Taprobane Tours W.A. Pty Ltd v Singapore Airlines Ltd

Re: TAPROBANE TOURS W.A. PTY. LTD.
And: SINGAPORE AIRLINES LIMITED
No. WA G124 of 1987
FED No. 464
Trade Practices
96 ALR 405

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Lee J.(1)

CATCHWORDS

Trade Practices - misuse of market power - Trade Practices Act 1974, s.46 - definition of relevant market - whether respondent had substantial degree of power in market so defined - whether respondent took advantage of such power - purpose of exercise of such power - damages.

Trade Practices Act 1974 ss.4E, 46, 82; sub-ss.45D(1), 46(1) and (7), 46(7), 84(1); paras.46(1)(a), (b) and (c), 46(3)(a) and (b), 46(4)(a), (b) and (c)

Ah Toy J. Pty. Ltd. v. Thiess Toyota Pty. Ltd. (1980) 30 ALR 271

Mark Lyons Pty. Ltd. v. Bursill Sportsgear Pty. Ltd. (1987) 75 ALR 581

Queensland Wire Industries Proprietary Limited v. The Broken Hill Proprietary Company Limited (1989) 167 CLR 177

Kaze Constructions Pty. Limited v. Housing Indemnity Australia Pty. Limited (1990) ATPR 41-017

Tillmanns Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union (1979) 27 ALR 367

Top Performance Motors Pty. Ltd. v. Ira Berk (Queensland) Pty. Ltd. (1975) 24 FLR 286

Warman International Ltd. v. Envirotech Australia Pty. Ltd. (1986) 67 ALR 253

HEARING

PERTH

#DATE 30:8:1990

Counsel for the Applicant: C.G. Colvin

Solicitors for the Applicant: Robinson Cox

Counsel for the Respondent: A.J. Templeman, QC

and A.D. Fenbury

Solicitors for the Respondent: Turner Freeman by their agents

Slater and Gordon

ORDER

The applicant to file a short minute to give effect to these reasons for judgment.

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

JUDGE1

The applicant, Taprobane Tours W.A. Pty. Ltd. ("Taprobane"), commenced business as a travel agent in 1980. In about 1984, Taprobane expanded its business to include the creation and marketing of wholesale holiday tours ("wholesale tours"). Such travel agents are known as "wholesalers". A wholesaler creates a holiday tour programme by negotiating arrangements for the supply of necessary services for that programme and promotes the sale of such tours to "retail" travel agents, or perhaps more accurately the sale of such tours by "retail" travel agents to the customers of those agents. Taprobane specialized in wholesale tours from Australia to the Maldive Islands ("the Maldives") and later to Mauritius

