencies" The sense of identity thus created is used to foster loyalty of the newsagent to the wholesaler promoting the banner.

PROMOTIONAL ACTIVITIES BY STATIONERS SUPPLY
38. As has been noted, the applicant markets its own products under the brand name "Headline". As well, that name is used as a banner for the promotion of the applicant's activities and those newsagents wishing to participate in them. The promotional banner serves as a market focus and enables newsagents to gain the benefits of advertising and other promotional work undertaken by the wholesaler.

1. The promotional efforts of the applicant are concentrated on those times of the year when there is strong seasonal demand for particular products, the three principal promotions being: "Christmas", "Back-to-school" and "Midyear". Mr Squires deposed that advertising during this period was undertaken by means of television, radio and the print media. There was no evidence of specific examples of advertising in these media. However evidence was given of promotional brochures and an example was exhibited to Mr Squires' first affidavit.

2. The applicant uses promotional brochures to identify newsagents with the "Headline" banner. It provides brochures to individual newsagents, often with the newsagent's name printed on them. These brochures display a range of products, some of which are marketed under the trade mark "Headline". The example in evidence was prepared by the applicant for its "Back-to-school" promotion. On its front page, the title "Headline Newsagent" appears in large print. A range of stationery and office supplies is detailed in the brochure, some of the stationery bearing the "Headline" trade mark.

3. Funds for the promotional activities of the applicant are derived in two ways. First, newsagents are charged directly for the costs of producing the brochures that are supplied to them. Secondly, for other advertising undertaken by the applicant, the applicant adds a percentage margin to the cost of certain products, which are prominently featured in the advertising campaign.

PROMOTIONAL ACTIVITIES BY VNS
42. In mid-1989 VNS established the "Logo" banner under which its promotional activities have been conducted. Promotion of products under "Logo" occurs by means similar to those employed by the applicant under the "Headline" banner. Mr Fullagar deposed that as at October 1991 there were approximately 120 newsagents who advertised under the "Logo" banner.

1. The funding of the "Logo" promotions is somewhat different from that used by the applicant for "Headline". Newsagents who elect to participate in the "Logo" advertising campaign pay an advertising levy equal to 1.5% of the invoice value of their purchases. These funds are then expended by a marketing committee which comprises Mr Fullagar, six participating newsagents and the marketing manager of VNS.

THE COMMENCEMENT OF NEWSPOWER IN VICTORIA
44. "Newspower" is a trademark owned by Newspower Trading Pty Ltd and is registered in respect of stationery products. Newspower Trading Pty Ltd is a wholly-owned subsidiary of Newspower Ltd., a company incorporated in Queensland. Newspower Ltd. is the successor in title to the business carried on by Capital Associated Newsagents Co-operative (Qld) Ltd which is the Queensland equivalent of VANA. In Queensland, Western Australia and Tasmania "Newspower" is used as the promotional banner of authorized newsagencies and is under the control of the State Association of Newsagencies. The "Newspower" banner was launched in Melbourne in 1989. That initial attempt to introduce "Newspower" into Victoria was not successful.

1. In mid-1989 VANA, in pursuit of a unified marketing and promotional structure which it saw as necessary for newsagents in Victoria, decided to obtain the services of a marketing consultant to relaunch "Newspower" in this State. Solterbeck Marketing Pty Ltd ("Solterbeck") was appointed. In October 1989, Solterbeck presented a marketing plan to the VANA committee. The marketing objectives for Newspower were identified in that documents as:
   

"(a) LONG TERM

To create a disciplined marketing tool which improves profitability of Newsagents.

(b) SHORT TERM

- To improve services to Members

- To be respected by Newsagents and Publishers - To unite the Newsagents and their trading groups under one common banner.

- To create advertising and promotional activities to obtain a higher profile of Newsagents with the public and Publishers."

