Robert Hicks Pty Ltd (trading as Auto Fashions Australia) v Melway Publishing Pty Ltd [1998] FCA 1379 (30 October 1998)

Last Updated: 4 November 1998

FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES - Misuse of market power - Whether refusal to supply street directories to prevent competition with existing wholesale distributors contravenes s 46(1) of the Trade Practices Act 1974 (Cth) - Whether there is a national or city based market for street directories - Consideration of when a refusal to supply is taking advantage of market power - Principles applicable to determining purpose - Form of injunctive relief that is appropriate for a contravention of s 46(1)

PRACTICE AND PROCECURE - Expert evidence - Calling experts to give evidence at conclusion of evidence adduced by parties

WORDS AND PHRASES - "Purpose"

Trade Practices Act 1974 (Cth) ss 46(1), 80(1)

Queensland Wire Industries v BHP Ltd [1989] HCA 6; (1989) 167 CLR 177 - applied

Regents Pty Ltd v Subaru (Aust) Pty Ltd [1998] ATPR 41-647 - considered

Queensland Co-Operative Milling Association Ltd (1976) 25 FLR 169 - cited

Re Tooth & Co Ltd; Re Tooheys Ltd [1979] ATPR 18,174 - cited

Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109 - cited

Eastern Express v General Newspapers (1992) 35 FCR 43 - applied

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

Chan Cuong Su v Direct Flights International Pty Ltd and Ors (Federal Court of Australia, Lehane J, 14 October 1998) - cited

General Newspapers Pty Ltd v Telstra Corporation [1993] FCA 473; (1993) 45 FCR 164 - cited

Industrial Equity Ltd v The Deputy Commissioner of Taxation [1990] HCA 46; (1990) 170 CLR 649 - cited

Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd [1978] FCA 27; (1978) 33 FLR 294 - cited

ACCC v Z-Tek (1997) 78 FCR 197 - cited

ROBERT HICKS PTY LTD (TRADING AS AUTO FASHIONS AUSTRALIA) V MELWAY PUBLISHING PTY LTD

VG 192 OF 1995

JUDGE: MERKEL J

PLACE: MELBOURNE

DATE: 30 OCTOBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 192 of 1995

BETWEEN:	ROBERT HICKS PTY LTD (trading as AUTO FASHIONS AUSTRALIA) ACN 005 072 775 Applicant
AND:	MELWAY PUBLISHING PTY LTD ACN 004 640 420 Respondent
JUDGE:	MERKEL J
DATE OF ORDER:	30 OCTOBER 1998
WHERE MADE:	MELBOURNE

THE COURT MAKES THE FOLLOWING DECLARATION AND ORDERS:

1. A declaration that the refusal by the respondent to supply Melway street directories to the applicant since 7 April 1995 is conduct which contravened s 46(1)(c) of the Trade Practices Act 1974 (Cth).

2. Interlocutory judgment be entered for the applicant for damages to be assessed pursuant to s 82 of the Trade Practices Act 1974 (Cth) in respect of the said contravention of s 46(1)(c) of that Act by the respondent.

3. The respondent, whether by its servants, agents or howsoever otherwise, be restrained from refusing to supply Melway street directories to the applicant where the purpose or the substantial purpose of the refusal is to prevent the applicant from engaging in competitive conduct with any wholesaler or distributor of Melway directories in relation to the sale of such directories to retailers.

4. The respondent pay the applicant's taxed costs of and incidental to the proceeding.

5. Liberty to apply be reserved in respect of the assessment and payment of damages payable pursuant to the interlocutory judgment referred to in Order 2.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 192 of 1995

BETWEEN:	ROBERT HICKS PTY LTD (trading as AUTO FASHIONS AUSTRALIA) ACN 005 072 775 Applicant
AND:	MELWAY PUBLISHING PTY LTD ACN 004 640 420 Respondent

JUDGE:	MERKEL J
DATE:	30 OCTOBER 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Introduction

The applicant ("Auto Fashions") is a wholesaler of motor vehicle spare parts and accessories. From approximately March 1986 to 30 June 1995 it acted as a wholesale distributor to automotive parts retailers of the Melway street directory for Melbourne and its metropolitan area.