Such wholesale tours rely upon the services of international airlines to convey tourists to holiday destinations out of Australia. Wholesalers have arrangements with such airlines for the issue of tickets at discounted rates ("wholesale fares") and receive support and endorsement from the airlines in the preparation and distribution of their tour brochures.
In 1984 Taprobane approached the respondent, Singapore Airlines Limited ("Singapore Airlines"), and entered an arrangement with the airline pursuant to which it received the benefit of a special promotional fare for tourists departing from Perth for the Maldives. Singapore Airlines commenced regular flights from Singapore to the Maldives en route to Europe and return in about March 1984. At all material times, Singapore Airlines was the only airline offering a flight from Australia to the Maldives via Singapore. Other flights to the Maldives were via Sri Lanka or India, and were indirect.
Taprobane arranged contracts for resort accommodation in the Maldives and prepared itineraries incorporating Singapore Airlines flight schedules. It prepared and published a brochure detailing the contents of its tours in about June 1984. The brochure was approved by Singapore Airlines and carried its endorsement. At about the same time, Singapore Airlines extended the discounted fares offered to Taprobane to include travellers departing from Australia from airports in the Eastern States.
At the time, there were three principal operators providing wholesale tours to the Maldives, namely CBR Tours, Penthouse Tours and Club Mediterranee.
In about May 1985, after Singapore Airlines commenced a service to Mauritius from Australia via Singapore, Taprobane made an arrangement with Singapore Airlines for the provision of wholesale fares to be incorporated in tours to Mauritius to be prepared and promoted by Taprobane.
Taprobane put together a combination of services for the provision of accommodation, meals and travel to be incorporated in a wholesale tour to be retailed by travel agents to Australian travellers to Mauritius. A brochure was prepared and published in respect of those tours in about September 1985.
The agreement to provide wholesale fares was for an annual period between 1 April and 31 March. It was the practice of Singapore Airlines to advise wholesalers by October/November in any year of the level of fares to be charged to them in the succeeding year commencing on 1 April.
By 31 March 1985, Taprobane had made a successful start to its operations as a wholesaler of tours, particularly for tours departing from the west coast of Australia.
Taprobane organized seminars and promotional activities in Melbourne, Sydney and Adelaide, forwarded circulars to all travel agents and produced video-taped displays for the use of other agents to promote its tours.
By March 1986, it had more than doubled the sales made in the preceding year, the major part of the increase being attributable to sales of tours departing from the Eastern States.
In January 1986 CBR Tours, the leading wholesaler of tours to the Maldives, had collapsed. Thereafter, the volume of Taprobane's sales of tours to the Maldives to customers in the Eastern States increased sharply.
However, the fall of CBR Tours had several important ramifications. Firstly, Singapore Airlines decided that it was obliged to take over some of the liabilities of CBR Tours to protect the goodwill of the airline and to preserve the credibility of the Maldives as a tour destination. Secondly, Singapore Airlines decided to recover some of the outgoings disbursed to meet those liabilities by entering the market for the sale of wholesale tours to the Maldives and Mauritius under the name "Island Affair Holidays". It had already been in the business of selling wholesale holiday tours to various Asian destinations under the name "Asian Affair Holidays".
The Singapore Airlines' decision to offer wholesale tour packages was made urgently and was put into operation as soon as March 1986. Notwithstanding the lack of preparation for the venture, by 31 March 1987 Singapore Airlines had captured the major share of the sale of tours to the Maldives formerly enjoyed by CBR Tours.
In August 1986, Singapore Airlines' Market Development Manager conducted a review of the airline's support of various tour wholesalers. The wholesalers were considered under the following categories: Maldives, Mauritius, Asia, the India Region, Europe and Egypt. The review recommended that Taprobane receive wholesale fares for tours departing from Perth only and that it be denied wholesale fares for departures from eastern Australia
In November 1986, the Singapore Airlines General Manager for Australia considered and rejected that reommendation. He directed that Taprobane be "cancelled as a tour wholesaler associate of Singapore Airlines".
Upon being informed of that decision, the Western Australian management of Singapore Airlines ("State management") notified its disagreement with the decision and stated that Taprobane's performance had justified continuation of its wholesaler status.
Between November 1986 and February 1987, debate ensued between State management and Australian management of Singapore Airlines as to the merits of the decision and the entitlement of Taprobane to expect the grant of wholesale fares.
In February 1987, the General Manager withdrew his previous direction and determined that Taprobane be given the same fares and support for wholesale tours to the Maldives and Mauritius as enjoyed by another Western Australian based tour wholesaler, New Horizons Pty. Ltd. ("New Horizons"), namely for tourist departures from Western Australia only.
Singapore Airlines, through Island Affair Holidays, and all other wholesalers of tours to the Maldives and Mauritius to whom wholesale fares were granted by Singapore Airlines, had the benefit of wholesale fares for Australia- wide departures.
Tour wholesalers other than Taprobane had been notified in early January 1987 of the wholesale fares to apply for the season commencing 1 April 1987. Minor amendments to arrangements, but not to the level of prices, were advised to those wholesalers in early March 1987.
The wholesale fare ex-Perth to the Maldives, available to New Horizons and other wholesale tour operators, was $690 for departures on days other than Fridays and Saturdays for which the fare was $770.
After the decision was made in February 1987 that Taprobane would be allowed to operate out of Western Australia and receive the same wholesale fares as New Horizons, State management advised Taprobane unofficially of the General Manager's direction and of the level of the wholesale fares from Perth for tours to the Maldives and Mauritius. However, by March 1987 Taprobane had not been officially informed of the terms on which wholesale fares would be supplied to it and it remained unable to present tour programs and prices for the season commencing 1 April 1987.
On 12 March 1987 the Market Services Manager of Singapore Airlines ("Howard") visited Perth and met the Manager of Taprobane. Taprobane sought to have wholesale fares restored for departures from Melbourne, Sydney and Adelaide and informed Howard that it was estimated that 70 per cent of its tour sales had been made in the Eastern States of Australia. The details of sales made for the year ending March 1987 show that estimate to have been accurate.
The meeting generated some unpleasantness, perhaps not a surprising event in the circumstances. After the meeting, Singapore Airlines requested further information from Taprobane and stated that it would consider Taprobane's proposals. The further information was supplied but no decision was made on whether Taprobane would be granted wholesale fares for departures from the Eastern States. By repeated telexes, Taprobane pressed for an urgent decision and made it known to Singapore Airlines that Taprobane's inability to issue brochures for the 1987/88 season had caused a loss of market share to Taprobane and the viability of that aspect of Taprobane's business was under threat. It also sought advice on what fares would be charged by Singapore Airlines for approximately 40 bookings Taprobane had made some months previously for departures to be made from Sydney, Melbourne, Brisbane and Adelaide after 1 April 1987.
On 25 March 1987, Howard advised Taprobane that Singapore Airlines would provide a wholesale fare to the Maldives and Mauritius from Perth only and that in respect of the booked Eastern States departures, full details of the names of the passengers and their itineraries were required to be supplied to the Sales Manager for Western Australia by 3 April 1987. On 31 March 1987, Taprobane sought confirmation that those bookings would be honoured at the fare levels previously available to Taprobane for Eastern State departures at the time the bookings were made. No confirmation was provided and by telex on 7 April 1987, State management was instructed as follows by Howard:

"BOOKINGS EX W.A. MUST BE AT NEW PRICES X IF WE ALLOW TAPROBANE OLD PRICES WE RUN THE RISK OF UPSETTING NEW HORIZONS AND OUR OTHER WHOLESALERS X TEA WILL ADV YOU THE FARE LEVEL APPLIC FOR THE BOOKINGS ALREADY HELD, AS DETAILED IN YR TLX X I ASSUME THEY ARE ALL EXISTING BKGS AND WERE NOT MADE AFTER THE DECISION TO REMOVE THE FARE FROM THE EAST COAST HAD BEEN TRANSMITTED X

RGDS,

..

