Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd

[1994] FCA 628

62% 9 9

JUDGMENT No. ........ ........ . J ,--

CATCHWORDS

PRACTICE AND PROCEDURE - application to strike out paragraphs

of statement of claim on ground that they have tendency to

cause prejudice, embarrassment and/or delay - whether allegations of facts and circumstances concerning matters extraneous to geographic market for pre-mixed concrete capable of being relevant to degree of first respondent's power in that market.

Federal Court of Australia Rules, Order 11, r.l6(b)

Trade 1974, 6.46

REQlSTRY

SHEPPARD, JENKINSON and DRUMMOND JJ

S AUGUST 1994 12 SEP 1994

AUSTRAUA

BRISBANE pRlNUPAL

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1. Leave be granted to the applicant and to the

respondents to appeal against the judgment of this
Court delivered on 12 May 1994.

1. The applicant and the respondents file notices of appeal pursuant to that leave.

2. These orders not be entered until such notices of appeal have been filed.

4 .     The appeal by the applicant be allowed.

1. The orders made by Cooper J on 12 May 1994 be set aside.

2. In lieu thereof it be ordered that the respondents' notice of motion filed on 11 February 1993 be dismissed with costs.

7 .    The appeal by the respondents be dismissed.

1. The respondente pay to the applicant its costs of the applicant's appeal and the respondents' appeal.

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

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SHEPPARD J: To be determined are two applicatione for leave

to appeal and, if leave be granted, the consequential appeal8

from a judgment of a judge of this Court (Cooper J) delivered on 12 May 1994. The matter before his Honour was a notice of motion taken out by the respondents to the original application seeking an order that paras. 3(b) and (c), 14, 15(b) to (f) inclusive, and 17 of the applicants' statement of claim be struck out on the grounds that the paragraphs had a tendency to cause prejudice, embarrassment and/or delay in the proceedings. The application was made pursuant to Order 11 r.l6(b) of the Court's Rules.

His Honour ordered that paras. 3(b), 3(c), 14, lS(d) and 15(f) of the statement of claim be struck out and that the applicant have leave to amend para.17 to delete therefrom the reference to para.14. The Trade Practices Comiseion seeks leave to appeal against those orders upon the basis that his Honour was in error in ordering any part of the statement of claim to be struck out. The respondents to the original application, to whom I shall refer as 'the respondents', seek leave to appeal because they say that hie Honour was in error

statement of claim as well as the paragraphs which were struck	in not striking out paras. lS(b), (c) and (e) and 17 of the
out.
The Trade Practices Commission commenced proceedings against the respondents to recover pecuniary penalties in respect of alleged contraventions of the
1974. It also sought injunctive relief. By its statement of
claim, the Trade Practices Commission pleaded in para .3 (a)
that the first respondent ('Pioneer") was at all material times a trading corporation within the meaning of the Act incorporated in Queensland. Paragraphs 3(b) and (c), which were ordered to be struck out, were as follows:-

'3.	The First Respondent, Pioneer Concrete (Qld) Pty. Limited ('Pioneer concrete (Old)'):-
(b) subsidiary of Pioneer International Limited ('Pioneer International') and is and was at all material times a companies ('the Pioneer Group');
(C) at a11 material times carried on

business, inter alia, as a producer
and supplier of pre-mixed concrete in
all or almost all areas of Queensland,
within the Building Materials Division
of the Pioneer Group;'

Paragraph 3(d) alleged that, at all material times, Pioneer supplied pre-mixed concrete in an area in and around Warwick in Queensland which was described as the Warwick area and defined in particulars appended to the paragraph. The pre- mixed concrete was alleged to have been supplied from

Pioneer's pre-mixed concrete batching plant in Warwick.

Paragraphs 4, 5 and 6 identified the personal respondents

to the application and alleged that each acted on Pioneer's

behalf as servant or agent and acted within the scope of his actual or apparent authority. Paragraph 7 made allegations about other employees of Pioneer. It is unnecessary to refer

to the detail of these.

Paragraph 8 referred to two people, Mr. and Mrs. Roche, who were alleged to have carried on business, inter alia, as producers and suppliers of pre-mixed concrete. They were alleged to have supplied pre-mixed concrete in the Warwick area from 14 March 1990 and to have employed a man named Pringle as the manager of their batching plant in Warwick.