The respondent ("Melway") is the publisher and wholesaler of the Melway street directory which is one of three street directories available in respect of Melbourne and its metropolitan area. The two competing directories, the UBD street directory and the Gregory's street directory, are published by Universal Press which is the major publisher and supplier of street directories for Brisbane, Sydney, Adelaide and Perth. A fourth directory is published by VicRoads but mainly relates to Victorian country areas. Understandably, sales of a city directory are largely confined to the city and suburban areas to which the directory relates. Melway also publishes and wholesales the Sydway street directory in respect of Sydney and its metropolitan area.

On 2 February 1995, Melway gave notice of termination of Auto Fashion's distributorship. Subsequently, Melway refused to supply Melway street directories to Auto Fashions. The refusal resulted in Auto Fashions commencing a proceeding in the Court against Melway in which Auto Fashions claimed that Melway's refusal to supply contravened s 46(1) of the Trade Practices Act 1974 (Cth) ("the TPA").

The object of s 46(1) is the protection, advancement and promotion of a competitive environment and competitive conduct on the assumption that competition protects the interests of consumers and is in the public interest: see Queensland Wire Industries v BHP Ltd [1989] HCA 6; (1989) 167 CLR 177 at 191 per Mason CJ and Wilson J, 194 per Deane J and 213 per Toohey J. The sub-section provides:

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

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

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

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

Auto Fashions alleges that, in refusing to supply the Melway street directory to it, Melway has taken advantage of its power in the market in Melbourne and its metropolitan area for the supply, by wholesale, of street directories for the purpose of preventing or deterring Auto Fashions from engaging in competitive conduct in that market.

The proceeding raises the following issues:

* the definition of the relevant market;

* whether Melway has a substantial degree of power in that market;

* whether Melway, in refusing to supply street directories to Auto Fashions, has taken advantage of its power in that market;

* whether any taking advantage of the power was for a proscribed purpose;

* the relief (if any) that is appropriate.

Background

(i)(a) The Melbourne directory market

The first Melway street directory was published by Melway in 1966. It was an instant success despite the fact that it was considerably more expensive than the other street directories which were then available. The directory has continued to enjoy significant popularity with consumers. It uses single line cartography, colour maps and contains user friendly information. Originally it was the policy of Melway to publish new updated editions annually, however that proved to be difficult and has not occurred. As of September 1998, 26 editions of the Melway street directory have been published and distributed for sale to the public.

Melway developed a strategy of encouraging taxi companies, real estate agents and a number of other businesses to use Melway map references in their business and advertising. By the early 1980's, Melway had become the dominant street directory in the Melbourne directory market with the UBD and Gregory's directories being the only competing products. As Gregory's is a compact directory, Melway's main competitor has been the UBD directory.

Until recently the UBD directory was not well known to Melbourne consumers and was regarded by many retailers as inferior in quality to the Melway directory. However the 1998 Melbourne UBD directory (the 34^th edition) was a significant improvement on previous directories and is regarded by a number of experienced retailers and wholesalers as equal in quality to the current Melway directory (the 26^th edition).

Recently, Universal Press's more aggressive marketing and advertising of its UBD directory led to a slight increase in its sales and market share in Melbourne. Notwithstanding these factors, consumers have demonstrated a strong sense of brand loyalty to Melway. In addition, customer reliance on the accuracy of the Melway directory, the widespread referencing in advertising and by consumers to the Melway directory, the effective marketing of the directory and its established repute has led consumers to refer to and regard Melway as a generic description of a Melbourne street directory. As a consequence, Melway has been able to maintain its dominant share of the market for Melbourne street directories despite the extensive efforts of Universal Press to make inroads on that share.

Several witnesses spoke of the "icon" status of the Melway directory. That status was illustrated by the General Manager of Universal Press who, by way of anecdote, said that the Hertz company replaced Melway directories in their rental cars with the Gregory's compact directory after discovering customers were stealing the Melway's directories. As he explained:

"that's a statement in its own right, I guess."

It is difficult to obtain accurate figures as to the respective market shares of the competing directories, as those shares change whenever a new edition of a directory is published. The general pattern is for sales of a directory to fall away towards the end of an edition but to rise dramatically in the first two months of the publication of a new edition which is usually accompanied by extensive advertising and marketing. As the recent Melway and UBD editions have been published at different times, it is difficult to obtain an accurate estimate of current market shares at any particular point of time. Subject to that qualification, the evidence indicates that the approximate retail market shares for Melbourne street directories are as follows:

* Melway - in excess of 80%-90%;

* UBD - in excess of 2.5%-5%;

* Gregory - less than 5%;

* VicRoads - insignificant.