JOAN,

CLD U PLS ADV PERSQ FARE LEVELS EX EAST COAST X BE CAREFUL BECAUSE AS YOU ARE AWARE WITH TAPROBANE I HAVE STRUCK A SPECIAL FARE EX PER WHICH IS HIGHER THAN OUR OTHER NETTS TO MALE FOR OUR WHOLESALERS X".

Notwithstanding these instructions, State management considered Singapore Airlines to be under an obligation to Taprobane and took upon itself to commit Singapore Airlines to honour the prices in force when the bookings were made.
On about 6 April 1987, Taprobane received a letter from Howard setting out the level of wholesale fares granted to Taprobane with respect to departures from Perth. In respect of the Maldives, the fares were $708 for weekday departures and $880 for the departures on weekends. It appeared that after the meeting with Taprobane on 12 March 1987, Howard had returned to Sydney and determined that not only should Taprobane not receive wholesale fares for Eastern States departures but a special wholesale fare should be struck for departures from Perth being a higher fare than that available to the wholesalers in competition with Taprobane.
Both Taprobane and the State management protested to the head office about the fares set by Howard which were significantly higher than the fares available to New Horizons.
In the second paragraph of a letter to Howard dated 8 April 1987, Taprobane stated, inter alia:

"We note that the fares given to us to the Maldive Islands ex Perth are significantly higher than advised by the Perth Sales Department at the beginning of March. We trust that we are not being disadvantaged against other tour wholesalers in respect of price."

That letter brought the following chain of telex communications between Howard and State management:
Howard to State Manager - 16 April 1987:

"TAPROBANE TOURS LETTER DTD 8 APR PARA 2

PSE ADV WHEN LEVELS WERE GIVEN TO TAPROBANE TOURS IN MARCH AND UNDER WHOSE AUTHORITY STOP U WILL REALISE FROM CORRESPONDENCE THAT TAPROBANE LEVELS EX WA ARE CONSIDERABLY HIGHER THAN OTHER OPERATORS STOP OUR ARRANGEMENTS WITH WHOLESALERS MUST OBVIOUSLY REMAIN CONFIDENTIAL STOP AYE DONT LIKE THE TONE OF HIS LETTER STP WE BELIEVE OUR CONCERN IS JUSTIFIED BECAUSE OF THE WAY OUR COMPANY HAS BEEN TREATED IN THE PAST MONTHS STOP APPRECIATE YR COMMENTS ON HIS LETTER STOP REGARDS"

State Manager to Howard - 16 April 1987:

"I HVE SPOKEN TO JOHN HENVILLE WHO IS INVESTIGATING LEVELS GIVEN TO TAPROBANE MARCH BY SALES REP KAY BARTON CMA WITH HIS AUTHORITY STP KAY ON SICK LEAVE N HAS FILE STP I SUPPOSE U CAN APPREC WHY TONE OF TAPROBANE'S LETTER IS SUCH WHEN U HVE ELECTED TO CUT OFF HIS SOURCE OF EARNING POTENTIALS IN OTHER STATES OTHER THAN WA N HERE U HVE PREJUDICED HIS OPPORTUNITIES BY PROVIDING HIGHER LEVELS THAN THAT PROVIDED TO NEW HORIZONS STP I AM NOT SURE WHAT YOUR CONCERN IS STP TAPROBANE PROVIDES 4 OR 5 TIMES MORE REVENUE THAN THE WHOLESALER U ELECTED N APPOINTED TO GIVE SPECIAL FARES CMA THAT BEING NEW HORIZONS HERE STP I ALSO AM NOT SURE WHAT YOU MEANT BY HOW OUR COMPANY HAS BEEN TREATED IN THE PAST MONTH FOR ALL THEY DO IS GIVEN US SUPPORT CMA PASSENGERS HENCE REVENUE STOP RGDS"

State Manager to Howard - on or about 22 April 1987:

"HVE SPOKEN TO KAY AS TO HOW N WHY FARE GIVEN TO TAPROBANE STP LEVELS PROVIDED WERE AS PER GMAS AA428/T WHICH U AGREED CUD BE GIVEN TO TAPROBANE WA LEVEL ONLY STP AYE UNDERSTAND THIS A RESULT OF OUR MANY SUBSTANTIATIONS AS TO WHY TAPROBANE FAR GREATER SUPPORTER THAN NEW HORIZONS STP APPR U ADVSG WHY A HIGHER FARE LEVEL PROVIDED TO THE BETTER CONTRIBUTOR STP RGDS"