Paragraph 9 made allegations about a company, Sellars Holdings Limited. It was said to be a subsidiary of Ready Mixed Concrete Limited and a company within "the CSR group of companies." It was said that Sellars carried on business as a producer and supplier of pre-mixed concrete in various areas and supplied pre-mixed concrete in the Warwick area from its batching plant at Warwick.

Paragraph 10 alleged that foundations and footings for zmst types of buildings, for kerbs and gutters, for footpaths and the majority of floors for most types of buildings contructed in the Warwick area were constructed, almost

that at all material times Pioneer, Sellare and a firm	exclusively from pre-mixed concrete. Paragraph 11 alleged
operated by the Roches, Warwick Ready-mixed Concrete, were the suppliers of all, or almost all, pre-mixed concrete supplied
in the Warwick area.
Paragraph 12 of the statement of claim alleged that there wae a market for the production and supply of pre-mixed concrete in the Warwick area or that there were separate

S

markets for the supply of building materials used in the Warwick area for the construction of foundations and fittings, kerbs and gutters, footpaths and floors.

Paragraph 13 made allegations that, at all material times, from 14 March 1990, the Roches' firm supplied pre-mixed concrete in the Warwick area in competition with Pioneer and Sellars.

Paragraph 14, which was ordered to be struck out, was as

follows :  -

"14. At all material times the Pioneer Group:-

(a) had substantial financial resources;

(b)	carried on business in a wide range of industries;
(c)	with operations in many countries and having! considerable financial strength by

was a large diversified group of companies geographic spread of its activities;

(d) had assured supplies of raw materials, such

as sand, aggregate and cement, required for

the production and supply of pre-mixed
concrete in Australia through quarries and
plants owned and operated by subsidiary or

related companies;

(e)	was one of the largest producers and suppliers of pre-mixed concrete in the world;
(f)	was concerned to maintain a substantial market share in all or almost all markets in Australia in which pre-mixed concrete was supplied;
(g)	by virtue of the geographic spread of its pre-mixed concrete businesses and the substantial market share enjoyed by all or almost all of these businesses, had the capacity to sustain significant financial losses in any one of those businesses;
(h)	was prepared to sustain significant financial losses to maintain a substantial market share in all or almost all markets in Australia in which pre-mixed concrete
was supplied. '

Paragraph 15 was as follows:-

'15.

At all material times Pioneer Concrete (Qld):

(a) until about March 1990, had a substantial share of the Warwick concrete market;

(b) had substantial financial resources;

(c)	had assured supplies of raw materials, such as sand, aggregate and cement, required for the production and supply of pre-mixed concrete in Queensland through quarries and plants owned and operated by subsidiary or related companies;
(d)	was concerned to maintain a substantial market share in all or almost all markets in Queensland in which pre-mixed concrete was supplied;
(e)	by virtue of the geographic spread of its pre-mixed concrete businesses and the substantial market share enjoyed by all or

almost all of these businesses, had the

capacity to sustain significant financial

losses in any one of those businesses;

(f) was prepared to sustain significant financial losses to maintain a substantial market share in all or almost all markets in Queensland in which pre-mixed concrete was supplied.'

As mentioned, it was ordered that paras.(d) and (f) of this paragraph be struck out. The respondents seek, in addition, the striking out of paras. (b), (c) and (e). The Trade Practices Commission, on the other hand, contends that the paragraph should be allowed to remain in the form in which it was pleaded.

Paragraph 16 alleged that, at all material times, Pioneer and Sellars did not compete, or did not compete to a significant extent with each other, in the Warwick concrete market on the price of pre-mixed concrete supplied by each of them either at any time or prior to either 14 March 1990 or 12 November 1990. Paragraph 16 further alleged that Pioneer and Sellars had an arrangement or undertstanding with each other that they would make available to each other by way of loan the use of trucks for the cartage of pre-mixed concrete in the Warwick area when either requested that a truck be lent. This arrangement was not, at least until May 1991 extended to the Roches' firm. Paragraph 16 also alleged that Pioneer and Sellers had excess capacity to produce and supply pre-mixed concrete in the Warwick concrete market either at all times or prior to 14 March 1990 or 12 November 1990.

