Telstra Corporation Ltd v Australian Competition and Consumer Commission (No 2) - [2007] FCA 493

FEDERAL COURT OF AUSTRALIA
Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493
COMPETITION LAW – exercise of the Commission’s power to issue a Part A competition notice pursuant to s 151AKA(2) of the Trade Practices Act 1974 (Cth) and written notice pursuant to s 151AKA(10) of the Act – whether competition notice circular, uncertain and fails to specify matters required by s 151AKA(2) – sophisticated carrier would understand terminology used in notices – competition notice states with sufficient clarity that carrier has engaged in at least one instance of anti-competitive conduct of a kind described in the notice – s 151AKA(2) complied with – allegation that s 151AKA(10) notice uncertain, circular and does not describe a kind of anti-competitive conduct – s 151AKA(10) notice describes with sufficient clarity a kind of anti-competitive conduct – whether kind of anti-competitive conduct specified in s 151AKA(10) notice differs in substance from kind of anti-competitive conduct described in competition notice – s 151AKA(10) notice describes the kind of anti-competitive conduct by reference to Retail Customers, a “weighted average” and the bundled Retail Fixed Services Market – competition notice describes the kind of anti-competitive conduct by reference to Lower Spend Customers and supply of services by means other than a bundle – difference of substance in kind of anti-competitive conduct described – failure by the Commission to comply with s 151AKA(10) – Commission not entitled to issue Part A competition notice
ADMINISTRATIVE LAW – jurisdiction – whether “decision” to issue a s 151AKA(10) notice is reviewable pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B of the Judiciary Act 1903 (Cth) – satisfaction of s 151AKA(10) by the Commission involves no reviewable “decision” under s 5 but is reviewable “conduct” under s 6 of the ADJR Act – also reviewable pursuant to s 39B(1A)(c) of the Judiciary Act – whether Commission obliged to provide Telstra with statement of reasons pursuant to s 13 of the ADJR Act – decision to issue competition notice may result in the bringing of proceedings for the recovery of pecuniary penalties (para (f) of Sch 2 to the ADJR Act) – no obligation to provide reasons for either decision
PROCEDURAL FAIRNESS – whether s 151AKA(10) of the Act exhaustively defines the requirement of procedural fairness – obligation to accord procedural fairness at common law not displaced by s 151AKA(10) – Telstra was not given an opportunity to be heard in respect of differences of substance between the s 151AKA(10) notice and Part A competition notice – Telstra was not given an opportunity to be heard in respect of issues or material adverse to Telstra and not apparent from the Consultation Notice – seriousness of the consequences of a Part A competition notice – denial of procedural fairness
Trade Practices Act 1974 (Cth) Pt XIB, ss 151AB, 151AJ, 151AK, 151AKA, 151AO, 151AOA, 151AOB, 151AP, 151AQ, 151AS, 151BC, 151BX, 151BY, 151CB, 151CC, 151CE
Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 5, 6, 13, Sch 2
Judiciary Act 1903 (Cth) s 39B
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 cited
Annetts v McCann (1990) 170 CLR 596 cited
Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88 cited
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 applied
Burswood Management Ltd v Attorney-General(Cth) (1990) 23 FCR 144 cited
Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 applied
Department of Industrial Relations v Forrest (1990) 21 FCR 93 cited
Deputy Commissioner of Taxation v Woodhams (2000) 199 CLR 370 cited
Fieldhouse v Commissioner of Taxation (1989) 25 FCR 187 cited
George v Rockett (1990) 170 CLR 104 cited
GribblesPathology (Vic) Pty Ltd v Cassidy (2002) 122 FCR 78 cited
Kindimindi Investments Pty Ltd v Lane Cove Council (2006) 143 LGERA 277 cited
Kioa v West (1985) 159 CLR 550 applied
Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149 cited
Melbourne Home of Ford Pty Ltd v Trade Practices Commission (No 3) (1980) 47 FLR 163 cited
Minister for Immigration & Multicultural Affairs v Lat (2006) 151 FCR 214 cited
Minister for Local Government v South Sydney City Council (2002) 55 NSWLR 381 considered
Mison v Randwick Municipal Council (1991) 23 NSWLR 734 cited
Muin v Refugee Review Tribunal (2002) 76 ALJR 966 cited
Murphy v KRM Holdings Pty Ltd (1985) 8 FCR 349 cited
NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 223 ALR 171 cited
Neate v Australian Securities Commission (1995) 60 FCR 518 cited
Newcastle City Council v GIO General Limited (1997) 191 CLR 85 cited
Plaintiff S157/2002v Commonwealth (2003) 211 CLR 476 cited
Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368 cited
Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57 cited
Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 cited
Ricegrowers Co-operative Mills Ltd v Bannerman (1981) 56 FLR 443 cited
SA Brewing Holdings Ltd v Baxt (1989) 23 FCR 357 cited
Salim v Loh [2005] FCA 372 cited
Television Corporation Ltd v The Commonwealth (1963) 109 CLR 59 cited
Telstra Corporation Limited v Australian Competition and Consumer Commission (2006) 68 IPR 571 cited
The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 cited
Tobacco Instituteof Australia v National Health and Medical Research Council (1996) 71 FCR 265 cited
VHAPof 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 80 ALD 559 cited
Aronson M, Dyer B and Groves M, Judicial Review of Administrative Action (3^rd ed, Lawbook Co., 2004) at 438–41
Robertson A, “The administrative law jurisdiction of the Federal Court – Is the AD(JR) Act still important?” (2003) 24 ABR 89
TELSTRA CORPORATION LIMITED (ACN 051 775 556) v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION AND OPTUS NETWORKS PTY LIMITED (ACN 008 570 330)
NSD 810 OF 2006
BENNETT J
5 APRIL 2007
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 810 OF 2006

BETWEEN:

TELSTRA CORPORATION LIMITED (ACN 051 775 556)
Applicant

AND:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Respondent

OPTUS NETWORKS PTY LIMITED (ACN 008 570 330)
Second Respondent

JUDGE:

BENNETT J

DATE OF ORDER:

5 APRIL 2007

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The parties submit proposed orders to give effect to these reasons within 14 days.

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

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 810 OF 2006

BETWEEN:

TELSTRA CORPORATION LIMITED (ACN 051 775 556)
Applicant

AND:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Respondent

OPTUS NETWORKS PTY LIMITED (ACN 008 570 330)
Second Respondent

JUDGE:

BENNETT J

DATE:

5 APRIL 2007

PLACE:

SYDNEY

REASONS FOR JUDGMENT

Telstra challenges the issue by the Australian Competition and Consumer Commission (‘the Commission’) of a Part A competition notice under s 151AKA(2) (‘the Competition Notice’) of the Trade Practices Act1974 (Cth) (‘the Act’). The statutory power to issue a Part A competition notice lies in Pt XIB of the Act. Part XIB is directed to ‘[t]he Telecommunications Industry: Anti-competitive conduct and record-keeping rules’. Within that statutory framework, prior to the issue of the Competition Notice and pursuant to s 151AKA(10) of the Act, the Commission gave written notice to Telstra (‘the Consultation Notice’) of its proposal to issue a Part A competition notice. Telstra also challenges the issue of the Consultation Notice. Telstra asserts that the notices and the decisions to issue them lack validity and that it was denied procedural fairness.
The notices were issued in the context of certain action by Telstra in connection with charges for its wholesale and retail telephone line rental services and correspondence between Telstra and the Commission. While the notices relate to asserted anti-competitive conduct, these proceedings are not to determine whether Telstra has engaged in anti-competitive conduct. At issue is whether the Commission exercised its powers validly under the Act and accorded Telstra such procedural fairness and natural justice as the statutory context or (if applicable) the common law required.
BACKGROUND
The underlying subject matter of these proceedings relates to the pricing of wholesale and retail line rental packages provided by Telstra. Telstra sells access to its Public Switched Telecommunications Network (‘PSTN’) to its own retail customers and to wholesale customers who are themselves licensed carriers or carriage service providers. Access to the PSTN is a “line rental” service which enables the customer to establish a link between it and the telephone exchange. In practical terms, however, line rental by itself does not provide a functional telephone service. It is necessary to acquire some further calling service in order to make use of the telephone. The simplest form of residential package available from Telstra to retail customers is “HomeLine Part”, which is a bundle of line rental with local call services only. Customers who select the HomeLine Part plan may then pre-select the other telephony services (eg, national long distance, international and fixed-to-mobile calls) from any carrier, including carriers other than Telstra. Telstra’s wholesale customers, such as Optus, may provide such pre-selectable services as part of a package that they provide to their customers.
At the wholesale level, Telstra offers a stand-alone line rental service which is not bundled with other call services. Telstra charges other carriers and carriage service providers per month for line rental services for on-sale to residential end users. This wholesale service was and is known as “Home Access”.
On 28 October 2005, Telstra informed the Commission of its intention to implement and from 5 December 2005 implemented a change to its wholesale Home Access plan, increasing the monthly price by $3.10 from $24.50 (excluding GST) to $27.60 (excluding GST) (‘the Home Access increase’). The Home Access increase was announced to at least some wholesale customers on 2 November 2005. Up to 30 November 2005 the Commission did not communicate to Telstra any relevant concerns held by it about the proposed increase.
On 1 December 2005, Telstra also increased the price of its HomeLine Part service, that is, the pre-selectable service it provides its retail customers, from $26.95 (including GST) to $31.95 (including GST) (‘the HomeLine Part increase). The Commission was informed of Telstra’s intention to implement that price increase by letter dated 23 September 2005. On 24 October 2005, the Commission “consented” to the HomeLine Part increase. The Commission points out that that consent, given for the purposes of the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) and a specific statutory instrument, involved no view as to whether the proposed conduct would contravene the “competition rule” as defined in s 151AK of the Act.
On 30 November 2005, the Commission wrote to Telstra requesting that it refrain from implementing the Home Access increase pending further investigation by the Commission and consultation with Telstra’s wholesale customers. The Commission expressed concern that the proposed increases would take advantage of market power and have the effect of substantially lessening competition.
The Commission’s concern at the consequence of the increases was particularised:
·There had been no corresponding price increase for other Telstra line rental products.
·Almost all of Telstra’s retail residential line rental plans would now be priced below the price paid by wholesale Home Access customers.
·Retail HomeLine Part customers who pre-selected another carrier for pre-selectable calls would pay more for their local services (local calls and line rentals) than most other Telstra residential customers.
The Commission’s assertions, on which the concerns were based, were rejected by Telstra with an explanation of the increases. Telstra declined to provide the undertakings sought.
On 22 December 2005, the Commission issued the Consultation Notice. Telstra sought information on which the Commission relied in issuing the notice. That information was not provided. Telstra made a submission in response to the matters set out in the Consultation Notice under cover of a letter dated 27 January 2006.
On or before 12 April 2006, the Commission made a decision to issue the Competition Notice with respect to Telstra. The Competition Notice was served on Telstra on or about that day.
Optus relies on the Competition Notice in a separate proceeding (‘the Optus proceeding’) against Telstra. In the Optus proceeding, Optus alleges that Telstra has breached s 151AK of the Act and relevantly claims relief under 151CC and 151CE of the Act. The existence of the Competition Notice is a precondition to the availability of that relief.
Telstra seeks, in these proceedings, to review the Commission’s “decisions” to issue the Consultation Notice and the Competition Notice. It also seeks to review conduct engaged in by the Commission for the purpose of making those decisions. Its application for review is made to the Court pursuant to ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (‘the ADJR Act’), s 39B of the Judiciary Act 1903 (Cth) and s 163A(1) of the Act.
No competition notice has previously been considered in any proceeding in this Court.
The main issues that have arisen in these proceedings are:
·The Consultation Notice:
1.Did the Commission’s decision to issue the Consultation Notice involve or include a decision or conduct for the purposes of ss 5 and 6 of the ADJR Act or is it otherwise susceptible to review?
2.Is the Consultation Notice uncertain?
3.Does the Consultation notice comply with the requirements of s 151AKA(10) of the Act?
·The Competition Notice:
1.Is the Competition Notice uncertain?
2.Does the Competition Notice comply with the requirements of s 151AKA(2) of the Act?
3.Does the Competition Notice differ in substance from the Consultation Notice such that s 151AKA(10) of the Act was not satisfied?
·Procedural fairness
1.Does s 151AKA(10) of the Act displace the Commission’s obligations of natural justice or procedural fairness?
2.Did the Commission fail to accord Telstra procedural fairness in connection with the issue of either notice?
·Was the Commission obliged to provide, in accordance with s 13 of the ADJR Act, reasons for its decisions to issue each of the notices?
STATUTORY FRAMEWORK OF A PART A COMPETITION NOTICE
It is necessary to begin with an examination of the relevant statutory framework. The Commission has taken one of the courses of action available to it under Pt XIB of the Act. I only propose to consider Pt XIB to the extent necessary and relevant to these proceedings.
Division 3 of Pt XIB of the Act deals with competition notices. A notice issued under s 151AKA(1) or (2) is known as a Part A competition notice. Such a notice may state that a carrier or carriage service provider has engaged, or is engaging in, a specified instance of anti-competitive conduct (s 151AKA(1)). Alternatively, it may state that a carrier or carriage service provider has engaged, or is engaging, in at least one instance of anti-competitive conduct of a kind described in the notice (s 151AKA(2)). A notice under subs (2) is not required to specify any instance of anti-competitive conduct (s 151AKA(5)).
In deciding how to describe a kind of anti-competitive conduct in a notice issued under subs (2), the Commission may have regard to whether the carrier or carriage service provider could, by varying its conduct, continue to engage in anti-competitive conduct and avoid proceedings against it under Div 7 of Pt XIB the Act (s 151AKA(6)(a)) and ‘any other matters that the Commission thinks are relevant’ (s 151AKA(6)(b)).
A carrier or carriage service provider must not engage in anti-competitive conduct, that rule to be known as the “competition rule” (s 151AK). The Commission may issue a Part A competition notice where the Commission has ‘reason to believe’ that the carrier or carriage service provider has engaged, or is engaging, in an instance of anti-competitive conduct (for a s 151AKA(1) notice) or at least one instance of a kind of anti-competitive conduct (for a s 151AKA(2) notice) (s 151AKA(7) and (8)). That refers to the mental state or view required of the Commission before a notice may issue. The Commission accepts that it must have a bona fide view and a reasonable basis for it.
The two circumstances in which a carrier or carriage service provider is said to engage in anti-competitive conduct are set out in s 151AJ of the Act. Anti-competitive conduct occurs, in substance, where the carrier or carriage service provider has a substantial degree of power in a telecommunications market and takes advantage of that power, or takes advantage of that power and engages in other conduct, with the effect or likely effect of substantially lessening competition in that or any other telecommunications market (s 151AJ(2)). It also occurs where the carrier or carriage service provider engages in conduct in contravention of ss 45, 45B, 46, 47 or 48 of the Act and that conduct relates to a telecommunications market (s 151AJ(3)).
A carrier or carriage service provider may apply to the Commission for an order exempting specified conduct from the scope of s 151AJ (s 151AS(1)). Such an order is known as an “exemption order”. The Commission must not make an exemption order unless it is satisfied that the conduct will or will likely result in a benefit to the public that outweighs the detriment of any lessening of competition or unless satisfied that the conduct is not anti-competitive (s 151BC(1)). Telstra has not applied for such an order.
The Competition Notice was issued under s 151AKA(2) of the Act. That is, it is a notice stating that Telstra has engaged, or is engaging, in at least one instance of anti-competitive conduct of a kind described in the notice. Before issuing a Part A competition notice under s 151AKA(2), by s 151AKA(10)(a), the Commission must give the carrier or carriage service provider a written notice (‘s 151AKA(10) notice’):
·stating that the Commission proposes to issue a Part A competition notice under the relevant subs (2) in relation to the carrier or carriage service provider;
·describing, in summary form, the kind of anti-competitive conduct that is proposed to be specified in the Part A competition notice; and
·inviting the carrier or carriage service provider to make a submission to the Commission on the proposal by a specified time limit.
The Commission must consider any submission that is received within that time limit (s 151AKA(10)(b)).
Section 151AKA(9) is equivalent to s 151AKA(10) and provides that the Commission must give written notice prior to the issue of a Part A competition notice under s 151AKA(1) of the Act.
The term ‘Consultation’ appears as a heading to subss (9) and (10) of s 151AKA of the Act. That heading has no statutory force. It is not part of Pt XIB of the Act (Acts Interpretation Act 1901 (Cth) s 13(c)).
If a notice fails to meet the statutory description in s 151AKA(10) of the Act or is otherwise invalid, then a necessary precondition to the exercise of the power to issue a Part A competition notice pursuant to s 151AKA(2) has not been met and the competition notice is invalid.