1. On 24 April 1990 VANA Book Services Pty Ltd (originally Oracles Pty Ltd) changed its name to Newspower (Victoria) Pty Ltd. That company is a wholly owned subsidiary of VANA. Newspower (Victoria) is the exclusive licensee of the "Newspower" trademark for Victoria. The term "Newspower" is used by the parties to signify both the company, Newspower (Victoria) Pty Ltd., and the marketing banner, "Newspower" which is controlled by a management committee comprising seven voting members; three from Newspower (Victoria) Pty Ltd, two advertising members of Newspower, Mr Fullagar and the Newspower co-ordinator who, at the time of the hearing, was still to be appointed.

2. Originally designed as a marketing vehicle for products other than stationery products, Newspower Victoria changed its direction in September 1990 when it was decided to include stationery in its marketing activities. To that end, arrangements were to be made with a wholesale supplier of stationery products which could provide products bearing the "Newspower" brand. It was originally envisaged by VANA that both VNS and the applicant could work together as wholesale suppliers of stationery bearing the "Newspower" brand. Evidence was given of a meeting on 10 September 1990 at the offices of Solterbeck which was called to discuss these proposals. In attendance were Mr O'Malley, Mr Fullagar, Mr Squires and Ms Heidi Solterbeck. Mr Squires deposes that, at that meeting, a proposal was made by VANA which involved:
   

"Stationers Supply and the Third Respondent (VNS) entering into an arrangement under which both Stationers Supply and the Third Respondent would divide the proposed Newspower promotional stock lines between them, each company purchasing specific products from suppliers and then selling those products to the other to enable both to have a complete stock line."

1. Both the applicant and VNS rejected those proposals for the sharing by the applicant and VNS of the role of wholesaler. It was then decided by VANA to make arrangements for the appointment of what Mr O'Malley referred to as a "preferred wholesaler" which would supply "Newspower" branded products.

AGREEMENT FOR EXCLUSIVE SUPPLY
49. The Newspower marketing committee and the VANA Board resolved to issue invitations to the applicant, VNS and Gordon and Gotch Ltd. to tender for the supply of "Newspower" branded products. The invitation to tender was in the form of a letter from Brian O'Malley as "President of Newspower". The relevant part of that letter was in these terms:

"SUBJECT: NEWSPOWER BRANDED PRODUCTS

This letter seeks a response from the Stationery Wholesaler who wishes to be the sole supplier of Newspower Branded Product, and the preferred Supplier to Newspower Members per se. TERMS

1. We are seeking to generate Rebates on all Newspower Member purchases in order to form a substantial funding platform for Newspower.

2. Sole supplier situation would apply for a three (3) year period, subject to performance and price competitiveness.

3. Notice of termination would be three (3) months, from both Supplier and Newspower."

1. Both the applicant and VNS submitted tenders. By letter dated 30 November 1990, Ian Ford, General Manager Stationery Division of Gordon and Gotch Ltd. informed Mr O'Malley that his company did not wish to tender.

2. VNS was the successful tenderer and, on 3 June 1991, a letter of intent was signed by Mr Fullagar of VNS and by Mr O'Malley for Newspower (Victoria). That document purports to set out the rights and obligations of VNS and Newspower (Victoria) in relation to the appointment of VNS as "preferred warehouse". The relevant parts of the agreement are as follows:
   

"VANA/NEWSPOWER therefore

1. Agrees to grant to VNS for an agreed period (perhaps 3 years with suitable options) rights of usage of the Newspower brand name under guidelines to be laid down by VANA/Newspower.

2. Agrees to grant to VNS rights to purchase, warehouse and distribute Newspower brand products throughout the State of Victoria. Pricing of Newspower brand products throughout the State of Victoria. Pricing of Newspower brand merchandise to be determined by the Committee with the proviso that a satisfactory margin is maintained for VNS.

3. Agrees to continuation of LOGO brand product and acknowledges VNS desire to continue promotions under the LOGO banner.

4. Agrees that a representative of VNS will be requested to join the Marketing Committee which manages Newspower.

5. Agrees that if offered direct special deals from manufacturers, it will not proceed with these deals without first seeking co-operation from VNS.