Paragraph 17 was as follows:-
'17.	By reason of the allegations contained in paragraph 3, 11, 14, 15 and 16 hereof, at all material times, Pioneer Concrete (Qld) had a substantial degree of power in the Warwick concrete market.'

Paragraph 18 alleged that Pioneer sought to deter the Roches from setting up and operating a pre-mixed concrete batching plant in Warwick in competition with Pioneer. Particulars appended to the paragraph identified a conversation in which two of the personal respondents on behalf of Pioneer were alleged to have made statements to the Rochee in whcih they were told that it would be foolish for them to set up a plant in Warwick, that Pioneer did not like small businesses taking its market share, price cutting by Pioneer was possible, 'You should be conscious of what

happened to Conrock in Townsville", "Pioneer will crush you -

it ie not a good idea to set up a plant in Warwick', and
'Pioneer has ways had means of forcing small businesses out.'

Paragraph 19 alleged that the two personal respondents acted in the manner alleged in para. 18 for the purpose of preventing the entry of the Roches into the Warwick concrete market and deterring or preventing their firm from engaging in competitive conduct in that market. Paragraph 19 thus alleged breaches by the respondents of the provisions of 8.46 of the

P r a c m 1974 ('the Act').

The allegations in the remaining paragraphs of the statement of claim pleaded facts and circumstances which, if eetabliehed, would involve the respondents in other breaches of the Act. It is unnecessary to refer to the detail of these paragraphs.

The section of the Act which is in question is 8.46. The

section, so far as relevant, is as follows:-

'46.(1)

A corporation that has a substantial degree
of power in a market shall not take advantage
of that power for the purpose of -

(a)	eleminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;
(b)	preventing the entry of a person into that or any other market; or

(C) deterring or preventing a person from

engaging in competitive conduct in that

or any other market.

( 1 A ) For the purposes of subsection (1):

(a)	competitor includes a reference to competitors generally, or to a	the reference in paragraph (l)(a) to a competitors; and
(b)	the reference in paragraphs (l)(b) and (C) to a person includes a reference to persons generally, or to a particular class or classes of persons.

(2) If -

(a)	a body corporate that is related to a corporation has, or 2 or more bodies corporate each of which is related to the one corporation together have, a substantial degree of power in a market; or
(b)	a corporation and a body corporate that is, or a corporation and 2 or more bodies corporate each of which is, related to the corporation, together have a substantial degree of povrr in a market,

the corporation shall be taken for the purposes of this section to have a substantial degree of power in that market.

(3) In determining for the purposes of this

section the degree of power that a body corporate or
bodies corporate has or have in a market, the Court
shall have regard to the extent to which the conduct
of the body corporate or of any of those bodies
corporate in that market is constrained by the

conduct of -

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

(4) In this section -

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

(C) a reference to power in relation to, or

to conduct in, a market is a reference
to power, or to conduct, in that market
either as a supplier or as an acquirer of

goods or services in that market.'

The section was amended in 1986 by the z a d e Practica

. .

1986.   Subsection 46(1) and (3) of the Act prior

to these amendments were as follows:-

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

(a)	eliminating or substantially damaging a person, being a competitor in that market or in any other market of the corporation or of a body corporate related to the corporation;
(b)	preventing the entry of a person into that market or into any other market; or
(c)

deterring or preventing a person from that market or in any other market.

........ ........ ........ ........ ........ ........ ..

A reference in this section to a corporation or other body corporate being in a position subetantially to control a market for goods

( 3 )

or services includes a reference to a corporation or	othe body corporate, as the mcase may be, having by
reason of its share of the market, or its ahare of the market combined with the availability to it of technical knowledge, raw materials or capital, the power to determine the prices, or control the production or distribution, of a substantial part of the goods or services in that market.'

Amendments were made to subsections (2) and (4) but it is not material to refer to the detail of the subsections in their pre-amended form.

In reaching his conclusion, his Honour referred extensively to the decision of the High Court in Oueensland

. .

s Ptv. - Llmlted v - v r a - CO,

. .