The State management request for reasons for the head office decision referred to in the final sentence of the last telex apparently drew no response.
Some weeks later in May 1987 the fare of $880, payable by Taprobane for the more popular days of departure from Perth, was reduced to $810 after State management had pointed out that the ordinary published fare for the low season period was cheaper than the fare offered to Taprobane.
In his evidence, Howard suggested that the setting of the fare at $880 had occurred by mistake. The extent of the mistake was not described but even so it was fully intended by Singapore Airlines, through Howard, that there be a considerable differential between the fare paid by Taprobane and other wholesalers in respect of the more popular days of departure from Perth. It was said that another employee, the Tariffs Executive had been responsible for setting the actual level of the fare after being instructed by Howard to incorporate an appropriate differential into the fare to be paid by Taprobane.
However, the footnote, addressed to the Tariffs Executive ("Joan") endorsed on the telex communication from Howard to State management on 7 April 1987 set out earlier in these reasons, indicates that Howard had a particular role in setting that fare. Howard did not explain in his evidence what instructions he had given the Tariffs Executive to enable the fare to be calculated nor how the calculation had been made in error and contrary to his instructions. The Tariffs Executive was not called to provide any evidence on the matter.
In addition, Howard's attention had been drawn to the extent of the fare differential by Taprobane's letter of 8 April 1987, referred to above, which brought the response in the telex from Howard to State Management on 16 April 1987, referred to earlier, advising that State Management could realize from the correspondence that the fare levels to be paid by Taprobane were considerably higher than those to be paid by other operators.
Prior to these adverse decisions by Singapore Airlines, Taprobane, in specializing in wholesale tours to the Maldives and Mauritius, had won a significant share of all wholesale tours sold to those destinations. In the period between March 1986 and March 1987, Taprobane maintained its share of those sales although the total number of departures to the Maldives from Australia decreased in that period.
Taprobane contended that the actions of Singapore Airlines resulted in Taprobane being forced to withdraw from the business of offering wholesale tours to both destinations. I accept that Taprobane could not continue its specialized operations as a wholesaler of tours to Mauritius and the Maldives based upon the sales of tours to Western Australian customers alone and that the less favourable wholesale price granted to it was a significant disadvantage to it as a competitor. Taprobane's business in that field ceased very soon after March 1987.
The views expressed by the State Manager in his telex communication to Howard of 16 April 1987 showed an awareness of that prospect.
In its statement of claim in these proceedings, Taprobane alleged that the conduct of Singapore Airlines, described above, was done in contravention of s.46 of the Trade Practices Act 1974 ("the Act") and that Taprobane suffered loss, or damage, by that conduct and was entitled to recover the amount of that loss, or damage, pursuant to s.82 of the Act
The relevant parts of s.46 of the Act are as follows:

"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 into that or any other market; or

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

(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) Without in any way limiting the manner in which the purpose of a person may be established for the purposes of any other provision of this Act, a corporation may be taken to have taken advantage of its power for a purpose referred to in sub-section (1) notwithstanding that after all the evidence has been considered the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person or from other relevant circumstances."

Section 4E of the Act provides the following definition and aid to definition of the term "market":

"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."

Taprobane bore the onus of proving

(i) a relevant market;

(ii) that Singapore Airlines had a substantial degree of power in that market;

(iii) that Singapore Airlines took advantage of that power; and

(iv) that Singapore Airlines did so for one of the purposes set out in sub-s.46(1).

Market and Market Power

Taprobane pleaded that there were separate wholesale markets for the sale of "package island holidays" including airfares and accommodation bookings from Perth to the Maldives, from the capital cities of other States of Australia to the Maldives, from Perth to Mauritius and from the capital cities of other States to Mauritius or, alternatively a wholesale market for the sale of such island holidays from the capital cities of all Australian States to the Maldives and Mauritius. As a further alternative, Taprobane pleaded that the relevant markets were for the supply of passenger airline services for flights from Australian capital cities to the Maldives and from Australian capital cities to Mauritius.
In its defence, Singapore Airlines pleaded that there was a market for "packaged island holiday tours" for tourists originating from Australia and sub-markets for such tours to the Maldives or Mauritius for tourists originating from Australia but that at no material time did Singapore Airlines have a substantial degree of power in the market, or sub-markets. Singapore Airlines otherwise denied that markets existed as pleaded by Taprobane.
By that pleading it may have appeared that Singapore Airlines accepted that either of the sub-markets described was a market for the purpose of s.46 of the Act. However, the parties presented their cases as if those questions remained live issues.
The hallmarks of "market" and "market power" have been discussed and explained by the High Court in Queensland Wire Industries Proprietary Limited v. The Broken Hill Proprietary Company Limited (1989) 167 CLR 177. Mason C.J. and Wilson J. stated at pp 187-188:

"The analysis of a s.46 claim necessarily begins with a description of the market in which the defendant is thought to have a substantial degree of power. In identifying the relevant market, it must be borne in mind that the object is to discover the degree of the defendant's market power. Defining the market and evaluating the degree of power in that market are part of the same process, and it is for the sake of simplicity of analysis that the two are separated. Accordingly, if the defendant is vertically integrated, the relevant market for determining degree of market power will be at the product level which is the source of that power: see the discussion of market power below. After identifying the appropriate product level, it is necessary to describe accurately the parameters of the market in which the defendant's product competes: too narrow a description of the market will create the appearance of more market power than in fact exists; too broad a description will create the appearance of less market power than there is."

At pp 195-196 Deane J. said:

"In the case of an alleged contravention of the provisions of s.46(1), there will ordinarily be little point in attempting to define relevant markets without first identifying precisely what it is that is said to have been done in contravention of the section. The present case, with its variety of arguable markets, is no exception. ..