6. Agrees to give VNS first refusal on all warehousing opportunities offered.

7. Agrees to use its best endeavours to promote the sales of product through the VNS warehouse.

8. Agrees that VNS has final say in matters concerning pricing, distribution and policy of the VNS warehouse. Victorian Newsagents Supplies therefore

1. Agrees to perform a normal warehousing function for all Newspower Members except any Member who does not abide by the accepted rules of business.

2. Agrees to perform the warehousing function at a price for goods which on an overall basis is competitive in the market place.

3. Agrees to waive VNS membership loan for Newspower Members buying promotional stock only. However once ongoing purchases through VNS take place, membership loan is applicable.

4. Agrees, so long as it is acceptable to both parties, to source and stock for resale, Newspower brand products which may be used as items for advertised promotions or may be stock lines for sale on a regular basis.

5. Agrees as much as is possible, to ensure that non-Newspower outlets do not receive Newspower Branded merchandise.

6. Agrees that non-advertising Newspower members can purchase Newspower branded product.

7. Agrees to pay to Newspower a percentage of the total turnover through the warehouse whether by direct purchase, charge through or any other method. This percentage to be 0.2% for the first 12 calendar months, paid monthly, and to be reviewed prior to the commencement of the second twelve month period.

8. Agrees to continue to collect an advertising levy at an agreed rate (currently 1.5%) for disbursement on a monthly basis to LOGO and Newspower to enable the funding of advertised promotions. This rate to be reviewed by Newspower Committee annually.

9. Agrees to disburse the advertising levy in the same ratio as the total dollar purchases of the Members of the two promoting groups.

10. Agrees that VNS will only support LOGO newsagents with catalogues.

11. Agrees to manage and coordinate stationery promotions under the Newspower banner.

12. Agrees that the Newspower Committee has the right to discuss submissions/potential purchases direct with suppliers of special or promotion items for Newspower.

13. Agrees that a suitable clause be included in the contract to protect VANA/Newspower and allow flexibilities to VNS in the event of a proposed sale.

14. Agrees that the options granted in relation to the usage of the Newspower name are not automatically transferable in the case of a sale, provided that the transfer of those rights is not unreasonably withheld.

15. Agrees, that a standard non-competition clause in the event of a sale, would form part of any formal contract.

16. Agrees to use its best endeavours to promote the VNS/Newspower warehousing arrangements. General Notes

It is acknowledged that LOGO/Newspower promotions may carry the same items which may include LOGO branded products. It is acknowledged that Newspower may request VNS to promote some specific products at less than the normal mark-up, where it is deemed that the product is price sensitive.

It is acknowledged that a performance clause for both parties is to be included into the legal agreement as well as a termination time period.

It is acknowledged that non-advertising Newspower members may purchase promoted stock lines at normal shelf price. However, they will not have access to exclusive promoted items."

1. It is said by the applicant that the agreement granted to VNS the right to act as exclusive supplier of "Newspower" brand products and other products the subject of Newspower promotions in return for which VNS gave two commitments; first, to pay a percentage of its turnover to Newspower Victoria and secondly not to support its own "Logo" brand. In the course of cross-examination by Mr Sweeney QC, who appeared with Mr Mukhtar for the applicant, Mr Fullagar conceded that VNS would not have been prepared to enter into to a non-exclusive licence to supply "Newspower" products. I accept that it was a term of the agreement between Newspower Victoria and VNS that the latter would attain the status of exclusive supplier. That would have the effect of precluding Newspower Victoria or individual newsagents from obtaining "Newspower" branded products from any other source.

2. As to the second commitment by VNS not to support its "Logo" brand, I accept that it was agreed between Newspower Victoria and VNS that the "Logo" brand would be phased out as demand for "Newspower" products became established. It is true that, at the time of hearing, approximately 120 newsagents were gathered under the "Logo" banner. However, it was conceded by Mr Fullagar that VNS was, in effect, prepared to give up the "Logo" banner in return for obtaining the rights to supply "Newspower" products. Implicit in that concession was a recognition that it would not be commercially feasible for VNS to retain, in the long term, two brands of its own.