(1989) 167 CLR 177 and the decision of the Full Court

. .

of this Court in V e s s Ptv V G e n e r a l

PtV. . . (1991) 35 FCR 43. Reference was also

made to other authorities including m t t s . . V T r a d e

. .

S C - (1990) 24 FCR 313 and pevids

. .

v u r n e v - General of the C - (1994) 121 ALR

241.

His Honour said that, although the cases often listed relevant criteria to assess the structure of a market and the existence and extent of market power of an individual corporation operating in that market, the criteria were not fixed nor necessarily relevant to every market. Ultimately what must be identified was the relevant market and its structure and the particular circumstances of the individual corporation which bore upon its freedom of conduct in that

market. Hie Honour continued:-

'One of the circumstances which may be relevant to market power as reflected in some of the cases is the ability of a participant in the market to act without regard to its competitors because of its access to capital or the extent of its own financial resources. Most recently Spender J said in D.I.WL . . . .

Betallere v Davld H o l u Ptv.

(1993) 114 ALR 579 as to the effect of the merger

there in issue on the relevant market (at 632-633):-

'1 have earlier indicated my view that
the annual sales volume would have to
be in excess of $150 million to be
viable. Without sufficient market share

it would be disadvantaged in relation to
quantity by discounts, rebates and
promotional fundinq. such market share
would not come easlly and the merged entity
would have long pockets for a retaliatory
price war.'

On appeal Spender J's statement was quoted by Von Doussa J, with whom O'Loughlin J agreed, without demur as one of the findings made by Spender J in a proper analysis of market and market dominance

(v	Ptv. Ltd, v Attornev	-	of t&
Commonwealth.'

His Honour also said:-

'A corporation's access to capital and its ability to use that capital to create or raise barriers to entry are relevant circumstances which can give rise to an absence of competitive constraint in a market. The ability or threat to engage in 'deep pocket' predatory pricing either as a barrier to entry or as a means to exercise influence over, or to damage, a weaker competitor in the market was specif ically contemplated by section 46(3) prior to the 1986 . . v- amendment (eg. V t i c e s - s e c i

- (1980) 53 FLR 135 at 147); the subsection recognised that a corporation may have market power because of the ' technical knowledge, raw materials or capital' available to it. The policy underlying the 1986 amendments to section 46 was not to limit but to liberate the operation of the section in order to catch all types of market power irrespective of source. Notwithstanding the debate in the academic writings by lawyers and economists as to whether or not predatory pricing	exists in fact or ought to be prohibited as contrary	to competition policy."
Later his Honour said:-
"The Full Court in - warned that it would be an error to translate the U.S. decisions on 'predatory pricing' into the operation of section 46 at the expense of an independent examination of the Australian legislation as it applies to each case. Their Honours observed that questions of whether pricing policy or strategy were proscribed by section 46 did not depend on any pre-ordained and fixed categories as to the level of pricing or
economic theory or practice and remained to be determined by an application of the section to the facts of any particular case (35 FCR at 71-72). However, their Honoure did not hold that use of pricing for a predatory purpose, or the ability to do so, was never a circumstance to which section 46 applied. It therefore follows that an allegation of substantial wealth, or access to substantial resources, continue6 to be relevant to an allegation that a corporation has market power. This follows because the corporation has the available resources to engage, or threaten to engage, in predatory pricing, and thereby exercise power in the market over the conduct of other competitors or potential competitors. The abillity to use the resources for a predatory purpose remains an aspect of market power for the purposes of section 46 of the Act and nothing said by the Full Court in Eastern in my view casts doubt on that proposition.'

His Honour'e conclusions were that the fact that Pioneer was a subsidiary of another Pioneer company and part of the Pioneer group was not shown on the pleading to be relevant to any power that Pioneer might have in the Warwick concrete market. It was not pleaded that the corporate relationship iteelf enabled Pioneer to act independently of others in the relevant market. And the fact that Pioneer carried on business in numerous other markets in Queensland was not 'on

any circumstance giving Pioneer any particular market power or the pleading' demonstrated as creating in the Warwick market level of market power. His Honour said:-

"To the extent that the Commiseion submits that the aesociation gives rise to eubstantial financial and other resources, those circumstances are already pleaded in paragraphs 15(b) and (c) of the etatement of claim. To the extent that it is contended that the circumstances pleaded in paragraphs 3(b) and (c) are neceseary allegations to found a basis for the allegations in paragraph 14 of the etatement of claim, if paragraph 14 is itself not maintainable, the need for paragraphs 3(b) and (c) goee away.'