The Act distinguishes between a “reason to believe” and “reason to suspect” that a carrier has contravened, or is contravening, the competition rule. In the latter circumstance, the Commission must act expeditiously in deciding whether to issue a competition notice (s 151AQ(1) of the Act). It must act expeditiously to determine whether it has a “reason to believe” that the competition rule is being contravened. If so, the Commission may issue a s 151AKA(10) notice as a first step towards issuing a Part A competition notice.
In deciding whether to issue a competition notice, by s 151AP, the Commission must have regard to any guidelines in force which it has formulated (s 151AP(1)(a)). Those guidelines must address the appropriateness of issuing a competition notice as opposed to taking other action under the Act (s 151AP(3)). The Commission is also to have regard to such other matters as the Commission considers relevant (s 151AP(1)(b)).
The Commission may vary a competition notice, so long as the variation is ‘of a minor nature’ (s 151AOA(1)). It must give written notice of any such variation (s 151AOA(3)).
The purpose of a Part A competition notice, as submitted by the Commission, is to give the recipient a warning so that it can make an assessment as to whether or not it should continue with the conduct asserted to be anti-competitive. The warning has force by reason of Div 7 of Pt XIB of the Act. Pursuant to that division, the issue of a Part A competition notice allows:
·The Commission to institute a proceeding for the recovery of a pecuniary penalty for a contravention of the competition rule (s 151BY), which penalty is not to exceed the sums prescribed by s 151BX(3). Those sums are significant (s 151BX provides for $10 million for each contravention plus $1 million for each day for the first 21 days during which the contravention continues and $3 million for each day thereafter).
·The Commission to apply for an order relating to public disclosure or advertisement (s 151CB).
·Third parties who have suffered loss or damage by the relevant conduct to bring an action for damages, but only for the period when the relevant Part A competition notice was in force (s 151CC of the Act).
·Third parties to seek other compensatory orders for the period during which the Part A competition notice is in force (s 151CE).
The pecuniary penalties payable under s 151BX were increased to their current level by amendments made by Sch 4 to the Telecommunications Legislation Amendment (Competition and Consumer Issues) Act 2005 (Cth). The Explanatory Memorandum to the Telecommunications Legislation Amendment (Competition and Consumer Issues) Bill 2005 (Cth) recognised that Telstra owns infrastructure which its competitors need to access and interconnect with in order to compete effectively against Telstra. It also referred to the fact that ‘Telstra’s control of this infrastructure, combined with its market position, creates an incentive and ability for it to favour its own retail business in the provision of access to important services provided over this infrastructure’ (at 2). The increase in penalty was to provide sufficient deterrent to weigh against the benefit of breaching the competition rule. The potential penalties can be said to be serious and substantial.
The Court cannot, however, order the recipient of a Part A competition notice to pay a pecuniary penalty or damages under these provisions unless it is first satisfied that the recipient has, in fact and at law, contravened the competition rule. The fact of issue of a Part A competition notice is irrelevant to proof of the matters set out therein.
A Part A competition notice comes into force when it is issued unless a later time is specified (s 151AO(1)). The Commission may revoke the notice, at any time, pursuant to s 151AOB of the Act. Unless a Part A competition notice is revoked, it remains in force until the end of the period specified in notice, which may not be longer than 12 months (s 151AO(1)).
It is comprehended within the statutory framework that the kind of conduct described in the Part A competition notice need not be identical with that described in the s 151AKA(10) notice. This is evident from the fact that a s 151AKA(10) notice must only describe the kind of anti-competitive conduct in ‘summary form’ and that s 151AKA(10)(a)(ii) refers to conduct ‘that is proposed’ to be specified in the subsequent Part A competition notice. The Commission may change its views and wish to alter the description or detail of the anti-competitive conduct in the Part A competition notice after receiving submissions from the carrier or carriage service provider pursuant to a s 151AKA(10) notice. The critical issue in this case is the extent to which the notices may differ. The parties disagree as to whether the kind of anti-competitive conduct in the Competition Notice is within the description of the kind of anti-competitive conduct, in summary form, in the Consultation Notice and the extent of information required in that “summary”.
A s 151AKA(10) notice serves to advise the carrier or carriage service provider that the Commission proposes to issue a Part A competition notice and to give the opportunity to make a submission in relation to that proposal. The Act comprehends that, before a Part A competition notice issues, the recipient must have the opportunity to make submissions to the Commission with respect to the kind of anti-competitive conduct that is proposed to be the subject of that notice. If there is a change in the substance of the anti-competitive conduct, as described in summary form in the s 151AKA(10) notice and as described in the Part A competition notice, so that a different kind of anti-competitive conduct is specified in the latter notice, the statutory scheme has not been complied with.
A further question arises whether the Act or the principles of natural justice require that the carrier or carriage service provider first be given the opportunity to address the new conduct. This, in turn, raises the question whether s 151AKA(10) codifies and prescribes the totality of procedural fairness to be accorded to the carrier or carriage service provider prior to the issue of a Part A competition notice. The Commission submits that it does. Telstra submits that it does not. Optus submits that s 151AKA(10) of the Act does not displace the Commission’s obligation to accord procedural fairness but that that obligation was complied with.
THE STATUTORY NOTICES
There is no general principle that uncertainty in an executive instrument spells invalidity (Television Corporation Ltd v The Commonwealth (1963) 109 CLR 59 at 71 per Kitto J). The question is whether what has been done in fact answers the description of what the statute permits to be done in law. A statutory notice such as a s 151AKA(10) notice or a Part A competition notice (together, ‘the Statutory Notices’) must not be so vaguely expressed that its meaning of application is a matter of real uncertainty. The Statutory Notices must convey, with reasonable and sufficient clarity and certainty, the subject matter with which they deal and enable the recipient to know what is required if their issue is to be a valid exercise of statutory power (Television Corporation Ltd at 70 per Kitto J; SA Brewing Holdings Ltd v Baxt (1989) 23 FCR 357 at 369 per Fisher and French JJ (with whom Wilcox J agreed); Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368 at 373, 374 per the Full Court). Where different kinds of subject matter are dealt with by different statutory provisions, the Statutory Notices should specify or make clear which particular aspects of the statutory regime are referred to and/or relied upon (Department of Industrial Relations v Forrest (1990) 21 FCR 93 at 118 per Lockhart and Hill JJ).
The severity of prospective penalties or consequences of failure to comply with a statutory notice that flow from the subject matter and the impact of the characterisation of the conduct are relevant factors in identifying the requisite degree of certainty (see Pyneboard at 374, Fieldhouse v Commissioner of Taxation (1989) 25 FCR 187 at 208 per Hill J). Account is to be taken of the statutory context in which the issue of a statutory notice arises and of the relevant interests of third parties. To take an example relevant to a Part A competition notice, a third party may contemplate bringing an action for damages in reliance on that notice and has an interest in knowing with clarity the ambit and scope of the notice.
One of the purposes of the Statutory Notices is to enable the recipient to identify its allegedly anti-competitive conduct. The requirement of reasonable clarity is met if, where a statutory notice is to elicit a response, the notice makes it reasonably clear, in the circumstances in which it is given and on a fair reading of its terms, what information is required or sought.
The Statutory Notices should be reasonably construed and the requirement for clarity is not to be applied ‘in a precious or hypercritical fashion’ (Pyneboard at 375). Nor should the Statutory Notices themselves be construed as statutory provisions: ‘[a]rtificial dissection, in the cause of determined obfuscation, can introduce an argumentative element of uncertainty into words which, when read reasonably in context, are adequate to convey a plain and clear meaning’ of what is required (Pyneboard at 375). The Statutory Notices need not plead all the facts necessary to constitute a contravention or possible contravention of the Act (SA Brewing at 370 per Fisher and French JJ).
The question is whether a reasonable person in the position of the addressee of a statutory notice can fairly comply with its requirements or take advantage of the opportunity offered (Fieldhouse at 208 per Hill J with whom Burchett J relevantly agreed). The Statutory Notices are concerned with the conduct of carriers or carriage service providers and can only be given to a carrier or a carriage service provider. In this case, the Statutory Notices were given to Telstra, a sophisticated, well-advised company with significant telecommunications experience. The notices followed a course of correspondence between Telstra and the Commission concerning the subject matter of the notices. Context may make something certain that, in the abstract, is uncertain.
Telstra relies on observations by Lockhart and Hill JJ in Forrest at 118 to suggest, in effect, that the Consultation Notice must make explicit on its face every nuance or explanation without regard to the fact that Telstra, as the recipient, has knowledge of and understood certain of the terminology and subject matter. Their Honours in Forrest were referring to a different kind of notice: a conclusive certificate under s 34 of the Freedom of Information Act1982 (Cth) (‘the FOI Act’). The Court there was concerned with whether that notice would be uncertain to a review Tribunal charged with the function of determining whether reasonable grounds existed for the documents the subject of the certificate to be exempt from the FOI Act. In the present case, the s 151AKA(10) notice sought information from a recipient in the industry about its own processes.
The purpose of a s 151AKA(10) notice is to provide the affected carrier or carriage service provider with an opportunity to make a submission to the Commission on its proposal to issue a Part A competition notice. The Commission is obliged, by the Act, to consider any such submission. To achieve its purpose, a s 151AKA(10) notice must provide sufficient detail to enable a real, practical and reasonably specific response as to whether or not the recipient is engaging in the kind of conduct alleged and whether that conduct is anti-competitive. Further, a s 151AKA(10) notice is not of a mere advisory character. It should provide sufficient information to enable consideration of a possible modification of conduct.
As stated in SA Brewing at 375, with respect to notices under s 155 of the Act, the Statutory Notices ‘must specify the information sought with sufficient clarity to enable [the] recipient to know what is required’. As with s 155 notices, the Statutory Notices are to be reasonably construed and terms used in them ‘will ordinarily take their meaning’ from the commercial circumstances in which the notices are given (SA Brewing at 369 citing Melbourne Home of Ford Pty Ltd v Trade Practices Commission (No 3) (1980) 47 FLR 163 at 175–6).
THE CONSULTATION NOTICE: CERTAINTY AND COMPLIANCE WITH S 151AKA(10)(a)(ii)
Telstra’s challenge to the Commission’s conduct in issuing the Consultation Notice raises three broad issues:
(1)Is the Consultation Notice uncertain and/or does it fail to describe sufficiently a type or kind of anti-competitive conduct as required by s 151AKA(10)(a)(ii)?
(2)Does the Consultation Notice describe, in summary form, the same kind of anti-competitive conduct described in the Competition Notice?
(3)If the Consultation Notice does not describe, in summary form, the same kind of anti-competitive conduct described in the Competition Notice, was Telstra denied procedural fairness?
This section addresses the first issue only. The second and third issues are considered after an assessment of the Competition Notice.
Telstra contends that the Consultation Notice fails to specify the type or kind of anti-competitive conduct that has been engaged in or is being engaged in by Telstra and that it does not enable Telstra to identify what is to be done to avoid engaging in such conduct. Telstra asserts that the meaning and operation of the Consultation Notice is not reasonably certain; it does not communicate with reasonable clarity what conduct is impugned; and it fails to comply with s 151AKA(10)(a)(ii) of the Act in that it does not describe in appropriate summary form the kind of anti-competitive conduct that is proposed to be specified in a competition notice.
The Consultation Notice is Annexure A to these reasons. In order to understand this section of my reasons, it is necessary first to read that notice. Where I refer to defined terms in the Consultation Notice those terms take their meaning from that notice.
Telstra’s criticisms of the Consultation Notice relate to the description of the conduct and to the drafting of the notice. In summary, Telstra identifies the following deficiencies in the Consultation Notice:
(a)It does not specify whether the anti-competitive conduct is within s 151AJ(2) or s 151AJ(3) of the Act.
(b)It gives inadequate description of the market in which Telstra is said to have a substantial degree of power. There are no particulars of the way in which Telstra is said to have taken advantage of its power in that market.
(c) In specifying the kind of conduct said to be anti-competitive:
(i)the notice does not articulate the substance of the anti-competitive conduct or how it is characterised to be anti-competitive;
(ii)the explanation is circular and amounts to saying that the conduct is anti-competitive where it is anti-competitive.
The Commission puts in issue, as a preliminary matter, whether its “decision” or conduct in issuing the Consultation Notice is reviewable by the Court.
Reviewable decision or conduct?
The Commission accepts that its decision to issue the Competition Notice is reviewable pursuant to s 5 of the ADJR Act and s 39B of the Judiciary Act. The Commission asserts, however, that its “decision” to issue the Consultation Notice is not so reviewable.
Section 5 of the ADJR Act relevantly provides for review in this Court of a ‘decision to which [the ADJR Act] applies’ on any one or more of the grounds set out in that section. Review may also be sought in respect of conduct engaged in for ‘the purpose of making a decision to which [the ADJR Act] applies’ on the grounds prescribed in s 6.
A “decision” to which the ADJR Act applies is, subject to exceptions that are not presently relevant, a decision of an administrative character made, proposed to be made, or required to be made, under an enactment or by a Commonwealth authority or an officer of the Commonwealth under an enactment (s 3(1) of the ADJR Act). A “decision” will generally, but not always, ‘entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration’ (Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 337 per Mason CJ, with whom Brennan and Deane JJ agreed). It will also involve a substantive determination. ‘If “decision” were to embrace procedural determinations, then there would be little scope for review of “conduct”’ as expressly contemplated by s 6 of the ADJR Act (Bond at 337).
The Commission accepts that the “decision” to issue the Consultation Notice is a step taken under the Act. It submits, however, that that step is determinative of nothing (Neate v Australian Securities Commission (1995) 60 FCR 518 at 520–1); it does not confer, alter or otherwise affect legal rights or obligations, whether arising under the Act or otherwise. At most, the decision is said by the Commission to precede ‘an act (the issue of a notice under s 151AKA(10)(a)) which gives rise to a limited procedural right (to have a submission considered) and a concomitant obligation to consider it’.
The Commission further submits that, in any event, Telstra did not apply for a review of the alleged “decision” to issue the Consultation Notice within time (s 11(3)(b)(iii) of the ADJR Act).
Telstra submits that the decision to issue the Consultation Notice depended upon the exercise of a specific statutory power under s 151AKA(10) of the Act, which decision gave rise to a legal right to put submissions to the Commission and legal obligation on the Commission to consider those submissions. It was a prerequisite to the issue of a Competition Notice and therefore had, according to Telstra, operative effect and impacted directly on Telstra’s legal rights and obligations. Further, Telstra submits that an extension of time to review that decision should be granted as the Commission has pointed to no prejudice arising from such an extension being granted. Optus consents to an extension of time being granted.
Consideration
As Mason CJ observed in Bond, a reviewable decision for the purposes of s 5 of the ADJR Act is ‘a decision which the statute requires or authorizes rather than merely a step taken in the course of reasoning on the way to the making of the ultimate decision’ (at 336). It is the case that s 151AKA(10) of the Act requires a notice under that section to be given prior to the issue of a Part A competition notice pursuant to s 151AKA(2). However, the satisfaction of that statutory prerequisite involves no “decision” of an administrative character. In order to comply with s 151AKA(10) the Commission must, as I have noted, give a notice stating that the Commission proposes to issue a Part A competition notice (s 151AKA(10)(a)(i)), describing in summary form the kind of anti-competitive conduct proposed there to be specified (s 151AKA(10)(a)(ii)) and inviting the carrier to make a submission within the specified time limit (s 151AKA(10)(a)(iii)). The Commission must then consider any submission received within time (s 151AKA(10)(b)). The discharge of those statutory obligations involves no determination of a substantive nature. The issue of a s 151AKA(10) notice is an action taken prior to the ultimate decision to issue a Part A competition notice upon satisfaction of the “reason to believe” threshold. That action is procedural in character and involves no “decision” within the meaning of s 5 of the ADJR Act.
It follows that, there being no relevant “decision”, it is unnecessary to consider whether an extension of time should be granted under the ADJR Act to review the “decision” to issue the Consultation Notice.