STRUCTURE OF NEWSPOWER
54. The success of the "Newspower" banner depended on the ability of VANA, Newspower Victoria and VNS to persuade newsagents to adopt it in preference to the alternatives. Given the reduced prominence to be accorded by VNS to its own "Logo" brand the "Headline" banner represented the main competition to the emerging "Newspower".

1. As a starting point all members of VANA became, by unilateral declaration of VANA, non-advertising members of Newspower. Newsagents were then invited to become advertising members. In order for that to occur, newsagents were required to enter into membership agreements with Newspower Victoria. A copy of the four page pro forma advertising membership agreement is in evidence. At the top of the first page is the "Newspower" logo and below that appears the heading "Newspower Advertising Membership Agreement - Newspower Victoria Pty. Ltd. (Inc. Vic.)". The relevant provisions of the agreement are set out below:
   

"4. OBJECTIVES

The objectives of both parties to the Agreement are: - To strengthen the trading relationship between Newsagents and Publishers by Co-operative promotional activity. ...

5. RIGHTS OF THE NEWSPOWER ADVERTISING MEMBER - To promote and trade under the banner "Newspower" and to use and sell the Newspower range of products and services. - To participate in all advertising and promotional activities organised and carried out by Newspower. ...

6. OBLIGATIONS TO MEMBERS

- Members must display the Newspower signage material to clearly identify the Newsagency as a Newspower outlet. The Corporate identity Manual clearly outlines these requirements.

- Members must guarantee payment of the advertising levy on its due date, and this levy must be paid three (3) months in advance.

- Members must participate in all Newspower service initiatives in compliance with Newspower policy (including Fax Service).

- Members must actively support all promotional initiatives in compliance with Newspower policy.

...

7. MANAGEMENT

Responsibility for the function of marketing shall be vested with Newspower Pty. Ltd. (Inc. Vic.). Newspower shall determine advertising, promotional and merchandising activity.

A member who fails to give adequate support to the Newspower Group, or who fails to honour the spirit and letter of his obligations in this Agreement shall be required to resign."

1. Those newsagents who applied to become advertising members of Newspower were also supplied with a circular entitled "The Balance Of Power Is About To Change In Your Favour". The following parts of it are relevant insofar as they set out what Newspower Victoria regarded as being the rights and obligations of advertising members of Newspower:
   

"NEWSPOWER RELAUNCH

Objective

To restructure Newspower as the marketing arm of VANA as a strong promoting and buying group into advertising and non-advertising members.

To align Newspower with VNS, as the preferred Stationery Wholesaler for Newspower.

To utilise the VNS warehousing facilities to expand Newspower's activities into as many areas as possible which will advantage Newsagents i.e. books, magazines, computers, display and merchandising etc.

WHAT CAN NEWSPOWER DO FOR YOU?

. Newspower can now provide you with product promotion at the key promoting times in the year:-

Christmas

Back to School

Mid Year

Mothers Day

Fathers day

The warehouse gives Newspower the facility to manage and co- ordinate promotions and to collect funds to advertise these promotions.

WHAT ARE THE OBLIGATIONS OF AN ADVERTISING MEMBER? . Advertising members will actively participate in all Newspower promotions - this means they will stock all promotion lines at the agreed promotional prices, and will carry Newspower stock lines as they become available. ...

. Must Actively support all other Newspower initiatives - including circulation drives, magazine display promotions, book promotions (if book sellers) etc. ...

. Will have significant negotiation strength due to their disciplined and organised group structure. Q. WHY WOULD I CHANGE FROM A LOGO/HEADLINE MEMBER TO A NEWSPOWER ADVERTISING MEMBER?

A. The choice belongs to the individual. As a Newspower advertising member you have more opportunity to expand and develop your total business base than you can ever have as a HEADLINE or LOGO member. Newspower is the marketing group for the whole Newsagency industry on a national basis. ...