Section 4E confines 'market' for the purposes of the Act to 'a market in Australia' and provides that, when the word 'market' is used in relation to any goods or services, it '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'. Section 46(4) provides that a reference in s.46 to a market is a reference to a market for goods or services. The Act does not otherwise seek to define what is meant by the word 'market'. That is not surprising since the word is not susceptible of precise comprehensive definition when used as an abstract noun in an economic context. The most that can be said is that 'market' should, in the context of the Act, be understood in the sense of an area of potential close competition in particular goods and/or services and their substitutes (cf. Re G. and M. Stephens Cartage Contractors Pty. Ltd. (1977) ATPR 17, 445, at p 17,460.) The identification of relevant markets and the definition of market structures and boundaries for the purposes of determining whether B.H.P.'s refusal to supply Y-bar to Q.W.I. contravened s.46(1) involves value judgments about which there is some room for legitimate differences of opinion. The economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted. One overall market may overlap other markets and contain more narrowly defined markets which may, in their turn, overlap, the one with one or more others."

Dawson J. agreed with the reasons of Deane J. and added the following comments:

"...the concept of the market (is) a concept which is sometimes dealt with in a more complex manner than is necessary. A market is an area in which the exchange of goods or services between buyer and seller is negotiated. It is sometimes referred to as the sphere within which price is determined and that serves to focus attention upon the way in which the market facilitates exchange by employing price as the mechanism to reconcile competing demands for resources: see Stigler and Sherwin, 'The Extent of the Market', Journal of Law and Economics, vol.28 (1985) 555, at p 555." (pp 198-199)

Singapore Airlines contended that in defining the relevant market in which it was to be determined whether a substantial degree of power existed, one could look no further than the market in which Singapore Airlines competed with many other airline carriers to supply airline services to Australian tourists.
If only the broadest consideration of market were to be applied, that may be correct, but it would not take into account the possibility of the existence of clearly defined spheres of commercial activity which together may form a larger market but individually may be discrete markets, albeit subordinate, in which market power was capable of being exercised. The ascertainment of market power has an integral role in defining the relevant market to which s.46 applies to regulate conduct therein. The nature of the power may show how confined, or how broad, the relevant market is.
In the present case, it was not in issue that Singapore Airlines was the principal supplier of airline services between Australia and the Maldives. Upon Singapore Airlines commencing a service between the Maldives and Singapore by arrangement with the government of the Maldives in 1984, no other combination of airline services provided a practicable, feasible or economic alternative for travel by air to that destination by Australian tourists. Singapore Airlines had an overwhelming dominance in the supply of airline services to the Maldives thereafter. However, the supply of a service from Australia to the Maldives via Singapore was limited by the need for Singapore Airlines to meet the demand for the service between Singapore and the Maldives from tourists from other sources. As is referred to later in the reasons, the volume of Australian tourists using Singapore Airline services to the Maldives was reduced because of the strength of the demand for that service by tourists from other countries and their capacity to pay increased prices. The sale of airline services from Australia to the Maldives provided a negligible part of the revenue Singapore Airlines received from its worldwide operations.
From the foregoing it may be concluded that Singapore Airlines could promote or retard a wholesaler in a "down-stream" Australian market for wholesale tours to the Maldives without fear of that wholesaler being able to incorporate or promote the airline services of a competing airline in such tours. Furthermore, because of the limited airline services available, a denial of wholesale fares to the Maldives to a particular wholesaler would have the effect of reordering the business of wholesalers rather than reducing the number of passenger flights Singapore Airlines was able to sell. In addition, Singapore Airlines' achievement of dominance in the "down-stream" market for the sale of wholesale tours to the Maldives insulated it from a loss of profit in the market for the supply of airline services to the Maldives if it decided to reduce the opportunities of other wholesalers to have access to those services.
Other factors of importance identifying the relevant market were the existence of a defined area of economic activity which used such airline services to promote holiday tours to the Maldives as a distinct concept and as a product with significant identifying features. A number of wholesalers promoted a holiday to the Maldives as a separate holiday experience. There was a clearly delineated area of competition for the supply of wholesale tour packages to the Maldives
The definition of the market in the present case arises out of a combination of the market power of Singapore Airlines and an observable area of economic activity which involved competitive conduct by wholesalers carrying on the business of promoting the sale of tours to the Maldives.
When all those matters are taken together, the relevant market which emerges at the time of the conduct in respect of which complaint is made in this matter is the market for the supply of airline services to persons engaged in providing wholesale tours to the Maldives. Such a description of the market would only be too narrow if it created an erroneous appearance of market power and in this case that would not be so.
A similar conclusion may be reached in respect of the supply of airline services for wholesale tours from Australia to Mauritius where Singapore Airlines was the dominant supplier of airline services, although fewer wholesalers were engaged in competition and the market operated at a lower level of activity.
However, it is unnecessary to consider separately the existence of a market in respect of the supply of airline services to Mauritius. Taprobane's claim for loss or damage is almost entirely causally connected to Taprobane's inability to compete in the market for the supply of wholesale tours to the Maldives and its case for restitution of any loss stands, or falls, upon whether the supply of air services to the Maldives may be regarded as a separate market.
The consideration of whether any services are substitutable for, or otherwise competitive with, the Singapore Airlines supply of airline services to the Maldives is restricted to that market. In that market there are no substitutable services for the services provided by Singapore Airlines. It was contended by Singapore Airlines that any airline service to an island holiday resort of a similar type was a substitutable service so far as the Australian tourist was concerned but such a submission must fail when the relevant market is defined as above.
It is then necessary to look at the market for air services to the Maldives to assess whether Singapore Airlines' dominance therein was translated into market power.
Singapore Airlines had no real competitor in its delivery of airline services to the Maldives, but if it were open to another operator of airline services to enter the market and provide immediate competition, such a prospect may have acted as a constraint upon monopolistic conduct and in that way may have actually restricted market power.
International airline services are highly regulated and depend upon the grant of landing rights pursuant to an accord between sovereign countries. That form of regulation is, ipso facto, a barrier to competition. Such an accord has been reached between the governments of Singapore and the Maldives. Singapore Airlines enjoyed the benefit of the barrier provided by the regulation of landing rights and there was nothing in the evidence placed before the Court to suggest that it was in any way constrained by the conduct of a potential competitor in respect of how it conducted itself in relation to the provision of its airline services.
In respect of the segment of economic activity represented by the delivery of airline services to the Maldives to Australian tourists, Singapore Airlines was capable of controlling the delivery of those services and it thereby possessed market power, a power it was capable of extending into other markets including the market for the supply of wholesale tours to the Maldives. (See Queensland Wire per Mason C.J. and Wilson J. at pp 187, 192.
Take Advantage of Market Power
As was established in Queensland Wire, the words "take advantage of" in sub-s.46(1) do not bear any moral connotation or a notion of reprehensible conduct which has regard to intent and motive. The words simply mean the use of a power available to a corporation in a market.
Although the ordinary exercise of the advantage of market power may be reflected in increased prices and profits, the use of that power may be demonstrated in other ways including the reordering of competition by refusal to deal, or dealing in a restrictive manner. (See Queensland Wire per Dawson J. at p 200.)
Viewed in that way, it must be accepted that Singapore Airlines took advantage of its market power by its refusal to continue to deal with Taprobane in supplying wholesale fare for departures from the Eastern States and by its discriminatory pricing of such fares for departures ex-Perth. (See Mark Lyons Pty. Ltd. v. Bursill Sportsgear Pty. Ltd. (1987) 75 ALR 581 at p 592.) This was not a case of mere exercise of a legal right divorced from any exercise of market power. (See Top Performance Motors Pty. Ltd. v. Ira Berk (Queensland) Pty. Ltd. (1975) 24 FLR 286; Ah Toy J. Pty. Ltd. v. Thiess Toyota Pty. Ltd. (1980) 30 ALR 271; Warman International Ltd. v. Envirotech Australia Pty. Ltd. (1986) 67 ALR 253.)
It was not seriously contended that if the relevant market were found to be the market for the supply of airline services to the Maldives, Singapore Airlines had not taken advantage of the substantial degree of power it possessed in that market, and the principal issue was whether Singapore Airlines had so acted for a purpose proscribed by s.46 of the Act.
Purpose
It does not follow from the mere demonstration of the fact that a corporation has taken advantage of a substantial degree of market power that it has done so for a purpose proscribed by s.46.
In determining what was the purpose of a corporation pursuant to s.46, it would be necessary to consider subjective elements in addition to objective components to consider whether the totality of the circumstances established that the corporation had acted for a purpose which attracted the operation of s.46. (See Tillmanns Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union (1979) 27 ALR 367, per Deane J. at pp 382-383.) Although in Tillmanns Butcheries Deane J. was concerned with differently worded provisions of sub-s.45D(1) of the Act, the intent of the legislature that a subjective purpose is to be applied in s.46 is made reasonably clear by the provisions of sub-s.84(1) of the Act although, of course, as sub-s.46(7) reiterates, such a purpose may be established by inferences from conduct and circumstances.
In its statement of claim, Taprobane alleged that Singapore Airlines took advantage of the substantial degree of power that it held in the market for the supply of airline services from Australia to the Maldives for the purpose of eliminating, or substantially damaging, Taprobane, a competitor of Singapore Airlines in the wholesale market for the sale of tours to the Maldives or for the purpose of deterring, or preventing, Taprobane from engaging in competitive conduct in the latter market.
In its defence, Singapore Airlines denied that its actions had such a purpose and stated that its actions reflected a decision taken for the purpose of:

1) improving its profitability by ensuring that it dealt only with established operators who might be expected to provide regular and reliable custom to Singapore Airlines, and 2) avoiding financial loss of the kind suffered by Singapore Airlines after the collapse of CBR Tours.

The evidence clearly established that Taprobane was an efficient operator with a competitive product and that it conducted its business on proper financial terms with both Singapore Airlines and with the accommodation resorts in the Maldives from which it obtained accommodation services.
There was nothing in the evidence to suggest that Taprobane represented any risk of financial loss to Singapore Airlines by its continued operation as a wholesaler and this contention was not relied upon by counsel for Singapore Airlines in his final address. Singapore Airlines did have an interest in seeing that any promoter of wholesale tours endorsed by it did not damage the reputation of the Maldives as a holiday destination for Australian tourists but it was conceded that there were no complaints against Taprobane in the history of its operation of those tours.
Similarly, the evidence adduced in support of its case did little to support Singapore Airlines' contentions that it acted for the purpose first described above. It was the evidence of the General Manager for Australia, Mr Killick, that, in acting on behalf of Singapore Airlines in making a decision in the matter, he was concerned by the fact that Taprobane had no office of its own in Sydney or Melbourne from which to conduct its wholesale activities and that it used the services of an agent not held in high esteem in the travel industry, according to Mr Killick.
That may have been part of the reasoning that led to the decision to refuse to deal with Taprobane in respect of wholesale fares for Eastern States departures and may have been a legitimate consideration notwithstanding that it was not discussed with Taprobane. However, an analysis of the surrounding circumstances, in addition to the oral evidence of the officers of Singapore Airlines who were the organs through which it operated, show that the original decision made in November 1986 to exclude Taprobane from access to wholesale fares was motivated entirely by another consideration.