"None of the circumstances pleaded in paragraph 14 either alone or with other circumstances pleaded, operate to give the first respondent any greater degree of market power than the circumstances pleaded in paragraphs 15 and 16 of the statement of claim give to the first respondent. Nor has any attempt been made to plead a connection between the circumstances pleaded in paragraph 14 and the ability of the first respondent to act unconstrained by the conduct of others in the Warwick concrete market. Each of the allegations in paragraphs 14(a), (d), (f), (g) and (h) is replicated in paragraphs 15(b), (C), (d), (e) and (f) respectively. As circumstances relevant to the first respondent, they gain nothing on the pleading as being circumstances or attributes also applicable to the Pioneer Group.'

Hie Honour, as his decision shows, thought that the

position was different in the case of paras. 15(b), (c) and

(e). Each of the circumstances there pleaded related to the

economic capacity of Pioneer to make decisions and engage in
conduct without the constraint of market forces, i.e.

competitive forces, in the Warwick market. His Honour thought

that, in conjunction with the matters pleaded in paras. 3(d),	11, 15(a) and 16, the matters pleaded in paras. 15(b) and (c)
were 'arguably' relevant to the identification and assessment
of market power of Pioneer in the Warwick market. On the
other hand, hie Honour thought that the matters pleaded in paras. 15(d) and (f) were not "economic circumstancesg which might operate to allow Pioneer to conduct itself in the market without regard to its competitors. His Honour said that the pleading asserted the attitude or state of mind of Pioneer which may have provided the motive or explanation for alleged predatory conduct in the market. However, he thought that it was the economic power which enabled an individual in a market to act without regard to the conduct of other competitors. It was this which was relevant to the identification and assessment of market power. His Honour concluded that paras. 15(d) and (f) were thus irrelevant and embarrassing. His Honour did not strike out pare. 17. Because of his conclusions in relation to paras. 3 and 15 the only amendment to it which was required was the deletion of the reference to para. 14.
During the argument before us it became clear that Pioneer's purpose in pursuing the strike out application was not simply a 'tidying-up' exercise, but rather an attempt to circumscribe the way in which the Commission would be able to put its case. At the heart of the application is a question of substance, not procedure or form. There is, of course, a question whether an application to strike out a pleading is an
appropriate proceeding to determine such a question. It would
seem to me, and counsel for Pioneer conceded as much, that the course which has been adopted will not succeed unless it is clear beyond question that the result is as Pioneer contends it is.
The central plank in the argument is Pioneer's construction of subsec.46(3) of the Act. The opening words of subsec.46(1), namely, 'A corporation that has a substantial

degree of power in a market shall not take advantage of that

power for the purpose of . . . " are illuminated by the

provisions of subsec.46(3). Relevantly, the subsection provides that, in determining the degree of power that a body corporate has in a market, the Court shall have regard to the extent to which the conduct of the body corporate is constrained by the conduct of competitors, or potential competitors, of the body corporate in that market. Plainly, the more the body corporate's conduct is constrained by the conduct of competitors in the market, the less power the body corporate will have in the market to act unrestrained by competitive forces therein. So, if competition rules the market, the corporation will not have market power otherwise than because of its competitive strength. But if the body corporate for whatever reason is free to act in the market unrestrained by the competition therein, then it may be said to have a high degree of power in the market which does not have it6 origin in the competitive forces at play in the market. It is that power which subsec.46(1) seeks to affect

if it is used for any of the proscribed purposes in paras.(a),

(b) or (c) of the subsection. In the present case, the allegation is that the power which Pioneer has, is being, or has been used to prevent the entry of a person into the market i.e. the Roches.