That leaves for consideration whether the Commission’s conduct in issuing the Consultation Notice is reviewable “conduct” within s 6 of the ADJR Act. No specific time limit applies to the review of conduct. “Conduct” engaged in for the purpose of making a decision includes ‘the doing of any act or thing preparatory to the making of the decision’, including the taking of evidence or the holding of an inquiry or investigation (s 3(5) of the ADJR Act). It ‘points to action taken, rather than a decision made, for the purpose of making a reviewable decision’. Conduct is ‘essentially procedural and not substantive in character’ (Bond at 341–2).
The issue of the Consultation Notice was more than merely a preparatory step in the deliberative or reasoning process of the reviewable decision to issue the Competition Notice (Bond at 342). The issue of the Consultation Notice was “conduct” of the Commission within the meaning of s 6 of the ADJR Act and therefore reviewable pursuant to s 6 of the ADJR Act. It is also, in my view, amenable to review pursuant to s 39B(1A)(c) of the Judiciary Act.
Section 39B of the Judiciary Act
The parties accept that s 39B of the Judiciary Act applies to the decision to issue the Competition Notice. Section 151AQA of the Act contemplates an application to the Court under s 39B(1) in relation to that decision and prevents the Court from staying the process to issue the notice pending the finalisation of the application.
The Commission submits that the statutory scheme does not contemplate there being a reviewable decision or conduct in connection with the issue of a s 151AKA(10) notice. It relies on two matters in so doing. First, there is no specific provision for such review. Secondly, a review at that stage of the process would, the Commission submits, be contrary to the requirement for the Commission to proceed expeditiously once it has “reason to suspect” that there has been a contravention of the competition rule. The Commission points out that it would be unable to complete the process of forming a “reason to believe” under s 151AKA(8) if persons were able to invoke s 39B of the Judiciary Act before the Commission had received and considered the written submissions as contemplated by s 151AKA(10).
There are a number of reasons why the Commission’s submissions should not be accepted. There is no clear language excluding the right to invoke s 39B of the Judiciary Act. Importantly, s 39B(1A)(c) confers jurisdiction on the Court in any matter arising under any laws made by the Parliament other than an exception which does not apply here. The decision to issue the Consultation Notice is a matter arising by reason of Pt XIB of the Act. It is within jurisdiction whether it be considered a “decision” or “conduct” for the purposes of the ADJR Act. Further, in any event, it is accepted that there is jurisdiction under s 39B(1) of the Judiciary Act to review the Competition Notice. As Optus submits and the Commission accepts, a valid s 151AKA(10) notice is a prerequisite to the issue of a valid Part A competition notice. An assessment of whether the Consultation Notice complies with s 151AKA(10) is a necessary incident to the Court’s review of the Commission’s decision to issue the Competition Notice.
The discretionary matters raised by the Commission as to the appropriateness, in certain circumstances, of review of a s 151AKA(10) notice do not go to jurisdiction but to discretion in the granting of relief. If such relief is sought at an early stage, such as prior to the issue of a Part A competition notice and before any final or operative or determinative decision has been made, relief may be denied on substantive or discretionary grounds (Robertson A, “The administrative law jurisdiction of the Federal Court – Is the AD(JR) Act still important?” (2003) 24 ABR 89 at 94).
I will turn to consider what Telstra identifies as the deficiencies in the Consultation Notice.
(a) Alleged failure to specify s 151AJ(2) or (3)
Section 151AB provides that “anti-competitive conduct” has the meaning given to it in s 151AJ. Section 151AJ provides the circumstances in which a carrier or carriage service provider engages in anti-competitive conduct. “Engaging in conduct” encompasses the doing or refusing to do any act (s 4(2)). This leads the Commission to submit that ‘[t]he addition of the epithet ‘anti-competitive’ in the provisions of Division 2 of Part XIB appears to be more in the nature of a statutory description than an indication of content’. It follows, the Commission submits, that there is compliance with s 151AKA(10) if the Consultation Notice identifies the conduct as a “kind of anti-competitive conduct” and it is not required to indicate whether the conduct falls within s 151AJ(2) or (3).
The Consultation Notice states that the Commission, in deciding to issue the notice, ‘has had particular regard to section 151AJ(2)’ of the Act (para 4) and sets out the elements of anti-competitive conduct as defined in that subsection (paras 10 to 14). While that does not preclude regard to s 151AJ(3) of the Act, there is no reference to the purpose of engaging in that kind of conduct and there is an absence of reference to the distinguishing elements of subs (3), such as s 46 of the Act.
A reading of the whole of the Consultation Notice and reference to the Act would have established that the anti-competitive conduct to which the Consultation Notice referred was conduct within subs (2) of s 151AJ rather than subs (3). Further, Telstra responded to the Consultation Notice by engaging in a detailed analysis of the elements of contravention under s 151AJ(2) of the Act, which confirms that it understood the kind of conduct there alleged.
There was no uncertainty in this regard.
(b) The Market
The Consultation Notice asserts the existence in Australia of telecommunications markets no wider than the Wholesale Local Services Market and the Retail Fixed Services Market (paras 8 and 9). Those markets are defined in the notice. Paragraph 10 of the notice further asserts:
‘Without prejudice to the Commission’s views in respect of any other telecommunications markets, Telstra has a substantial degree of power in the Wholesale Local Services Market.’
The Consultation Notice was directed to Telstra, a sophisticated participant as a carrier in the telecommunications industry and the provider of wholesale Local Services. It is in that context that an assessment should be made of the clarity of the Consultation Notice.
The Commission Guidelines pursuant to s 151AP of the Act were issued in February 2004 (Australian Competition and Consumers Commission, Telecommunications competition notice guidelines (2004) (‘the Guidelines’)). The Commission submits that Telstra must be taken to have had the contents of the Guidelines in mind and also the capacity to segment the market to consider the effect on the market. In view of the relevance of the Guidelines as set out in s 151AP and their public availability, it is reasonable to assume that, in understanding the Consultation Notice, Telstra was aware of the content of the Guidelines, including the description of the markets. The Guidelines emphasise transparency in the investigative process and the decision to issue a competition notice. They relevantly state that, when deciding whether to issue a Part A competition notice the Commission will consider each of a non-exhaustive list of matters separately. The decision to issue a Part A competition notice depends on an overall balance of the factors listed. Those stated factors include:
·The extent of the conduct, that is whether the conduct is having an effect in segments of a market, across the whole of a market or in a number of markets. The example is given of conduct that occurs at the wholesale level of the market may also affect competition in downstream retail markets (the Guidelines at 17).
·Submissions received from the carrier or carriage services provider which the Commission must consider if received within the specified timeframe (the Guidelines at 19).
In the context of the whole of the Consultation Notice and the requirement that it identify the kind of conduct proposed to be specified in the Competition Notice in summary form, Telstra cannot have failed to understand what was meant by the Wholesale Local Services Market, defined as a telecommunications market for the supply of wholesale Local Services (paras 8(a) and 9). Nor could it reasonably have failed to understand why the Commission would assert that it has a substantial degree of power in that market. Telstra did not require particulars to understand how, by engaging in the Relevant Conduct, the Commission asserted that Telstra had taken advantage of its market power in the Wholesale Local Services Market.
(c) Specification of the kind of anti-competitive conduct
In order to understand Telstra’s complaint that the Consultation Notice does not adequately specify the kind of anti-competitive conduct, it is necessary to consider the context of the notice. The Consultation Notice was served after correspondence between Telstra and the Commission. It is also important to read the Consultation Notice as a whole. That assists in understanding the conduct, the market power and the alleged effect or likely effect on competition.
Context of the Consultation Notice
Telstra is required by rules made by the Commission in accordance with cl 5 of the Australian Competition and Consumer Commission (Accounting Separation – Telstra Corporation Limited) Direction (No. 1) 2003 (Cth) (‘the Direction’) to keep and retain records and provide reports to the Commission of “imputation”. The imputation reports must record, by cl 5(1)(a):
‘the values of Telstra’s internal supply of each of the core services as if Telstra had purchased the core service concerned at arm’s length at a wholesale price that is the volume weighted average of the prices that Telstra charges access seekers for that service’.
“Core services” for the purpose of cl 5 include “local carriage services”, that is, local call and line rental (cl 3 of the Direction; s 152AQB(1)(d) of the Act). Individual cost and revenue elements by customer group and the retail margin for each “retail service” must also be identified (cl 5(1)(b)) where a “retail service” is line rental, local calls, national long-distance calls, international calls, fixed to mobile calls and certain other services (cl 3 of the Direction). The volume-weighted average of the local carriage service is broken down into a local call component and a line rental component; Telstra is to record the retail costs in respect of each retail service and costs that are incurred in transforming the relevant core (or wholesale) service into the retail service (rules 5 and 8 of the Imputation testing (Initial Reports) Record Keeping and Reporting Rules (2004) (‘the Rules’) issued by the Commission further to the Direction).
By its report on imputation testing relating to the accounting separation of Telstra for the September quarter of 2005, the ninth set of reporting produced in accordance with the Direction, the Commission stated that it regarded imputation testing as designed to reveal whether there is a sufficient margin between Telstra’s retail prices and the prices Telstra charges wholesale access seekers to use its network, plus related costs, to enable equally efficient access seekers to compete in retail telecommunications markets (Australian Competition and Consumer Commission, Imputation Testing and Non-Price Terms and Conditions Report Relating to the Accounting Separation of Telstra for the September Quarter 2005 (2005) (‘the Imputation Report’)). It reported inter alia that, for the September quarter, Telstra passed the imputation tests for domestic and international long-distance calls, fixed-to-mobile calls and the bundle of fixed-line voice telephony services for both residential and business customer groups and for the bundle of certain internet (‘ADSL’) and fixed-line telephony services for business customers. However, Telstra failed the imputation test for local call services (line rental and local calls combined) for both residential and business customers and for all other (non-bundled) ADSL and fixed-line telephony services for business customers.
The Imputation Report stated that the “primary objective” of the Rules ‘is to provide an indication of whether Telstra is engaging in ‘systemic price squeeze behaviour in relation to core telecommunications services’ (at 7). The Imputation Report “spells out” at 8 that:
‘[a] “price squeeze” could occur if Telstra reduces the margin between its retail price for a retail service and the wholesale access price it charges for an essential input to that retail service. Telstra could reduce the margin by lowering the retail price for the service and/or raising the wholesale access price for the essential input.
If the difference between the wholesale access price and the retail price is not sufficient to cover Telstra’s network and retail costs of supply, retail suppliers as efficient as Telstra in the supply of the retail service might not be able to remain in the market, as they would be achieving negative profit margins.
Imputation testing can be used to detect possible price squeezes in a retail market.’
The Imputation Report gives a detailed description of the elements of an imputation test and the imputation tests conducted. It records the “fail” results for the local call and line rental service and concerns about potential price squeeze behaviour by Telstra. It states that the Commission has not previously regarded the fail results for the local call and line rental product as being a “serious concern” and notes that the results do not necessarily provide evidence of a contravention of the Act (at 21).
Correspondence between Telstra and the Commission
On 28 October 2005, after the Commission had consented to the HomeLine Part increase, a meeting took place between representatives of the Commission and Telstra. At that meeting, Telstra explained the reason for a proposed increase in the cost for wholesale customers to Home Access. This was to enable Telstra to recover more closely what it said was the efficient cost of restructuring the network. In the proposal Telstra referred to the concurrent HomeLine Part increase and asserted that wholesale customers would retain a margin in which to compete.
Telstra had briefed the Commission on its proposed price increases. It asserted, inter alia, that its wholesale customers would still have a “positive margin” after the proposed price increase in Home Access line rental. The Commission responded by letter dated 30 November 2005. That response referred to the HomeLine Part increase and the Home Access increase and noted that there had not been a corresponding price increase to Telstra’s “HomeLine Plus” and “HomeLine Complete” line rental rates, each being bundled residential packages. As a result, the Commission asserted that:
·‘following the Home Access price increase, almost all of Telstra’s residential plan line rentals will be priced below the price Telstra will offer its competitors for the only available wholesale line rental product’;
·‘residential customers who choose the HomeLine Part rate plan and pre-select another carrier for the carriage of pre-selectable calls will pay more for their local services (local calls and line rentals) than most other Telstra residential customers’.
The letter continued to assert that the increases will:
·‘give rise to a serious retail-wholesale price squeeze because wholesale customers will be paying Telstra more for HomeLine Access line rental than the vast majority of retail customers will be paying Telstra for line rental services’;
·‘mean that residential customers will be much less likely to choose a carrier other than Telstra for pre-selectable calls’; and
·‘raise costs, reduce their margins and prevent or hinder them from competing with Telstra in respect of residential customers’.
The letter then stated the Commission’s position:
‘The [Commission] considers that, by announcing and implementing the price increases, Telstra may be engaging, or proposing to engage, in anti-competitive conduct in breach of Section 151AK of [the Act].
The [Commission] is of the view that there is a strong argument that Telstra is taking advantage of its power in one or more of the following markets:
·     a wholesale local services market;
·     a wholesale market for essential inputs to downstream pre-select services which Telstra supplies to competitors; and
·     a residential fixed voice market,
with the effect, or likely effect, of substantially lessening competition.’
The Commission asked Telstra to refrain from implementing the Home Access increase without giving the Commission 10 days notice, pending further investigation by the Commission and consultation with Telstra’s wholesale customers.
Telstra, through its solicitors, responded the next day, pointing out that the Commission had consented to the HomeLine Part increase and that Telstra had notified the Commission of the proposed Home Access increase. Under the heading ‘Line rental price increases will not substantially lessen competition’ the letter stated that Telstra’s line rental prices had traditionally been set below cost, subsidised by call charges and that the Commission was aware of this fact and had ‘expressed a desire over the years for Telstra to rebalance its access and call charges’. Telstra asserted that the Home Access increase would allow Telstra to recover its costs of providing access and offset losses that Telstra would otherwise suffer due to it being unable to subsidise its access costs with call charges where retail customers do not utilise Telstra for long distance calls. Telstra contended that the HomeLine Part increase was for the same reason and emphasised ‘[l]ine access is not a service provided in isolation, and the profits obtained from the call services provided over the line must be taken into account’.
On the same day, the Commission issued a notice to produce documents under s 155(1)(b) of the Act. The notice set out the matters that the Commission specified constitute or may constitute contraventions of s 46 and/or s 151AK of the Act by reference to the proposed Home Access increase. A wide range of documents were required to be produced that related to that price increase. Those documents were produced.
On 22 December 2005, the Commission served the Consultation Notice.
Consideration
A s 151AKA(10) notice must describe “in summary form” the kind of anti-competitive conduct that is proposed to be specified in a Part A competition notice. This may be less than an exhaustive explanation of the Commission’s concerns, provided that the conduct to which the notice is directed is sufficiently identified. Section 151AKA(10) of the Act was introduced by the Telecommunications Competition Act 2002 (Cth) (‘the 2002 Amending Act’). As stated in the Explanatory Memorandum to the Telecommunications Competition Bill 2002 (Cth) (‘the 2002 Explanatory Memorandum’), ‘[i]t is not intended that the [s 151AKA(10)] notice will need to contain full particulars of the instance or kind of anti-competitive conduct that is proposed to be specified in the notice, although this may be appropriate in some circumstances’. There is no need to identify a specific instance of the conduct. The requirement that the conduct be described in “summary form” confirms, as set out in the 2002 Explanatory Memorandum, that the “substance” of the anti-competitive conduct must be specified rather than full particulars of the instance or kind of anti-competitive conduct.
(i) Substance of the anti-competitive conduct
Telstra emphasises that the reference to the ‘kind of anti-competitive conduct’ in s 151AKA(10)(a)(ii) refers to the kind of conduct that is proposed to be specified; there is no reference in s 151AKA(10) to “instances”. A notice under this subsection need only specify a kind of conduct and not an instance of conduct or an instance of a kind of conduct. Section 151AKA(2) provides that the Commission may allege in a Part A competition notice that the carrier or carriage service provider has engaged in ‘at least one instance of anti-competitive conduct of a kind described in the notice’. This means, Telstra contends, that the Commission is obliged to specify a kind of anti-competitive conduct in the Consultation Notice and then allege, in the Competition Notice, that the carrier or provider has engaged in at least one instance of anti-competitive conduct of that kind. Telstra complains that the Consultation Notice may specify instances but fails to achieve the requirement of stating what the kind of anti-competitive conduct is.