Q. BUT I AM A MEMBER OF STATIONERS SUPPLY. WHY WOULD I GO TO VNS FOR NEWSPOWER STOCK?

A. VNS is the preferred wholesaler for Newspower and any advertising member must buy Newspower promotional stock through VNS - so if you choose to belong to Newspower then you must buy promotion stock at VNS. All other stock purchases may be made at any other stationery warehouse."

1. It was said by the applicant that, pursuant to the arrangement with Newspower Victoria, an advertising member of Newspower is obliged to support "Newspower" promotions and, by virtue of that, is under an obligation to purchase "Newspower" promotional material which is only available from VNS. Further, the applicant contended that the promotional arrangements carry with them the probability that newsagents who are obliged to go to VNS for "Newspower" promotional material would, in the long run, purchase all the newsagent supplies from VNS. The applicant put forward three principal matters in order to support the second contention. First, newsagents generally attend in person at the warehouse of the wholesaler and may have travelled long distances in order to obtain the promotional material. Secondly, the prices of stationery products of both the applicant and VNS are competitive and thus there would be no advantage to a newsagent in purchasing some material from one wholesaler and the balance from the competitor. Thirdly, reliance was placed by the applicant on the fact that, in return for becoming the exclusive supplier, VNS agreed to pay a percentage of its total turnover to Newspower Victoria. This revealed, so it was said, a recognition by both VNS and Newspower Victoria that the benefit to accrue to VNS would be both the sales of "Newspower" promotional products and any incidental sales of other products.

2. For these three reasons just stated, it was put by the applicant that an obligation on advertising members to purchase promotional material from VNS compelled those newsagents to purchase all their stationery products from that source.

3. By way of identifying the obligations of advertising members of "Newspower", the applicant points to the membership agreement, the circular quoted above and a number of other documents and circulars supplied by VANA and Newspower Victoria. Both VANA and Newspower Victoria have been heavily involved in the promotion of Newspower and have actively encouraged newsagents to become advertising members. Once newsagents had elected to become advertising members and had entered into membership agreements with Newspower Victoria, both Newspower Victoria and VANA continued to emphasise the need for active participation in "Newspower" promotions and the concomitant obligation to purchase promotional material. The membership agreement is an agreement between newsagents and Newspower Victoria. VANA is not a party to it. In my view, Newspower Victoria provided the focal point for attracting and retaining the support of newsagents for "Newspower" promotions. The obligations which participating newsagents incur are derived solely from the membership agreement.

4. The evidence is equivocal as to the impact which the membership agreement has had on newsagents. The applicant led no evidence from newsagents. Mr Squires conceded that the applicant has continued to supply products to newsagents who are advertising members of "Newspower". Moreover, some advertising members had purchased material from the applicant matching the description set out in Christmas promotional material from "Newspower".

5. Mr O'Malley deposed that, to his knowledge, no advertising member of "Newspower" has been required to resign as a consequence of non-compliance with the obligations imposed by the membership agreement despite clause 7 of the agreement which provided for that course. However, he did note that a number of advertising members had not purchased promotional stock from VNS. Some 29 advertising members of "Newspower" had not purchased promotional stock in relation to the Christmas promotion and approximately 26 had not purchased material for the "back-to-school" promotion. Whether advertising members are obliged to purchase promotional material from VNS becomes relevant in considering the applicant's claims under ss.45(2) and s.47(7). I shall consider this aspect later in these reasons.

6. Putting aside the question of whether there is, in fact, an obligation on advertising members to purchase promotional material, it has not been made clear by the applicant that such an obligation entails that an advertising member is compelled to purchase non-promotional products. The question of why VNS agreed to pay to Newspower Victoria a percentage of total turnover was put to both Mr O'Malley and to Mr Reith who is chairman of the management committee of Newspower Victoria. Neither expressly conceded that advertising members were expected to purchase all of their stationery requirements at the same time as they were buying "Newspower" promotional material in accordance with the membership agreement. The applicant adduced no evidence of a belief by advertising members as to the obligations arising from that membership.