As I understood counsel's submission, it was that one had to find in the market itself the factors that gave the body corporate a substantial degree of power in that market. Such an approach would not accord the meaning to subsec.46(3) which I have accorded it. Counsel conceded that, until the 1986 amendments to the Act, the section was properly conetrued a8 counsel for the Commission contends that it now should be. Certainly factors outside the market giving corporations a mubstantial degree of power in the market were regarded as relevant under the pre-1986 form of the section. Reference

may be made to VLctorian Eaa -a Board V m o d E a u

ptv.	(1978) 33 PLR 294, m d e Pracues CO-	v
CSBP L F	-	(1980) 53 PLR 135 (referred to by his

Honour) and m Ptv. v A ~ i t a c - u

(1986) 67 ALR 433. In the I&&mod E- case a

supplier of eggs who supplied approximately 85 per cent of the requirements of the Australian Capital Territory for eggs nought an injunction to restrain the Victorian Egg Marketing Board from selling egg8 in the Territory at a price lower than the supplier's price. The Court found that the Board had a virtual monopoly of the market in Victoria. It had an oversupply of eggs for Victorian markets. It negotiated with

lower than that of the Territory suppliers. An injunction was	retailere in the Territory to eupply them at a price which was
granted. The factors which gave it a substantial degree of market power were extraneous to the market for eggs in the Territory.
I do not see myself why one should take the view that the prement form of the section has made any difference to the situation which existed prior to the 1986 amendments coming into force. We were referred to the explanatory memorandum circulated at the time the Bill was before Parliament. Paragraph 43 of the memorandum said that the new subsec.46(3) provided a guide to the way in which market power was to be determined. It required that consideration be given to the extent to which the conduct of a firm was or was not constrained by competition on the part of other participants in the market, potential entrants to the market, suppliers or
purchasers . Paragraph 44 was as follows:-

. The circumstances which give rise to absence of competitive constraint upon a corporation are diverse. They are not confined to size or market share in relation to competitors, or to those matters combined with technical knowledge, raw material8 or capital. Other matters such as easier access to supplies or government control8 on the market are relevant if they bear upon the extent to which the corporation can act without being constrained by competition. Thus market power can be derived from statutory limitations on competition (e.g. through the creation of statutory monopolies) in the 8 way as any other constraints or:

competition can affect the operatioi~ of the market.'

There ia nothing in these paragraphs which suggests that there

was any intention on the part of the legislature to narrow the	scope of 6.46. Rather, the intention seems to have been to
rake amendments which would make its meaning clearer and its operation thus more certain.

In the course of their joint judgment in

P+v. v v Ptv. Lockhart and

Gur~moar JJ said (at 62-3):-

"The primary consideration in determining market power must be taken to be whether there are barriers to entry into the relevant market. This is the Arnotts (at 336, 339) and Dowling (at 137-138). To fundamental point made in Queensland Wire; see also

what extent is it rational or possible for new entrants to enter the market in this case? That is the primary question in considering whether each of the respondents has a substantial degree of market power. Other factors to be taken into account in defining and identifying market power are referred to in the judgment in Queensland Wire, in particular per Mason CJ and Wilson J (at 188-190), namely:

. 'the ability of a firm to raise prices above the supply cost without rivals taking away customers in due time, supply cost being the minimum cost

an efficient firm would incur in producing the

product ' ;
.	'the extent to which the conduct of [any of the respondents] in that market is constrained by the conduct of ... competitors, or potential competitors ... (s46(3));
.

Market share of each respondent must be examined market power as 'the relative effect of percentage command of a market varies with the setting in which that factor is placed' (per Uason CJ and Wilson J when adopting the language of Reed J in

United S t a t e s v Colwlrbia S t e e l CO 334 U S 495 (1948);
.	The presence of vertical integration is another factor, but its presence does not necessarily mean that a substantial degree of power exists.

The question of whether any of the proprietors of ESN has market power must be considered also in light of the fact that 8.46 requires that there be a

subs tant ia l degree of market power.

market power it must have a considerable or large	For a corporation to have a substantial degree of
degree of such power. The difficulty lies not in defining the word 'substantial' but in applying the concept of a substantial degree of market power to the circumstances of each case and in identifying whether the requisite degree of market power exists. This is a relative concept."
The presence of vertical integration, the subject matter

of paragraph 15(c) of the statement of claim which Pioneer

a the primary judge should have struck out, requires an examination of matters external to the particular market. Yet as their Honours' comments show, it is a matter that can be relevant to the existence of market power in the context of a.46(1).