When State management was informed of that decision it was told that it had been made "as a consequence of management practices" of Taprobane reported to Mr Killick. When asked in cross-examination about the nature of these "management practices", Mr Killick stated that he had in mind some past event when Taprobane had been appointed as general sales agent for Air Lanka in Western Australia in place of an agent known to Mr Killick. Mr Killick had no personal knowledge of, nor involvement in, that event and at no time was the matter raised with Taprobane by Singapore Airlines. All dealings between Taprobane and Singapore Airlines were entirely satisfactory and gave Singapore Airlines no cause for complaint.
The subsequent decision in February 1987 to grant Taprobane access to wholesale fares for departures from Perth was only made after forceful representations were made by State management to the effect that the earlier decision could not be supported on commercial grounds. The final decision to impose a discriminatory fare for tour departures from Perth, made in late March 1987 and well after other competitors had been advised of their wholesale fares, could not be tied either to the prospect that Taprobane could not provide regular and reliable custom to Singapore Airlines or to Taprobane's lack of an acceptable agent in the cities of Melbourne and Sydney.
Whatever the motivations may have been which caused the officers of Singapore Airlines to act in that way, the purpose of Singapore Airlines was, at all times, reasonably clear.
It considered it had the right and the power to re-order the nature of the competition in the market for the supply of wholesale tours to the Maldives by exercising the substantial degree of market power that it had in the market for the supply of air services to the Maldives and it is beyond question that whatever other purpose, or purposes, Singapore Airlines may have sought to fulfil, one of the purposes in the mind of the decision-makers of that corporation, as shown by the totality of the evidence, was to rationalize or redefine the operations of the wholesalers in the market for the supply of wholesale tours to the Maldives by restricting the ability of Taprobane to engage in competitive conduct in that market.
It is sufficient for the purposes of s.46 that such a purpose be one of a number of purposes, it is not necessary that it be either a single purpose or a dominant purpose to attract the operation of the section. (See Tillmanns Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union (supra)).
The deterring of a person from engaging in competitive conduct is not confined by s.46 to the market in which the corporation has a substantial degree of power. It may take advantage of the power it has in one market for the purpose of deterring competitive conduct in another. A trader may be deterred from engaging in competitive conduct by suffering impediments that hold it back in the marketplace. If the trader's effectiveness, or efficiency, is impinged, its ability to maintain, or expand, competition will suffer and actions, or events, which cause such an impingement will amount to a deterrence from engaging in competitive conduct.
I am satisfied that Singapore Airlines took advantage of the power that it held in the relevant market to deter Taprobane from engaging in competitive conduct and in doing so contravened the provisions of s.46 of the Act.
Damages
It now remains to determine whether Taprobane suffered any loss, or damage, by the conduct of Singapore Airlines that contravened the provisions of s.46 of the Act.
As set out earlier in these reasons, the clear consequence of the refusal to provide Taprobane with wholesale fares out of the Eastern States was the collapse of Taprobane's business of selling wholesale tours to the Maldives and Mauritius.
In part, Taprobane presented its claim for loss, or damage, on two alternative bases.
Firstly, it sought the recovery of a proportion of the costs expended on the overheads and promotion of the wholesale tours division of its business, claiming such proportion of expenditure to be outgoings incurred to achieve future sales in succeeding years. Such a claim was founded upon an assumption that the cessation of the wholesale tours business by June 1987 made such expenditure wasted expenditure which had been incurred only in anticipation of the wholesale tours business being a continuing activity.
Alternatively, Taprobane sought to claim as a consequential loss the loss of profits caused by the abrupt end to a profit earning division of its business. It was accepted by Taprobane that it could not claim recovery of wasted expenditure on costs in addition to the loss of the profits that would have been earned upon such expenditure.
Taprobane relied upon the analysis of an accountant to support its alternative claims. After cross-examination, the evidence of that witness was substantially modified and calculations of loss heavily qualified.
It may be accepted that the appropriate measure of loss, or damage, in respect of a claim pursuant to s.82 for loss, or damage, arising out of a contravention of s.46 of the Act, may extend to a calculation of an amount sufficient to compensate a person for consequential costs, expenditure or investment thrown away by reason of the contravening conduct. Of course, such a claim would depend upon appropriate evidence to show the nature of the expenditure and the directness of the connection of its loss with conduct which was in breach of the Act.
Taprobane claimed that a sum of $129,679 had been expended between 1 January 1986 and 30 April 1987 on overheads directly related to the operation of the wholesale tours part of Taprobane's business. Taprobane allocated a proportion of that expenditure, acknowledged to be an arbitrary allocation, as expenditure directed to the achievement of future sales and sought to recover a sum of $64,283.
At the outset, it should be said that the sum of $129,679 was expended in the course of two financial years, 1985/86 and 1986/87, and that the whole of that sum was claimed and allowed as deductible expenditure of the business of Taprobane in the taxation returns for each of those financial years. How much of that expenditure may be regarded as thrown way is debatable. Certainly, some part of advertising and promotion costs, and printing and stationery expenditure may have been incurred in greater amounts for the purpose of servicing sales in later financial years but it becomes an exercise in speculation to attempt to place a monetary value on the extent to which such expenditure, already incurred, had been wasted upon the abrupt cessation of that aspect of Taprobane's business.