In Telstra’s submission, the “kind of conduct” must be described in terms sufficient to enable Telstra and third parties to know with reasonable clarity what conduct is being impugned and what it is required to avoid liability for the consequences of that conduct. As elaborated in [42], it must also be sufficient to enable a submission in response. A mere assertion, such as in the Consultation Notice, that conduct is anti-competitive is said not to fulfil this requirement. The substance of the conduct and how it is characterised as anti-competitive must be specified. Telstra points to the following:
·There is reference to the pricing of Telstra’s retail Local Services products when assessed as a ‘weighted average’ with no explanation of the meaning of that expression (para 5(b) of the Consultation Notice).
·The conduct is said to result in the alternatives ‘a negative margin, no margin or only a small positive margin’ without particularisation and in circumstances where previously the Commission had asserted ‘no margin’. There is no explanation of whether the conduct complained of is supplying in a small positive margin, in a negative margin or at no margin.
·There is no explanation why conduct such as supply in a small positive margin could not occur in a competitive market.
Telstra further contends that such description of the conduct as exists is capable of sufficient options and permutations to make the Consultation Notice uncertain as to the species of conduct that is being identified:
·Because of the definition of Local Services (para 1(a)), it is unclear whether the impugned conduct is the supply of line rental, locals call services or both.
·The expression in paragraph 5(c) ‘at prices set at a level whereby there was and is a negative margin, no margin or only a small positive margin between those prices and Telstra’s retail prices for Local Services’ is vague and unclear and gives rise to further permutations.
·The likely effect on competition, as described in paragraph 12, is said to be caused by Relevant Conduct taken alone or that conduct ‘together with the Other Conduct’. That description is not sufficiently certain.
·There are further permutations introduced by the different ways in which such conduct is then said to have the effect or likely effect of substantially lessening competition.
·The permutations are emphasised by the reference in paragraph 13 to ‘[f]urther or alternatively to paragraph 12’ and the description of the conduct as including ‘other conduct of Telstra in the supply of Local Services’, which “other conduct” is not identified.
·While Other Conduct was described by reference to the HomeLine Part increase, being ‘one of [Telstra’s] retail Local Services products’, the Other Conduct is not itself considered as the kind of conduct proposed to be the subject of the Competition Notice. It is only an addendum to the Relevant Conduct. It is not clear whether or how the Other Conduct should be addressed.
·The permutations are further emphasised in paragraph 14 which purports to be a summary of the kind of conduct said to be anti-competitive.
Optus submits that the Consultation Notice describes the kind of anti-competitive conduct in that it describes:
·The conduct (para 5).
·The markets in which the conduct occurred and that they are telecommunications markets (the Wholesale Local Services Market and the Retail Fixed Services Market) (paras 8 to 9).
·That Telstra has a substantial degree of market power in the Wholesale Local Services Market (para 10).
·That Telstra has taken advantage of its market power by engaging in the conduct in the Wholesale Local Services Market (para 11).
·That certain of the conduct in which Telstra has engaged has the effect or likely effect of substantially lessening competition in the Retail Fixed Services Market and that that conduct is therefore a kind of anti-competitive conduct (paras 12 to 13).
Optus submits that the ‘the kind’ of conduct which must be described in summary form in the Consultation Notice and must be referred to in the Competition Notice is conduct which meets one of the descriptions of anti-competitive conduct in s 151AJ: here, conduct that is defined by s 151AJ(2). The “instance” or instances of anti-competitive conduct that must be stated in the Competition Notice are an example of such conduct occurring in fact: here the implementation and maintenance of the “price squeeze”. As put by Optus ‘[i]t is no more complicated than that’.
Optus further contends that the Commission was entitled to refer to different or alternative effects of Telstra’s conduct and alternative formulations of the conduct. The purpose is to put Telstra on notice of the conduct which it proposes to include in a Part A competition notice.
The Consultation Notice stated that the Commission proposed to issue a Part A competition notice pursuant to s 151AKA(2) of the Act in relation to Telstra, in accordance with s 151AKA(10)(a)(i). It invited Telstra to make a submission to the Commission on that proposal by a specified time limit, in accordance with s 151AKA(10)(a)(iii).
The Consultation Notice described a kind of anti-competitive conduct in summary form (s 151AKA(10)(a)(ii)). It has not been suggested that, at the time of the issue of the Consultation Notice, the Commission did not propose to specify that conduct in a Part A competition notice. The Consultation Notice stated that, by engaging in the Relevant Conduct, Telstra has taken and is taking advantage of its market power in the Wholesale Local Services Market (at para 11). By reference to the effect, or likely effect, of that conduct, taken alone or together with the Other Conduct, being a substantial lessening of competition in the Retail Fixed Services Market for the reasons that were given (para 12), the element of anti-competitive conduct identified by s 151AJ(2)(b) was specified. By identifying the conduct which involved the taking advantage of market power, the market in which that power was taken advantage and its effect or likely effect in a telecommunications market, the kind of anti-competitive conduct was described in summary form.
It remains to be determined whether the kind of conduct described in summary form in the Consultation Notice is the same kind of conduct as described in the Competition Notice.
Following the issue of the Consultation Notice, by letter dated 6 January 2006 Telstra sought ‘clarification of the apparent inconsistencies’ between the Imputation Report and the Consultation Notice. I will return to that letter later. The Commission’s response, dated 16 January 2006, relevantly stated:
‘The Relevant Conduct and the Other Conduct of concern to [the Commission] are defined in [the Consultation Notice]. Similarly, the ways that [the Commission] considers that the Relevant Conduct may contravene the competition rule is described in [the Consultation Notice]. It is important for Telstra to note that nothing in this letter or any other correspondence should be taken as adding to, altering, or substituting for, anything stated in [the Consultation Notice]’ (my emphasis).
Telstra submits, with reference to that letter, that the surrounding circumstances and materials are not relevant to a determination of whether the Consultation Notice describes, in summary form, a kind of anti-competitive conduct. I do not accept that materials or understanding extrinsic to the terms of the notice are irrelevant to the assessment of the Consultation Notice.
Telstra submits that the Consultation Notice should be assessed on the basis that it should be able to be understood by third parties. Third parties have an interest in understanding the ambit and scope of a Part A competition notice for the purposes of s 151CC of the Act and of a s 151AKA(10) notice for the purposes of themselves making submissions to the Commission. There is no evidence that any third party had difficulties in understanding either of the Statutory Notices. I do not accept that, because a third party may rely on the existence of a Part A competition notice, it is appropriate to ignore the fact that the recipient of a s 151AKA(10) notice is a sophisticated and experienced carrier or carriage service provider. Further, an interested third party is likely to be another carrier or carriage service provider, or otherwise have an understanding of the telecommunications industry.
Even in the context of Telstra’s submission that the Consultation Notice must be valid on its face and cannot be supplemented by extraneous materials, it cannot be ignored that the recipient is Telstra. In order to assess Telstra’s understanding of the Consultation Notice and ability to respond to it, Telstra was in the position as described above – a reader well versed in the telecommunications industry and its terminology, a “skilled reader”. For example, Telstra complains that there is no definition in the Consultation Notice of wholesale and retail markets which, as Optus contends, are definitions known and utilised in the telecommunications industry. Telstra does not dispute that contention but maintains that it is irrelevant, because the notices ‘must be clear and certain on their face’.
The Consultation Notice must be considered in context. It relates to Telstra’s conduct and, insofar as it contains terms of art or references to Telstra’s products, unless the contrary is established or raised, the Commission is entitled to assume that Telstra was familiar with the subject matter and terminology. These observations apply equally to the Competition Notice.
Neither prior to the issue of the Consultation Notice nor in the notice did the Commission give Telstra the “material and analysis” forming the basis for or relating to the Commission’s allegations and statements in the Competition Notice. Telstra submits that it does not know what matters the Commission took into account in forming its views. To the extent that this is said to reflect Telstra’s ability to understand the kind of anti-competitive conduct described in the Consultation Notice, I do not accept that such information was necessary to enable understanding.
The Consultation Notice did not need to descend into detail of terminology and description in order to be clear. In the context of conduct relating to Telstra’s bundles of services, expressions such as “weighted average” and “a negative margin, no margin or only a small positive margin” are not unclear. The context is of a range of retail services, sold as a bundled package, where some are used to subsidise others. If the Consultation Notice was referring to individual services within the bundle, Telstra’s criticisms would have more substance. The Commission was not obliged, in the interests of clarity, to explain to Telstra why, where Telstra sells access to the PSTN to other carriers and carriage service providers as wholesalers, it could be thought by the Commission that Telstra had a substantial degree of power in the Wholesale Local Services Market.
(ii) Circularity
Telstra submits that paragraph 14, the ‘culmination’ of the Consultation Notice states, in effect, that the identified conduct is notified as being anti-competitive insofar as the conduct is anti-competitive (by substantially lessening competition). This is said to be circular. Telstra further submits that, if the Commission cannot itself identify the conduct, it can have no “reason to believe” that Telstra has engaged in anti-competitive conduct and the jurisdictional pre-requisite of s 151AKA(8) of the Act cannot be satisfied.
Optus submits that, by reading the Consultation Notice as a whole and noting that paragraph 14 expressly incorporates the effects identified in paragraphs 12 and 13, Telstra’s concerns about paragraph 14 and the alleged circularity are made clear. Paragraph 14 is then ‘simply the final aspect of description of the kind of anti-competitive conduct’ that is to be specified in the Competition Notice.
Telstra also criticises the Competition Notice on this basis. It is convenient to deal with this aspect of the two notices together.
I do not accept that the criticism of “circularity” of description of the kind of conduct renders the Consultation Notice or Competition Notice uncertain or invalid. When the notices are read as a whole, in the context of Pt XIB of the Act (in particular s 151AJ(2)(b) and s 4G) the assertions in paragraph 14 of the Consultation Notice and paragraph 13 of the Competition Notice are not unclear. The assertion is that where the conduct described in the Statutory Notices has the effect or likely effect of substantially lessening, preventing or hindering competition in a telecommunications market, it is anti-competitive conduct for the purpose of the notice and the Act. The Commission was not obliged to explain the terminology of the Act.
Conclusion
Telstra’s submission that the Consultation Notice is uncertain or lacking in clarity and does not sufficiently specify a type or kind of anti-competitive conduct is not accepted. The Consultation Notice describes a kind of anti-competitive conduct, which description is sufficiently clear.
ADEQUACY OF THE COMPETITION NOTICE
As a threshold to the issue of a Part A competition notice under s 151AKA(2), the Commission must have “reason to believe” that the carrier or carriage service provider concerned has engaged, or is engaging, in at least one instance of anti-competitive conduct of the kind to be described in the notice (s 151AKA(8)). If the Commission proposed to issue a Part A competition notice, it had, as a necessity, reason to believe that there was anti-competitive conduct by reason of Telstra’s conduct.
The Commission contends that the fact that it has “reason to believe” in relation to the conduct described in the Competition Notice is a relatively low threshold. The Commission draws in aid observations directed to the phrase “reason to believe” in cases concerning s 155 of the Act. In that context, the phrase is directed to a belief that a person is capable of furnishing information or producing, for example, documents relating to a matter that constitutes or may constitute a contravention of the Act. Telstra does not accept that this is analogous to the requisite reason to believe that a carrier or carriage service provider has engaged or is engaging in relevant anti-competitive conduct for the purposes of s 151AKA(8). It submits that the requisite state of mind requires the existence of facts which are sufficient to induce that state of mind in a reasonable person (George v Rockett (1990) 170 CLR 104 at 112).
The basis for the belief is set out in the correspondence and in the Consultation Notice. Telstra has not demonstrated that there was an absence of such belief prior to the issue of the Competition Notice. I will turn to consider the terms of the Competition Notice.
The Commission accepts that, if the Consultation Notice did not conform to the requirements of the Act such that no notice was given pursuant to s 151AKA(10), it was not in the position to issue a valid Part A competition notice.
Pursuant to s 151AKA(2) of the Act, a Part A competition notice must cite at least one instance of anti-competitive conduct of a kind described in the notice. As Telstra concedes, the notice is permitted to be in terms which describe conduct beyond identification of particular instances, so as to capture the conduct at a higher level of generality. However, this does not mean, Telstra contends, that any level of generality or abstraction would be a description which falls within the power granted to issue the notice.
The Competition Notice is Annexure C to these reasons. In order to understand this section of my reasons, it is necessary first to read that notice. Where I refer to defined terms in the Competition Notice those terms take their meaning from that notice.
Telstra’s challenge to the Commission’s decision to issue the Competition Notice raises three issues for determination:
(a) Does the Competition Notice lack clarity?
(b)Does the Competition Notice comply with s 151AKA(2) in the matters which it specifies?
(c)Does the Competition Notice describe the same kind of anti-competitive conduct described in summary form in the Consultation Notice?
In order to deal with these issues, it is necessary to have an understanding of the correspondence between the issue of the Consultation Notice and the Competition Notice.
Correspondence between the Consultation Notice and the Competition Notice
Telstra’s response to the Consultation Notice was the letter of 6 January 2006 which is Annexure B to these reasons.
The letter asserted, in summary, that:
·The Consultation Notice is inconsistent with the views expressed in the Imputation Report published after the Consultation Notice, which recognised, inter alia, that efficient carriage service providers can recover loss on line rental and local calls if the services are offered bundled with long distance and fixed to mobile calls.
·The Imputation Report recognised that the relevant area of competition is the service bundle rather than the line rental and local calls alone. The concern expressed about the margin in the Consultation Notice (negative, none or small positive) appears inconsistent with the Commission’s views expressed in the Imputation Report.
·While the price increases reduce the margins on the service bundle, Telstra’s imputation testing indicates that these margins (that is, margins on the service bundle) remain positive.
Optus contends that Telstra did not express difficulty in identifying the relevant conduct to the media nor in responding to the Consultation Notice nor in identifying the kind of anti-competitive conduct, in great detail, in that letter and its later submission.
The Commission’s response was by letter dated 16 January 2006. That letter responded to Telstra’s assertions as to the maintenance of a positive margin on the service bundle by relevantly asserting that:
‘pricing conduct may lead to competition concerns in a number of ways. This may be by creating a margin squeeze across a bundle of services (as suggested by your letter) but that is by no means the only way pricing conduct can generate competition concerns. Competition concerns often arise when pricing conduct creates a margin squeeze in relation to particular services within a bundle, even though there are cross-subsidisation opportunities across a wider bundle. Similarly, competition may be substantially lessened when pricing conduct raises rivals’ costs or increases barriers to entry. The specific ways in which the Relevant and Other Conduct create competition concerns are specified in [the Consultation Notice].’
The Commission’s response led to Telstra identifying, in a letter dated 20 January 2006, alleged uncertainties in the Consultation Notice. Telstra also requested further information which it asserted was necessary to prepare its submission and engage in an ‘open and meaningful process of consultation’ with the Commission. The request included information in relation to:
‘the precise manner in which the Commission claims [in its letter of 16 January 2006] that the existence of margins across the relevant product range as a whole is not sufficient to offset the fact that margins on some individual components may be negative.’
Telstra asserted that, notwithstanding the Commission’s reference to a ‘margin squeeze in relation to particular services within a bundle’ in its letter of 16 January 2006:
‘[t]he Consultation Notice does not provide any explanation of precisely why or how the lack of margin on the “Local Service” elements of the wider bundle would impede competition in the bundle as a whole’.