I do not take the listed factors as exhaustive. Obviously there will be a wide variety of circumstances which may bear on the question whether a body corporate has a substantial degree of power in a given market. Some of those factors will arise from within the market; others will be extraneous to it. Until evidence is taken and findings of fact made one cannot tell what ultimately will provide guidance to a court in determining the question whether a corporation has a substantial degree of power in the market. Once that has been determined the next question will be whether that power, if it is found to exist, is being used for one of the proacribed purposes.

What the statement of claim in the present case was

deaigned to do was to set out in paras. 3, 11, 14, 15, 16 and

capable of demonstrating that Pioneer had a substantial degree

17 an accumulation of factors which taken together were

of power in the market not arising by reason of its competitive position in that market. The matters pleaded, if established, would tend to show that the barriers for entry to the market had been raised so high as to discourage further entry to it. It is true that some of the allegations made in the relevant paragraphs are repetitive and that others go to the mtive or purpose of Pioneer. There may be, as his Honour

2 1

thought, a question about their relevance in relation to the question whether Pioneer had a substantial degree of power in the market. But they are likely to be relevant to the proof of one or more of the specified purposes in paras. (a), (b) and (c) of the subsection.

A matter which was discussed during the course of the argument was whether it could be right to say that 8.46 etruck at predatory pricing at all. There may be a question about this although I tend to think that, if the matters specified in the section are established, the fact that predatory pricing is what is being complained of is no bar to the section applying. After all a company which engages in predatory pricing is doing so as a means to an end. Its ultimate goal will usually be to secure the market for itself. Notwithstanding these views, I do not express any conclusion on the point. In my view, it would be quite inappropriate to do so in an application to strike out a pleading.

That leads me to say that a court asked to strike out all

or part of a pleading needs to be careful to ensure that

giving effect to the application does not prevent a party from making a case which it is entitled to make. One has to err on the side of caution lest one deprive a party of a case which in justice it ought to be able to bring. Having reflected on the matter, I have reached the conclusion that none of the paragraphs in the statement of claim was objectionable. I think none should have been struck out. I would reject the submissions made by Pioneer that further subparagraphs of para. 15 should go.

It may be that the parties will eventually be able to agree, either actually or hypothetically, on the facts and circumstances relevant to the question of the degree of Pioneer's power in the market. It may then be appropriate to raise for the Court's consideration a question of law, the question being whether the facts and circumstances to be relied upon by the Commission are capable of establishing that Pioneer has a substantial degree of power in the market within the meaning of 6.46. If it seems appropriate, the matter can then be dealt with on a final basis without the difficulties which are always present when a question is raised whether a pleading should be struck out. It should be said, however, that it may not be useful to separate the issue of the degree of Pioneer's power in the market from the other issues in the came.

Subject to those considerations, I think the matter is one which ought to go to trial on the issues which emerge from the rempondents' defence which was filed over two months prior to the notice of motion in question being taken out. Perhaps the fact that the respondents were able to plead to all the allegations in the statement of claim provides a strong indication that none of the paragraphs disclosed a tendency to cause prejudice, embarrassment or delay.

2 3

I think this matter raises questions important enough to warrant the grant of leave to appeal to each of the parties. There was no opposition to the grant of leave by either of them. In the result I would grant leave in each case. I would dismiss the respondents' appeal. I would allow the Commission's appeal. I would set aside the orders made by hie Honour and, in lieu thereof, order that the application made by the respondents to strike out certain paragraphs of the statement of claim be dismissed. The costs both before his Honour and before us should be paid by the respondents.

I certify that this and the d(L

preceding pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justlce Sheppard.

Associate

Date: g &UG ~/gi( iqY+

1

) No. QG143 of 1992

- 1

On Appeal from a Judge of the Federal Court of Australia

BETWBEN:	T R A D E	P R A C T I C E S
COMnISSION

Applicant

First Respondent

m: -

Second Reepondent

m: P

Third Respondent

m: -

Fourth Respondent

Sheppard, Jenkinson and Drummond JJ.
Brisbane

5 August, 1994

-

I have had the advantage of reading the reasons for

judgment of Sheppard J. Subject to one qualification, I agree

in all that his Honour has written.