(i)(b) The Australian directory market

The dominant publisher and supplier of street directories for capital cities other than Melbourne is Universal Press. In those cities, Universal Press has little competition from other directories although since 1993 Melway has published and supplied the Sydway directory to compete with Universal Press's directories in the Sydney market. However, Sydway has found it extremely difficult to gain any significant market share in Sydney notwithstanding that it appears to be competitive with the other directories.

The evidence suggests that it is likely that Melbourne is the largest directory market in Australia. Although there was little evidence on that matter, 60% of K-Mart's national directory sales were of Melbourne directories. The importance attached by Melbourne consumers to having the latest edition of Melway has probably led to Melbourne's national market share being significantly greater than might otherwise have been expected to be the case. Thus, the probability is that sales of Melbourne directories account for at least 50% of the national market for street directories.

(ii) The Melway distribution system

Melway attributes the success of its Melbourne directory in part to its decision to distribute and sell it to carefully selected wholesale distributors who are required to on-sell the directories only to retailers in the defined market segment allocated by Melway to the particular distributor. Although changes have been made to the distribution system from time to time, at the time of the termination of Auto Fashions' distributorship, the wholesale distribution network established, administered and maintained by Melway was as follows:

DISTRIBUTOR	MARKET SEGMENT
Gordon and Gotch	Newsagents and bookshops (including those sections in Coles Myer/Target stores)
Burson Automotive Pty Ltd Paul and David Auto	Service stations and Burson's retail outlets for automotive parts Services stations
Tom Morris	Office Stationers
Auto Fashions	Automotive parts (including those sections in Bunnings, McEwans and K-Mart stores)
Stan Earle Pty Ltd	"Over the counter" sales by the wholesaler and sales to authorised car dealers

Since 1995 the main changes to the network have been that Waymore Distribution replaced Gordon & Gotch as the distributor for the newsagent and bookshop market segment, Beyond Auto Pty Ltd (later known as On-Tel Australia Pty Ltd) replaced Auto Fashions as distributor for the automotive parts segment, Clive Hill Pty Ltd has replaced Tom Morris in the office stationers segment and Paul and David Auto has been permitted by Melway to sell to RACV shops and Australia Post.

Subject to minor exceptions, Melway only distributes directories through its appointed wholesalers. It has few, if any, direct sales. Melway's appointment of wholesalers from time to time has been informal, without any contractual documentation and on the basis that the distributorships are confined to an allocated market segment and are terminable at will. In the past, distributors have accepted that their appointment was on the basis that they would only sell the Melway street directory within their allocated market segment which, save for the service station segment where there were two competitors, was to be an exclusive Melway distributorship for that segment. As a consequence, in general, the Melway wholesalers were able to sell to retailers within the allocated segment without any competition in that segment from any other wholesaler in respect of the Melway street directory. In the service station segment, Burson Automotive and Paul and David Auto compete with each other but not with other wholesalers. Accordingly, there is no competition across the allocated segments.

From time to time problems have arisen when a wholesaler encroached upon what was believed to be the territory of another wholesaler. In such instances Melway resolved the dispute. However, such encroachments were unusual as, generally, the wholesalers appeared to be content with their protected market segments.

Melway's policy has been to offer its directories at the same price to all of its distributors irrespective of the quantities ordered. More recently, some differential price increases were imposed on Stan Earle Pty Ltd and on the two wholesalers in the service station segment. Although the basis for the increases was far from clear, they did not appear to be based on cost or distribution efficiencies. Whilst Melway endeavoured to ensure that each distributor was properly exploiting its market segment, it played no role in relation to the prices at, or the terms on which, the directories were sold by distributors to retailers. Accordingly, it was left to each of the distributors to fix its wholesale price to retailers and to offer such rebates or advertising allowances as were negotiated between the wholesaler and the relevant retailer.

In spite of the fact that each allocated market segment was not burdened by competition from a Melway wholesaler operating in another segment, there appears to have been strong competition between retailers in relation to retail sales of the Melway street directory. It was common for retailers within each segment, and across segments, to compete, particularly in relation to price. As a consequence, there was considerable variation in the price at which the Melway street directory was being sold to the public. Strong retail price competition, particularly in more recent times, has caused wholesalers to reduce some of the prices they offer to the retailers in their segment so as to enable those retailers to compete both within and across the various market segments.

In the result, although the Melway street directory is a highly successful product, recent profit margins for Melway as the publisher and supplier and of the various wholesalers and retailers do not appear to have been excessive. However, the competition that produced that result has not been competition between wholesalers. Rather, it was the price and promotional competition between retailers in respect of the Melway street directory.