7. It can be inferred that VNS entered into the agreement in the hope of a growth in the overall volume of wholesale sales by VNS as a wide acceptance of Newspower would be likely to generate an increase in the number of newsagents attending at the warehouse. However, the applicant can point to no aspect of the arrangements which compels advertising members to buy all their stock requirements from VNS. Nor has the applicant established how the fact that advertising members attend at the premises of VNS to purchase promotional material would, of itself, dilute the vigorous price competition that has existed between the applicant and VNS. It may well be convenient for advertising members to acquire stationery products supplied by VNS at the same time as they collect promotional material, but that would only overcome any price advantage which the applicant may have, if that price advantage were so small as to make it uneconomic for advertising members to patronize the applicant's warehouse at all.

8. The evidence does not enable me to determine whether it is more probable than not that advertising members will ultimately purchase all their stationery from VNS as a result of their obligation to purchase promotional material from VNS assuming, for the purposes of argument, that such an obligation has been imposed. Other factors, like price, variations in demand, availability of stock, efficiency of delivery and traditional loyalty may influence the decision of a newsagent to purchase stationery from one wholesaler rather than another.

THE MARKET
65. Many of the issues raised in these proceedings require a determination of the impact of the various arrangements on competition in a market. Accordingly, it is necessary to define the relevant market. In Trade Practices Commission v Australian Meat Holdings (1988) 83 ALR 299 at 317 Wilcox J adopted, as the definition of market, a submission which was in these terms:

"A market is the field of activity in which buyers and sellers interact and the identification of market boundaries requires consideration of both the demand and supply side. The ideal definition of a market must take into account substitution possibilities in both consumption and production. The existence of price differentials between different products, reflecting differences in quality or other characteristics of the products, does not by itself place the products in different markets. The test of whether or not there are different markets is based on what happens (or would happen) on either the demand or the supply side in response to a change in relative price."

"Section 4D(1) may be divided into the following elements each of which must be established: (1) There must be a provision of an arrangement or understanding made between persons, any two of whom are competitive with each other ... (2) The provision must be for the purpose of preventing, restricting or limiting one of the acts referred to in s.4D(1)(b) ... (3) The requirement of s.4D(1)(b)(i) and (ii) that the 'purpose of' relates to the supply of services to or the acquisition of services from particular persons in particular circumstances or in particular conditions must be satisfied."

1. Individual membership agreements are not themselves the subject of attack under s.45(2)(a)(i). Rather, it is contended that there is an understanding between Newspower Victoria and those newsagents who have applied to become advertising members of "Newspower" that identical membership agreements would be made with other newsagents. The attack is therefore upon a twofold understanding, first between Newspower Victoria and newsagents and, secondly, between individual newsagents themselves. The first question is whether there is any understanding between newsagents to which Newspower Victoria is also a party. It is obvious that the "Newspower" arrangements required the acceptance of individual newsagents which, it may be inferred, would not be forthcoming if it were regarded as unlikely that other newsagents would join. Clearly, there must have been an expectation that other newsagents would participate in the "Newspower" arrangements. However, an expectation of that kind does not carry with it an understanding, arrived at between newsagents, to enter into membership agreements. The applicant must go further and establish an understanding between newsagents because Newspower Victoria and newsagents are not, as between themselves, competitors in any market. I can discern, however, no evidence which establishes an understanding between newsagents. In my view, it is necessary to establish something more than a hope or expectation that a certain outcome will occur before the Court can find that an understanding exists. The applicant failed to make out its claim under this provision of the Act.

SECTION 47(6)
96. Section 47 prohibits exclusive dealing. The question raised by the present application in the context of s.47(6) may be briefly stated. Has Newspower Victoria supplied promotional services to advertising members on the condition that those newsagents will purchase goods of a particular kind or description from VNS? The applicant identifies the goods as "promotional goods" or alternatively "general newsagent supplies". The two essential elements of the conduct struck at by s.47(6) are indicated by the phrases "on the condition that" and "will acquire goods or services". In SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1982) 32 ALR 365 the meaning of the words "will acquire" were considered by a Full Court of this Court. In the course of his judgment Northrop J observed at 381:

"It does not matter whether the condition is legally binding or not (see s.47(13)(a) of the Act) but, in my opinion, the condition must have some attributes of compulsion and futurity. This can be expressed in the form: "If we do this, you will (must) do that." A condition in the nature of an obligation must be imposed upon the person dealing with the corporation. The condition to be complied with by that person must result from something done or to be done by the corporation imposing the condition."