The Telecommunications Legislation Amendment Act 1999 (Cth) was responsible for the insertion of s 151AKA of the Act and, consequently, the introduction of Part A competition notices into the statutory regime. Those amendments were relevantly the subject of consideration in the 1998 Supplementary Explanatory Memorandum, which states that ‘[i]n practical terms, a competition notice is intended to cause the recipient of the notice to stop the conduct [the Commission] considers is in breach of the competition rule by raising the possibility of court action and substantial penalties’ (at 1).
In the pre-existing regime, identified difficulties included the requirement to set out particulars of the contravention and associated delay, the inability to amend a competition notice and the ability of a recipient partially to modify its conduct and thereby escape a notice (the 1998 Supplementary Explanatory Memorandum at 2 and 7). The amendments were proposed to provide for a Part A competition notice that needed only to cite a specified instance or at least one instance of anti-competitive conduct of a kind therein described. This would enable the notice to be of a ‘more general nature than current competition notices’ and require a lesser level of detail and thereby reduce delay (at 2). It was intended, however, that a Part A competition notice would describe the kind of anti-competitive conduct in sufficient detail so as to enable it to be identified.
As for a s 151AKA(10) notice, the 2002 Explanatory Memorandum provided that (at 95):
‘It is not intended that the [s 151AKA(10)] notice will need to contain full particulars of the instance or kind of anti-competitive conduct that is proposed to be specified in the [part A competition] notice, although this may be appropriate in some circumstances. The [s 151AKA(10)] notice will be required to contain the substance of the anti-competitive conduct that will be specified in the [part A competition] notice.’
The common law obligation to afford procedural fairness
The Commission’s submissions, framed in different ways, in respect of both the Consultation Notice and the Competition Notice are that its obligation was to comply strictly with the statutory requirements as explicitly stated in the Act – so much and not more. It contends that, apart from the requirement to describe the matters set out in s 151AKA(10), it was not otherwise required to give Telstra notice of those or any other matters.
The Commission accepts for present purposes that, consistent with authority binding on this Court (Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149), it was required to afford Telstra procedural fairness in relation to the issue of the Competition Notice at common law. Optus accepts that s 151AKA(10) of the Act does not displace the Commission’s obligations of procedural fairness. The Commission wishes to reserve the question whether a common law duty exists should the occasion to contend otherwise arise but submits that, in any event and in the specific statutory context, the scope and content of that obligation have been satisfied. Put another way, the Commission says that the common law duty extends no further than what is required by s 151AKA(10). Optus submits that s 151AKA(10) reflects the procedural fairness required and that that obligation has been complied with.
I do not accept the Commission’s submission that the requirement to afford procedural fairness takes its content only from s 151AKA(10) of the Act. While the requirements of s 151AKA(10) of the Act clearly inform the obligation to accord procedural fairness at common law they do not displace it.
As Weinberg J noted in GribblesPathology (Vic) Pty Ltd v Cassidy (2002) 122 FCR 78 at [115], statutes commonly require the giving of notice or the invitation of submissions before a particular decision is made. The fact that a decision is preliminary (in the sense that it does not in itself affect rights without some further action being taken) does not obviate the duty to observe natural justice. Such decisions often affect ‘important interests, including reputation, or legitimate expectations’ (at [115]). It is not necessary that the decision have direct or indirect legal effect (Ainsworth v Criminal Justice Commission (1992) 175 CLR 564). The rules of natural justice apply where a statute confers a power to prejudice a person’s rights, interests or legitimate expectations unless they are excluded by plain words (Annetts v McCann (1990) 170 CLR 596 at 598).
As pointed out by Aronson M, Dyer B and Groves M, Judicial Review of Administrative Action (3^rd ed, Lawbook Co., 2004) at 438–41, it is common for statutes to impose procedural requirements which might otherwise be imposed by the rules of natural justice without indicating what effect these express requirements are intended to have on the application of ordinary principles of natural justice. The authors conclude that the presence of express procedural requirements will not normally, of itself, exclude or limit the application of natural justice. The common law rules of natural justice are taken to apply to the exercise of public power unless clearly excluded (Miah at [126] per McHugh J). The content of the duty is determined in the statutory context (at [130]).
It is not the case that the Act purports to exclude the rules of natural justice. There is nothing in Pt XIB that amounts to unmistakable and unambiguous language clearly expressing an intention to exclude natural justice in connection with the issue of a Part A competition notice (Plaintiff S157/2002v Commonwealth (2003) 211 CLR 476 at [30] per Gleeson CJ; cf Minister for Immigration & Multicultural Affairs v Lat (2006) 151 FCR 214 at [65] to [68] in considering s 51A of the Migration Act 1958 (Cth)). The fact that the Act provides for the provision of certain information in a s 151AKA(10) notice does not of itself evince an intention otherwise to exclude procedural fairness (Miah at [139] per McHugh J) or, indeed, the possibility of the provision of further information or further consultation. The Act mandates the giving of certain information in a s 151AKA(10) notice as a minimum. Such latitude in the information to be provided is encompassed by the requirement to describe in summary form the kind of anti-competitive conduct proposed to be specified in the Part A competition notice. A “summary form” allows for a minimum but not a maximum of information to be provided. There is no inconsistency between the application of subss (9) and (10), which impose a minimum standard and a common law duty of procedural fairness (Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88 at [10]).
There is no dispute that a common law duty of procedural fairness must accommodate to the statutory scheme. As stated by Mason J in Kioa at 585, the statutory power:
‘must be exercised fairly, i.e., in accordance with procedures that are fair to the individual considered in the light of the statutory requirements, the interests of the individual and the interests and purposes, whether public or private, which the statute seeks to advance or protect or permits to be taken into account as legitimate considerations.’
The decision to issue a Part A competition notice pursuant to s 151AKA(2) of the Act consequent upon a s 151AKA(10) notice being given was likely to affect and be adverse to Telstra’s interests. In those circumstances, the Commission was required to give Telstra the opportunity to ascertain the relevant issues. Where the exercise of the statutory power attracts the requirements of procedural fairness, Telstra was entitled to put information and submissions to the Commission (Alphaone at 591-2). The Commission was obliged to identify any issue critical to the decision to issue the Competition Notice which was not apparent from the Consultation Notice and any adverse conclusions, but not the reasoning process, which had been arrived at and which would not obviously be open on the material known to Telstra (Alphaone at 592).
The Commission contends that the requirements of procedural fairness for the issue of a Part A competition notice are less onerous than those applicable to a quasi-judicial Tribunal determining, for example, whether a person is entitled to refugee status, as in VEAL. The Commission points to the flexible nature of the duty and the need to adapt to the statutory requirements. For example, a judicial hearing with rights of appeal must precede the pecuniary consequences arising from the issue of a Part A competition notice. The Commission also challenges the impact of the reasoning in VEAL and Kioa. It emphasises the comment by Brennan J in Kioa at 628 that the person whose interests are likely to be affected by the exercise of a statutory power does not have to be given an opportunity to comment on every adverse piece of information, irrespective of its credibility, relevance or significance. As Brennan J recognised in Kioa, ‘[a]dministrative decision-making is not to be clogged’ by unnecessary inquiries. That observation is particularly relevant in a statutory context where the legislature has sought to respond to the fast moving pace of telecommunications markets and, in so doing, placed the Commission under an obligation to act expeditiously.
Was the obligation to afford common law procedural fairness complied with?
Optus contends that the Commission’s procedural fairness obligations were satisfied by the issue of the Consultation Notice and the consideration of Telstra’s submission in response. The Commission stated in a letter to Telstra dated 4 May 2006 that it duly considered Telstra’s submission. The Commission submits that it was only required to “have regard” to Telstra’s written submission in determining whether it had a “reason to believe” that Telstra had engaged in at least one instance of anti-competitive conduct of the kind it had described in the Consultation Notice. It submits that to “have regard to” means ‘to consider, think about and decide whether or not to deploy (the particular matter) in the reasoning leading to the decision’. It does not import any further requirement that may arise from the expression “take account of”; it does not require that the response actually be used in the reasoning process.
Telstra’s pleaded assertion that the Commission could not have had regard to its submission has not been established. Some of the information in the Competition Notice could be said to be referable to Telstra’s submission and there is no basis on which to conclude that the Commission did not or could not have had regard to the submission before issuing the Competition Notice. No lack of bona fides on the part of the Commission is alleged, nor is it said by Telstra that the Commission did not have “reason to believe”.
The Act recognises that a s 151AKA(10) notice will not contain all of the matters subsequently addressed by a Part A competition notice. The Commission is not under a duty to provide a fully particularised pleading in relation to the impugned conduct and a failure to do so does not amount to a denial of procedural fairness. A Part A competition notice does not itself commence proceedings, nor is it evidence in subsequent proceedings of the matters asserted therein. If proceedings commence, the carriage service provider will be provided with a pleaded case to answer with evidence and be entitled, in the ordinary course, to discovery and associated procedures.
Part of the procedural fairness provided for by s 151AKA(10) of the Act is “input” by the carrier or carriage service provider into the decision to issue a Part A competition notice. The s 151AKA(10) notice describes the proposed kind of anti-competitive conduct in summary form (s 151AKA(10)(a)(ii)) and the recipient has the opportunity to make submissions which the Commission must consider (s 151AKA(10)(b)). Even if the s 151AKA(10) notice is not properly called a consultation notice, it was so entitled by the Commission. Telstra was, in turn, entitled to believe that it had the opportunity to address the kind of conduct that was proposed to be cited in a Part A competition notice.
While the Commission may have regard to other matters that it thinks are relevant (s 151AKA(6)(b)), the Act does not oblige the Commission to include those matters in the s 151AKA(10) notice. The statutory requirement for procedural fairness is fulfilled in the case of a Part A competition notice issued under s 151AKA(2) by adhering to the process of consultation for which s 151AKA(10) provides and where the s 151AKA(10) notice includes the matters provided for in that subsection. This does not include the reasoning processes of the Commission or generalised information that the Commission might propose to take into account at the time of issuing either the s 151AKA(10) notice or the Part A competition notice. There is no basis in the Act itself for an entitlement to the material taken into account by the Commission or the mental processes of the Commission in issuing the Statutory Notices.
Accepting that the Act provides for a consultation process, the Commission submits that the one-time consultation process expressly contemplated by the Act was intended not to be transformed into an iterative process whereby each “significant’ refinement must be notified. To the extent that the Competition Notice added a “refinement” to a kind of anti-competitive conduct described in the Consultation Notice, I accept that submission. A refinement may occur by a different method of description of the same subject, reordering of information, elaboration and further particularisation. It does not extend to a change in the substance of the kind of anti-competitive conduct.
As Finn J observed in Tobacco Instituteof Australia v National Health and Medical Research Council (1996) 71 FCR 265 at 274, the courts have indicated in a variety of contexts that ‘[c]onsultation is no empty term’ nor ‘a mere formality’. The Commission has been given extensive powers which have been granted and affirmed in the context of certain conditions. The statutory process of consultation envisaged by s 151AKA(9) and (10) is rendered ineffective if the recipient is not given adequate and appropriate information in order to make an informed response.
Telstra was not afforded the opportunity to address issues relevant to the issue of the Competition Notice. Procedural fairness required that Telstra have that opportunity, whether such natural justice was in accordance with the statutory regime or common law principles.
The consequences of the denial of procedural fairness
Optus relies upon the context of the statutory power being exercised under a scheme in which the Part A competition notice:
(a)does not prevent Telstra from engaging in the conduct referred to in the notice;
(b)is not evidence of the matters referred to in it;
(c)is akin to a notice before action, in the sense that a person (including the Commission) has no right to sue for a breach of the competition rule unless a Part A competition notice has been issued; and
(d)may lead to the possibility of proceedings after its issue (in which proceedings the allegation of a breach of the competition rule will have to be proved to the civil standard of proof).
That characterisation, of itself, is correct. However, it does not take account of the whole of the statutory scheme. That includes the requirement for consultation prior to the issue of a Part A competition notice, the necessary content of that notice and the consequences of its issue.
The Commission contends that Telstra has not established that any departure from the requirements of procedural fairness was material or significant in reliance on NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 223 ALR 171 at [71] per Kirby J; Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 at [87] per McHugh J in dissent but not on this point). Even if there were deficiencies in the Statutory Notices, the Commission submits that the anti-competitive conduct there described may be sufficiently clear that Telstra suffered no prejudice (Salim v Loh [2005] FCA 372 at [4], [32]).
The seriousness of the consequences of a decision is relevant to the content of the requirement for procedural fairness. The Commission submits that the consequences of the Consultation Notice are relatively immaterial and that the Competition Notice itself has limited import. Telstra relies on the fact that the Part A competition notice predicates the bringing of an action for damages under s 151CC of the Act and that it entails a public statement by the Commission that it has a “reason to believe” that Telstra has engaged or is engaging in anti-competitive conduct. Telstra complains that that statement adversely affects its reputation.
The duty to accord procedural fairness regulates the exercise of power where a statute confers power on a public official ‘to destroy, defeat or prejudice a person’s rights, interests or legitimate expectations’ (Annetts at 598 per Mason CJ, Deane and McHugh JJ) or damage reputation (Ainsworth at 577–8). The existence of a Part A competition notice opens the door for a range of proceedings to be issued against Telstra. In so doing, it exposes Telstra to the possibility of substantial penalties which accrue from the date of issue.
As Telstra submits, the significance of the “gateway” that a part A competition notice represents ‘should not be underestimated’: the Court has extensive powers to make orders in s 151CE in respect of a contravention of the competition rule where the conduct is of a kind dealt with in a Part A competition notice in force at the time the alleged conduct occurred.
The Competition Notice is a pre-condition to the Commission’s powers under s 151BY of the Act to commence proceedings to recover a potentially substantial pecuniary penalty for a contravention of the competition rule (s 151BY(3), (s 151BX(3)(a)). It is also a pre-condition for a third party to commence proceedings for damages suffered by conduct done in contravention of the competition rule (s 151CC(3)).
Telstra emphasises the consequences to it in terms of potential civil liability and damage to reputation. The Commission responds that no pecuniary penalty can be imposed unless the Court is satisfied that Telstra has, in fact and at law, contravened the competition rule. The Part A competition notice is irrelevant to the proof of such a case and not necessary for the Commission or a third party to commence proceedings seeking an injunction under s 151CA(1) of the Act. It also observes that, even if the Competition Notice is set aside, Telstra may be exposed to pecuniary penalties of $10 million for contravening s 46 of the Act (s 76(1A)(b) of the Act).
The Commission does not accept Telstra’s characterisation of the consequences of a Part A competition notice as “extraordinary” and “punitive”. It points out that such a notice is an exercise of executive rather than judicial power and cannot be “breached”. It contends that the Competition Notice ‘simply indicates that [the Commission] has reached the “relatively low threshold of ‘reason to believe’” in relation to the conduct described in the notice’. That imports a requirement to come to the view in good faith and on reasonable grounds that Telstra is breaching or has breached the competition rule. There is no “finding” that Telstra has engaged or is proposing to engage in anti-competitive conduct, just a public announcement that the Commission has “reason to believe” that Telstra has engaged in at least one instance of anti-competitive conduct of a kind described in the Competition Notice. This is described as a ‘relatively low threshold’ (The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at [130] per Callinan J). The Commission does not accept that this involves damage to Telstra’s reputation.