The UBD directory has been unable to make any significant inroad on Melway's dominant share of the market for Melbourne street directories. Accordingly, competition from the UBD directory has not led Melway to make any changes of significance to its pricing or distribution system. The competition has been minor notwithstanding that the UBD directory remained significantly cheaper than the Melway directory and has offered significantly larger and, therefore more attractive, profit margins for wholesalers and retailers.

Although the distributors carry a large number of products for wholesaling to a range of retailers, they appear to regard the Melway street directory as a product which they must stock in order to meet the demands of their retailers. Accordingly, the Melway directory is regarded as an important and leading product by its distributors.

The sales patterns and demands of retailers for the Melway street directory vary significantly both within and across the various segments. For example, the major stores mainly market and promote the Melway directory for Father's Day and Christmas as the directory is a popular gift at those times. However the demand for the directory by many other retailers, such as service stations and book shops, is more constant although it rises significantly whenever a new edition is launched. Melway expects its distributors to carry sufficient stocks to service their customers' requirements.

Although the retail market appears to be reasonably well serviced, new opportunities have arisen from time to time in segments where the product had not previously been sold. Indeed, it was as a result of Auto Fashions suggestion in 1986, that the directory be marketed through automotive parts retailers, that it was appointed as the wholesaler for that segment which became Melway's second largest segment. More recently new outlets such as Australia Post have undertaken the retail sale of the Melway street directory.

(iii) The UBD distribution network

Universal Press sells directly to retailers as well as through wholesalers who wish to stock its directories. As Universal Press prefers to sell directly to larger retailers such as K-Mart, the stocking of UBD directories, particularly in Melbourne by wholesalers, is mainly to service such retail demand as arises from time to time. Universal Press has not confined wholesalers of its directories to any particular market segment.

As the UBD directory has made little inroad on Melway's Melbourne market share, the UBD directory unlike the Melway directory, has not been regarded by Melbourne wholesalers as an important product for them to carry. Although Auto Fashions raised the possibility of an exclusive distributorship with Universal Press after termination of its Melway distributorship, Universal Press did not display any interest in appointing an exclusive distributor for its Melbourne directories.

(iv) The termination of Auto Fashions' distributorship

A great deal of evidence was devoted to the circumstances in which Melway terminated Auto Fashions as a distributor. The background to the termination was as follows. Auto Fashions was owned and controlled by Mr Rayman Pawsey ("Pawsey") and Mr William Nagel ("Nagel"). Nagel had primary responsibility for Melway sales to all outlets other than K-Mart which was the responsibility of Pawsey. Auto Fashions became one of the leading distributors of the Melway street directory. As a result of a deterioration in the relationship between Pawsey and Nagel, Pawsey acquired Nagel's shareholding in Auto Fashions during 1993. By July 1993 Nagel had commenced his own business.

Late in 1994 Auto Fashions indicated to Melway that it did not regard itself as suitable for marketing the Sydway directory to retailers other than K-Mart. Nagel was then approached by Melway and asked if he could take over the distributorship of the Sydway directory for Sydney, which he agreed to do. By late in 1994 Melway had started to have doubts as to Pawsey's enthusiasm for the Melway street directory and it began considering whether to replace Auto Fashions with Nagel's company, Beyond Auto Pty Ltd, as the distributor for the Melway street directory to automotive parts retailers. That led to a notice of the termination, by Melway, of Auto Fashion's distributorship on 2 February 1995. The termination did not take effect until 30 June 1995.

Melway's evidence was that the reason for the termination was its dissatisfaction with various aspects of Auto Fashions' performance as a distributor. It is unnecessary to detail Melway's complaints or the manner in which they were raised with Pawsey. I am satisfied that the detailed reasons presented by Melway witnesses to the Court for the termination by Melway were not the real reasons for the termination which occurred on 2 February 1995. Whilst I accept that there may well have been a perception within Melway that Auto Fashions performance was not as good as Melway would have liked it to be, I am satisfied that that perception would not have led to the termination of its Melway distributorship in the absence of Nagel's availability to take over the distributorship. Although Melway witnesses were reluctant to concede that point, Mr Brian Lane ("Lane"), Melway's marketing manager, admitted that the confidence he had in Nagel, Nagel's availability to take over the distributorship and particularly, his feeling that "Nagel could do a better job" were the "crux" of the matter. However, if it be relevant, I do not accept Auto Fashions' contention that its termination was capricious or arbitrary.