1. With one qualification, I respectfully agree with what was there said by his Honour. It is not, in my view, necessary that the supplying corporation impose the condition. The condition may be attached to the supply at the instigation of either party or, indeed, a third party; the essential requirement is the obligation on the recipient of the goods or services to acquire goods or services of a particular kind or description from another: see Re Ku-Ring-Gai Co-operative Building Society (No.12) Ltd (1978) 36 FLR 134 at 167 per Deane J. The applicant must, in my view, establish an element of compulsion, not necessarily one that is legally enforceable, but one which goes beyond creating a mere hope or expectation in the person for whose benefit the condition has been attached.

2. I find that it was a purpose of the membership agreement, and of the circulars distributed by VANA and Newspower Victoria, to create a sense of obligation in advertising members to purchase Newspower promotional material. That sense of obligation was sought to be created by the terms of the agreement and by persuading newsagents that it would be in their interests to participate in the "Newspower" promotions. However, in the absence of evidence from advertising members, I do not accept that there was a level of compulsion going beyond mere persuasion. There is no evidence of any sanction being applied to a newsagent for non-compliance. Nor is there evidence that any advertising members felt a degree of compulsion because of the existence of such a sanction.

3. My clear impression from the evidence is that advertising members are free to purchase promotional material, or to decline to purchase promotional material, as they wish from time to time. The same newsagents are also free to withdraw from the "Newspower" enterprise. The applicant did not call any evidence of its own, or adduce any evidence from the witnesses called by the respondents, to dispel that impression.

4. The applicant submits that the "Newspower" arrangements are calculated to cause newsagents to conclude that they are obligated to VNS. It does not point to any legally enforceable arrangements. Whether there exists any compulsion on advertising members to purchase promotional material is not to be determined solely by reference to the expectation or desires of Newspower Victoria. It is a question which clearly requires reference to the advertising members themselves. As I have already indicated, evidence of the conduct of those members may warrant an inference that an obligation exists but the evidence before the Court is equivocal and does not support the inferences that the applicant has invited me to draw.

5. In Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238 Smithers J considered whether the respondent in that case had imposed conditions on its dealers in relation to the distribution of outboard marine motors other than those supplied by the respondent and whether those conditions were in breach of s.47(2). In dismissing the application, his Honour referred to the state of the evidence in terms which can be paraphrased to apply to the present case. At 286 his Honour observed:
   

"It appears that it was reported by those contacting dealers that some actually said they dared not take on the new brand for fear of jeopardizing their existing dealerships. It is equally clear, that although Mr Stevenson has recently been in personal touch with up to eighty Mercury dealers, not one has been called to give evidence of any actual stipulation existing between himself and Mercury that he is not to trade in other brands. It is evidently widely known to dealers that Mercury does not like its dealers selling other brands. No secret is made of this and persuasion is used to endeavour to achieve one brand operation by dealers. No doubt a wink is frequently as good as a nod and if there were evidence that dealers who "dualled" found themselves harassed or terminated it might be possible to draw the inference that despite its protestations to the contrary the reality was that the defendant did impose a condition of exclusivity upon its dealers. But there is no such evidence."

1. That case may be contrasted with Trade Practices Commission v Legion Cabs (Trading) Co-operative Society Ltd (1978) 35 FLR 372 where a member of a taxi co-operative was required by its rules to acquire a specified quota of petrol from one or more nominated service stations.

2. Accordingly, although Newspower Victoria wished to create a sense of obligation in its members to purchase promotional material and participate in promotional activities there is insufficient evidence for me to conclude that any advertising member felt so compelled. Therefore, I decline to accept the contention advanced on behalf of the applicant that there existed in fact an obligation upon advertising members to purchase promotional material. That contention having failed, the applicant cannot make out its claim under s.47(6).