No penalties or orders flow directly from the Competition Notice; it allows proceedings to be commenced. The Commission points out that the consequences of the Competition Notice could have been avoided by Telstra if Telstra had accepted the Commission’s invitation to give undertakings not to engage in the impugned conduct or successfully sought an exemption order pursuant to s 151AS of the Act. If Telstra were able to satisfy the Commission that the conduct was not anti-competitive or that the benefit to the public outweighs the detriment constituted by any lessening of competition, the Commission could make an exemption order (s 151BC(1) of the Act).
However, such an undertaking or the seeking of an exemption order would involve an acknowledgement by Telstra that its conduct or proposed conduct was anti-competitive, a proposition that it does not accept. The issue of a Part A competition notice should not force a recipient to accept the veracity of the allegations made which it disputes.
However they are characterised, the consequences that follow from the issue of a Part A competition notice are ‘intended to cause the recipient of the notice to stop the conduct [that the Commission] considers is in breach of the competition rule’ (the 1998 Supplementary Explanatory Memorandum at 1). From the Commission’s submissions, Telstra should have stopped its conduct by changing its pricing policy in order to avoid the potential consequences of the Competition Notice. That itself is a serious consequence.
I do not accept that Telstra should have been obliged effectively to admit to conduct it denied by giving the undertakings sought or hope for the best in obtaining an exemption order under s 151AS of the Act. While the intention of the Act may be to “coerce” a carrier into ceasing its anti-competitive conduct, that kind of coercion is not what is envisaged by the provisions of the Act. Telstra should not be coerced into ceasing to engage in what it views as legitimate activity or seeking to avail itself of exemption orders in respect of such activity. I do not accept that the availability of those avenues means that the Commission was not obliged to accord Telstra procedural fairness in connection with the issue of the Competition Notice.
I also do not accept the suggestion by the Commission that, if Telstra were in any doubt about the identification of the conduct to be addressed in the Competition Notice, the onus was on Telstra to overcome that doubt by describing its conduct in an application for an exemption order.
STATEMENT OF REASONS
Telstra requested the Commission provide it with a statement of findings and reasons for its decision to issue the Consultation Notice by letter dated 23 January 2006. That request was made pursuant to s 13(1) of the ADJR Act and refused by the Commission on 17 February 2006. A further request for a statement of findings and reasons in respect of the decision to issue the Competition Notice was requested by Telstra on 24 April 2006 and refused by the Commission on 28 April 2006.
Telstra seeks a declaration that it was entitled to make those requests and that the Commission was obliged by s 13 of the ADJR Act to provide the statements sought. The Commission, in response, submits that it was under no such obligation.
Where a decision is made to which s 13 of the ADJR Act applies, a person ‘entitled to make an application to [the Court]…under section 5 in relation to the decision’ may, by notice in writing, request the decision-maker furnish a statement in writing setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving reasons for the decision (s 13(1)). The decision-maker, upon receiving such a request, is obliged by s 13(2) of the ADJR Act to prepare the statement sought and furnish it to the person who made the request within 28 days.
Schedule 2 to the ADJR Act sets out classes of decisions that are not decisions to which the obligation to provide reasons pursuant to s 13 applies (s 13(11)(c)). One of those classes is:
‘(f) decisions in connection with the institution or conduct of proceedings in a civil court, including decisions that relate to, or may result in, the bringing of such proceedings for the recovery of pecuniary penalties arising from contraventions of enactments, and, in particular:
(i) decisions in connection with the investigation of persons for such contraventions;
…’
It is necessary to consider the Commission’s obligations in respect of the Competition Notice and Consultation Notice separately.
The Competition Notice
It is accepted by the Commission that Telstra is a person ‘entitled to make an application to [the Court]…under section 5’ in relation to the decision to issue the Competition Notice (s 13(1)). The Commission submits, however, that that decision is a decision in connection with the institution or conduct of proceedings in a civil court and, by the application of para (f) of Sch 2 to the ADJR Act, not a decision to which s 13 of the ADJR Act applies. The Commission relies on the following matters in support of that submission:
·The investigative nature of the Commission’s role in deciding whether to issue a Part A competition notice, including the “reason to believe” threshold;
·The close connection between the institution of proceedings in a civil court and the issue of a Part A competition notice, including the institution of proceedings for the recovery of pecuniary penalties, as emphasised by Telstra in its submissions as to the effect of a Part A competition notice;
·The breadth of the expression “in connection with” as used in para (f) of Sch 2 (Burswood Management Ltd v Attorney-General(Cth) (1990) 23 FCR 144 at 146); and
·Authority to the effect that a decision to issue a s 155 notice is not a decision to which s 13 of the ADJR applies (Ricegrowers Co-operative Mills Ltd v Bannerman (1981) 56 FLR 443).
Telstra submits that the words “in connection with”, though broad, must be construed in context. In its submission, the purpose of the exclusion in para (f) is to avoid the disruption of investigative procedures or court process with the requirement to furnish reasons. It relies on the observation of Fox J in Murphy v KRM Holdings Pty Ltd (1985) 8 FCR 349 at 351 to the effect that:
‘[t]he general idea behind par (f) seems to be that civil procedure will itself take care of what s 13 seeks to achieve when it requires reasons to be given. Conversely, civil procedure is not to be complicated by the s 13 procedure’.
The decision to issue a Part A competition notice is said by Telstra to be distinct both from an investigation and a decision to institute or conduct proceedings.
There may be no correlative decision by the Commission to institute pecuniary penalty proceedings pursuant to ss 151BX and 151BY of the Act following the issue of a Part A competition notice. Further, third parties will not necessarily issue proceedings to recover damages pursuant to s 151CC of the Act. Certainty of legal proceedings, however, is not necessary for a decision to fall within the broad terms of para (f) of Sch 2. Decisions which “relate to, or may result” in the bringing of proceedings in a civil court for the recovery of pecuniary penalties expressly are included in para (f) of Sch 2 to the ADJR Act. The issue of a Part A competition notice is a prerequisite to the bringing of proceedings in this Court for the recovery of pecuniary penalties for a contravention of the competition rule (s 151BY(3)(g) of the Act). The scheme of the Act expressly contemplates that such proceedings may result from a decision by the Commission to issue a Part A competition notice. Were it not for the fact that such proceedings may result, the desired incentive for the carrier to cease the allegedly anti-competitive conduct would diminish significantly. Indeed, Telstra relies upon that very consequence of the decision in its submissions as to the requirements of common law procedural fairness.
The Commission’s decision to issue the Competition Notice was a decision within the terms of para (f) of Sch 2 to the ADJR Act. It follows that the Commission was not obliged by s 13(1) of the ADJR Act to furnish Telstra with a statement of reasons for its decision to issue that notice.
The Consultation Notice
Telstra is not a person ‘entitled to make an application to [the Court]…under section 5’ of the ADJR Act as the issue of the Consultation Notice was not a “decision” within the meaning of s 5 ([56] above). The obligation to provide reasons pursuant to s 13 of the ADJR Act does not apply to reviewable conduct. It follows that the Commission was not obliged by s 13(1) of the ADJR Act to furnish Telstra with a statement of reasons for its “decision” to issue the Consultation Notice.
CONCLUSION
The Commission issued the Competition Notice which, in accordance with s 151AKA(2) of the Act, stated that Telstra has engaged and is engaging in at least one instance of anti-competitive conduct of a kind described in the notice. It is not disputed that that kind of conduct has to be the same, in substance, as the kind of anti-competitive conduct described in summary form in the Consultation Notice. Otherwise, the Commission was not entitled to issue the Competition Notice.
Each of the Consultation Notice and Competition Notice were clear in their terms to the extent necessary for Telstra, an experienced and sophisticated participant in the telecommunications industry, to understand. However, the notices differed in the kind of anti-competitive conduct described. Those differences are differences of substance. They relate to the retail market in which the Commission alleged that the conduct would have the effect or likely effect of substantially lessening, preventing or hindering competition.
The first difference was in respect of the provision of services in the retail fixed services market. The Consultation Notice addressed the provision of services by Telstra and its competitors by way of a bundle; the Competition Notice included the provision of unbundled services.
The second difference was in respect of the residential retail customers supplied. The Consultation Notice did not differentiate among those retail customers. The Competition Notice referred to the effect of conduct in competition for Lower Spend Customers, low-to-mid spending customers who constitute a segment of retail customers.
Accordingly, the Consultation Notice did not comply with s 151AKA(10) of the Act and the Commission was not entitled to issue the Competition Notice.
Telstra did not have the opportunity to respond to the invitation to make a submission to the Commission on the proposed conduct. Telstra was denied procedural fairness and natural justice, both under the statutory regime and at common law.
The Commission’s decision to issue the Consultation Notice is not reviewable under s 5 of the ADJR Act but its conduct in issuing that notice is reviewable under s 6 of the ADJR Act. The Commission’s decision to issue the Competition Notice is reviewable under s 5 of the ADJR Act. These are also matters that are within jurisdiction by reason of s 39B(1A)(c) of the Judiciary Act. Telstra is not entitled under s 13 of the ADJR Act to reasons for the Commission’s decisions.
The parties should confer and forward draft consent orders to give effect to these reasons to my associate within 14 days. If there is no consent, each party should forward draft proposed orders within that time.