In my view of the evidence of allocation of such expenditure, only $30,000 of the expenditure incurred could be said to have a particular component of its cost incurred for the purpose of future sales, of which at the most only one-third could be said to have been rendered unnecessary and, therefore, wasted upon the cessation of this part of Taprobane's business. After the benefit of the taxation deduction already received is taken into account, Taprobane's claim for recovery of such a consequential loss would not involve a sum greater than $5,000.
With regard to Taprobane's alternative claim for loss of profits and damage to goodwill, I have endeavoured to do the best I can with the figures provided in evidence. In 1985/86, Taprobane made a net profit of $8,630. In that year the gross profit received from wholesale tours represented about one-third of the gross profit of the business. In 1986/87, Taprobane recorded a net profit of $12,274 and the gross profit of the wholesale tour division provided about 39 per cent of the total gross profit of the business. From the details provided in respect of the overheads attributable to the conduct of the wholesale tours division referred to above, it would seem that wholesale tour overheads represented about 35 per cent of the total overheads of the business. A generous conclusion would be that the proportion of net profit of the business attributable to the return from wholesale tours would be approximately 40 per cent, being $3,450 in 1985/86 and $4,900 in 1986/87. There was no evidence that lesser sums would have been required to be expended on overheads in the succeeding years to maintain the same level of sales but provide a higher margin of net profit.
Taprobane claimed that in the two financial years following the cessation of the wholesale tour business, it would have enjoyed a substantial increase in sales in that area but for the conduct of Singapore Airlines which caused it to cease its business
The facts, however, show that such anticipations were entirely optimistic. In 1987/88, the number of Australian passengers travelling to the Maldives started to decrease and in 1988/89, it was substantially below previous levels. The Court was told that travellers to the Maldives from other parts of the world, particularly Japan, had increased and that the number of Australian tourists had been reduced correspondingly.
In addition to the decreasing market, Taprobane would have found itself in more direct competition with Singapore Airlines in selling its wholesale tours. Even if Taprobane maintained its share of the market, the volume of its sales would have fallen.
I am not satisfied that in the succeeding years Taprobane could have either increased or maintained the profits it received from its wholesale tours division in the 1986/87 year and consider that a sum of $7,500 would adequately represent the combined amount of net profits that may have been lost in those two years. As the rate of taxation that would have applied to the taxable income of a corporation received in the 1987/1988 and 1988/1989 financial years is the rate that now applies, there is no need to give further consideration to the impact of taxation on that sum, although, of course, any claim for interest should not extend to interest on the component thereof which is intended to compensate for the liability to income tax on that sum. (See Kaze Constructions Pty. Limited v. Housing Indemnity Australia Pty. Limited (1990) ATPR 41-017 at p 51.317 et seq.) It was not argued that the loss of these profits could not be considered as a consequential loss nor that two years was an unreasonable time to allow Taprobane to overcome the effects of the loss of the wholesale tours to the Maldives and Mauritius and to move into other areas of activity. The sum that it is entitled to recover for the loss of profits to restore it to the position it would have been in but for the contravention of the Act is, therefore, $7,500.
In addition, Taprobane claimed that it had suffered damage by loss of goodwill. The Court was not provided with any accounts for the years of trading ending 30 June 1988 and 30 June 1989. The Court was informed by the accountant's analysis that Taprobane had earned a net profit, before tax, of $5,795 in the year ending 30 June 1988.
I do not accept the calculation for loss of goodwill provided by Taprobane which involved a calculation of a notional net profit for the 1985/86 financial year by adding back 50 per cent of the portion of overheads claimed to have been wasted. In the absence of any evidence that the expended costs would not be recurring, it is inappropriate to use such a method of notional calculation. It may have been appropriate, as contended by the accountant, to ascertain the true nature of the net profit by adding back expenditure that carried the stamp of private benefits. The resultant calculation of goodwill using the method of calculation employed by the witness would be approximately $35,000. The present value attributed to goodwill by the witness was $25,000. The Court was not told how that sum was calculated nor to what extent the net profit for the year ending 30 June 1988 may have been increased to its true level by the adding back of like expenditure of a private nature in that year.
Having regard, however, to the extensive promotion that Taprobane undertook to gain its share of the market in the wholesale tours to the Maldives and to benefits that may have been received by the remainder of Taprobane's business as a retail travel agent had that former aspect of the business continued, I am satisfied that there would have been some damage to this intangible item of Taprobane's business and that I should endeavour to assess an appropriate sum to award by way of restitution having regard to the possibility that the subsequent development of other areas of its business may not replace the whole of the lost goodwill.
I consider $3,000 to be an adequate sum to be awarded in respect of that loss.
I will hear counsel as to the appropriate order for costs and the amount of interest to be awarded, if any, as sought in the application. The applicant will be directed to file a short minute of judgment to give effect to these reasons.

[1990] FCA 464

30 AUGUST 1990