The allegations in paragraphs 15(d) and 15(f) and

the corresponding allegations in paragraphs 14(f) and 14(h)

are no doubt examples of allegations concerning which Sheppard

J. has observed that "[tlhere may be a question about their relevance in relation to the question whether Pioneer had a substantial degree of power in the market". I agree with his Honour's further observation that "they are likely to be relevant to the proof of one or more of the specified purposes" in sub-section 46(1). But the circumstances alleged in the four sub-paragraphs are at best evidentiary, not ultimate facts, contributing to such a proof. And they are circumstances pleaded as contributing to the conclusion stated in paragraph 17 that Pioneer Concrete (Qld) Pty. Ltd. had at all material times a substantial degree of power in the Warwick concrete market. It is, I suppose, possible that an historical narrative of the way in which a substantial degree

of market power in that market had been acquired might

reasonably include reference to circumstances of the kind alleged in the four sub-paragraphs. And it is possible that knowledge of circumstances of that kind by competitors and persons contemplating entry into that market might contribute

to the creation or the continuance of that power. The

comprehend those possibilities. On the other hand the	pleading is not, however, so expressed as to be apt to
ambiguities to which these sub-paragraphs give rise are not likely to cause prejudice, embarrassment or delay. I agree in the orders propoeed by Sheppard J.

I certify that this and the preceding

page is a true copy of the Reasons for Judgment of the Honourable Hr. Justice Jenkinson. L U

ABsociate

Date:  5 ~ugust, 1994

No. QG 143 of 1992

-

m THE FEDERAL-

BETWEEN: -

Applicant

AND I

First Respondent

AND :  -

Second Respondent

AND :

Third Respondent

AND t -

Fourth Respondent

UKm:  Sheppard, Jenkinson and Dnnmoond JJ

EhcS: Brisbane

PPfB:  5 August, 1994

RmsONs POR JuDGnEm

I have had the advantage of reading in draft the

reasons for judgment of Sheppard J. I agree with the orders

proposed, for the reasons his Honour gives.

I would only add that I do not accept the proposition advanced on behalf of Pioneer that the inquiry which 6. 46(1) the m d e Pracuces Act 1974 requires to be undertaken into whether the respondent corporation has a substantial degree of power in a market is limited to the matters referred to in s. 46(3). The authorities show that the notion of constraining conduct as an aid to market identification in the contexts of both a. 46 and s. 50 is an imprecise one, incapable in itself of providing the solution

to that particular problem. See Queenslend Wire In-

Ptv. Ltd. v N P Co. LtdL (1989) 167 C.L.R. 177 at 195-6 and

199 and Ppyida Holdinas Ptv. Ltd. v m Atto-	-
(1994) 121 A.L.R. 241 at 259 and 275.

Section 46(3) emphasises the importance of examining the constraining influencee on the corporation exerted by its

competitors and potential competitors in that market and by

customers of the corporation and its competitors and by

suppliers to that corporation and its competitors in order to

assess the degree of market power possessed by the

corporation. But the notion of constraining conduct to which

S. 4 6 ( 3 ) directs the Court's attention is no more capable of

providing a complete answer to the question of what market power a corporation has than is the identification of constraining influencee on a corporation capable of providing a complete answer to the question of market identification. This, I think, is recognised by s. 46(3) insofar as it does not purport to limit the Court in determining whether a corporation has a substantial degree of market power to an examination of the constraints referred to in s. 46(3): the aub-section requires the Court only to "have regard to" those conatraining influences.

I certify that this and the preceding two pages are a true

copy of the reasons for judgment
herein of the Honourable Mr.

Justice Drwnmond.

Associate 8

ate 1 5 August, 1994

APPEARANCES

Counsel for the Applicant:  m. C.A. Sweeney, QC and

Mr. M.M. Stewart

Solicitors for the Applicantr Australian Government

Solicitor

Counsel for the Respondents:  Mr. D. Keane, QC and
Mr. S.J. Keim

Solicitors for the Respondents: Stephen Comino & Cominos

Date of Hearing:	1 August 1994
Place of Hearing:	Brisbane