I certify that the preceding two hundred and sixty-nine (269) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett.
Associate:
Dated: 5 April 2007

Counsel for the Applicant: T F Bathurst QC, J E Griffiths SC and J K Kirk

Solicitor for the Applicant: Mallesons Stephen Jaques

Counsel for the First Respondent: L G Foster SC and A I Tonking

Solicitor for the First Respondent: Corrs Chambers Westgarth

Counsel for the Second Respondent: S Gageler SC, K Richardson and S Free

Solicitor for the Second Respondent: Minter Ellison

Date of Hearing: 10, 11, 16 August 2006

Date of Judgment: 5 April 2007

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 810 OF 2006

JUDGE:	BENNETT J
DATE OF ORDER:	5 APRIL 2007
WHERE MADE:	SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 810 OF 2006

JUDGE:	BENNETT J
DATE:	5 APRIL 2007
PLACE:	SYDNEY

Counsel for the Applicant:	T F Bathurst QC, J E Griffiths SC and J K Kirk
Solicitor for the Applicant:	Mallesons Stephen Jaques
Counsel for the First Respondent:	L G Foster SC and A I Tonking
Solicitor for the First Respondent:	Corrs Chambers Westgarth
Counsel for the Second Respondent:	S Gageler SC, K Richardson and S Free
Solicitor for the Second Respondent:	Minter Ellison
Date of Hearing:	10, 11, 16 August 2006
Date of Judgment:	5 April 2007