SECTION 47(4)
104. The applicant alleges that VNS has engaged in exclusive dealing in contravention of s.47(4) of the Act in that it acquired the right to use the "Newspower" banner on the condition that those rights would not be supplied to another. That conduct, so it was said, had the purpose or likely effect of substantially lessening competition.

1. As a result of the tender process and the negotiations which followed it, VNS was appointed the preferred wholesaler thereby obtaining exclusive rights. It does not appear to have been disputed by the respondents that the benefits acquired by VNS pursuant to the preferred warehouse agreement constitute "services" as that term is defined in s.4 of the Act. Although it is by no means clear beyond argument, I assume in favour of the applicant that it was a condition of the arrangements that those benefits would not be supplied by Newspower Victoria to any other person.

2. The purpose for which the exclusive arrangement was made (that being the relevant conduct pursuant to s.47(4)) was the subject of detailed cross-examination of Mr Fullagar. It will be recalled that the exclusive supply arrangements arose as a result of the refusal of both VNS and the applicant to become joint suppliers of Newspower and were brought about as a result of initiatives by VNS and the applicant.

3. Mr Fullagar gave evidence that VNS was reluctant to work with the applicant because he believed that such arrangements would entail a giving up of confidential information on pricing, customer base and other matters. He further stated that there was a reluctance by VNS to forego the freedom, which it would otherwise enjoy, to negotiate its own prices. That freedom, he thought, may have been curtailed by a joint distribution agreement.

4. The other matter raised by Mr Fullagar as motivating the exclusive arrangements was that VNS would be required to phase out the "Logo" brand which VNS regarded as a valuable asset. He stated that VNS was reluctant to do that in return for what it regarded as a half share of a franchise.

5. I have already made reference to what is required of an applicant to prove a proscribed purpose. It was not expressly put to Mr Fullagar that the purpose of the arrangements was substantially to lessen competition in the market. He invoked, as reasons for seeking exclusivity, the reluctance of VNS to share information with the applicant and the commercial advantage of the arrangements. Those purposes are, of course, not synonymous with the purpose of substantially lessening competition. The evidence does not enable me to conclude that the engaging by VNS in the conduct described in s.47(4)(a) had the purpose of substantially lessening competition in the relevant market.

6. I have already made findings in relation to the effect of this exclusive licence agreement and I shall not repeat them. The applicant has not satisfied me that those arrangements have, or are likely to have the effect of substantially lessening competition.

SECTION 47(7)
111. Finally, it is pleaded that VNS requires non-advertising members to pay a premium price for "Newspower" promotional goods and refuses non-advertising members a discount because they have not agreed to acquire promotional services supplied by Newspower Victoria.

1. The applicant relies on a document entitled "The Newsagents Choice" which the applicant alleges is published and distributed by and on behalf of VANA and Newspower Victoria. That document purports to advise non-advertising members that they are able to purchase "Newspower" products but at a premium price.

2. The question of price differential between advertising and non-advertising members is not something which has been illuminated by evidence. Mr Fullagar was not cross-examined about it at all. No evidence was called by the applicant to establish actual differential prices. The document relied upon is, at best, equivocal about the actual pricing arrangements. The matter was put to Mr O'Malley in cross-examination. After initially stating that he did not believe a price differential existed he then, in response to a further question, said:
   

"As I understand it - and once again that's a thing you probably should bring up with Mr Fullagar in the pricing of product, but as I understand it, the prices coming out of the warehouse are exactly the same for all members of Newspower, advertising and non-advertising. It is the levy that is different, the advertising levy that is different."

1. The subject of differential pricing was not pursued further with Mr O'Malley. The evidence falls far short of satisfying me that a difference actually existed nor is there evidence of a refusal by VNS to supply "Newspower" promotional material to anyone who requested it. The applicant's case under this limb has, therefore, not been made out.

2. For these reasons the applicant has failed to establish its case under each of the grounds which it has raised. Accordingly, the application must be dismissed with costs.