In reality the termination is more appropriately expressed as the replacement of Auto Fashions by Beyond Auto. Nagel had established a good working relationship with Melway, particularly with Lane. By late 1994, the directors of Melway, on the recommendation of Lane, appeared to be enthusiastic about appointing Nagel's company to replace Auto Fashions as a Melway distributor.

Auto Fashions has relied upon Melway's refusal to supply after its termination, rather than its termination as a distributor, as the basis for its claim of a contravention of s 46 of the TPA. Accordingly, although the parties spent a great deal of time in relation to the issue of termination, apart from providing a context for the refusal to supply, the relevance of the reasons given for the termination to the issues arising in the proceeding is not readily apparent.

(v) Refusal to supply

The refusal to supply arose in the following circumstances. Immediately after the notice of termination of the distributorship on 2 February 1995, each party engaged solicitors to act on its behalf in the matter. Initially, the dispute related to the validity of the termination. However, on 24 March 1995, Auto Fashions wrote to Lane indicating that in the event that the distributorship ceased, Auto Fashions would wish to seek the wholesale supply of Melway street directories for sale to the retail market. Lane's advice was sought as to the terms and conditions upon which directories might be supplied to Auto Fashions.

On 28 March 1995 Melway responded to Pawsey's request seeking more information regarding "volume, frequency of orders etc". On 30 March 1995 the solicitors for Auto Fashions wrote to the solicitors for Melway indicating that Auto Fashions would require 30,000-50,000 directories per annum, with deliveries and orders being provided on a monthly basis; payment was to be thirty days after delivery. Auto Fashions solicitors also indicated that Auto Fashions expected to be in a position to continue selling Melway street directories to many of its old customers and in addition, it hoped to acquire new customers. The letter also raised the question of whether a refusal to supply would be a breach of the TPA. Auto Fashions provided the information sought by Melway concerning its request for supply and asked for a response by 3 April 1995.

On 7 April 1995, after further correspondence between the parties, the solicitors for Melway notified the solicitors for Auto Fashions that after the cessation of the distributorship, Melway

"does not propose to have any further business dealings with Auto Fashions."

In its further amended Statement of Claim, Auto Fashions pleaded that Melway continued to refuse supply to it of Melway street directories. In response to that allegation, Melway pleaded that it was, and remained, lawfully entitled to refuse to supply Melway street directories to Auto Fashions and admitted that, subject to any order of the Court, Melway did not intend to supply its directories to Auto Fashions.

Evidence was given by Mr Murray John Godfrey ("Godfrey"), a director of Melway, and Lane concerning the refusal to supply. Although the evidence given by those two witnesses was not entirely consistent, I find the following facts in relation to the refusal.

1. Melway believed that its current wholesale distribution system provided for an appropriately regulated, orderly marketing and distribution of Melway street directories. In particular, Melway believed that the appointment of distributors as exclusive distributors in respect of particular segments of the market for Melbourne street directories enabled it to maximise sales of its street directories.

2. It is difficult to ascertain the basis for Melway's belief other than that its experience was that its system had worked well for it. In substance, Melway's view was that freedom from competition in each allocated segment offered a necessary incentive to the distributor to exploit the segment to maximise its sales. That factor, plus the alleged expertise of distributors in relation to their segment, was said by Melway to have resulted in maximising overall sales of the Melway directory.

3. There was considerable uncertainty as to the consequences that might follow if Melway's current distribution system was dismantled. Melway was of the view that replacement of the present system by a different system in which appointed distributors competed generally for retailers' business in the wholesale market for Melway street directories would be harmful to its business and ought to be resisted.

4. The evidence does not enable me to form any view as to whether the dismantling of the current system would be likely to be harmful or beneficial to Melway's business. If it be relevant, I do accept that Melway's resistance to changing the existing system was because it was satisfied that that system constituted a reasonable commercial regulation of its distribution system in order to maximise sales of its directories.

5. Although Melway requested Auto Fashions to supply it with information in relation to the quantity and terms on which it wished to obtain supply of the Melway directories, Melway did not intend to supply directories to Auto Fashions after the termination of its distributorship.

6. Godfrey and Lane, who were involved in Melway's decision to refuse supply, appreciated that it was the intention of Auto Fashions to sell any directories supplied by Melway to existing retail customers of Auto Fashions and new retail customers without regard to the market segment in which the retailers operated. They also appreciated that the supply of directories to Auto Fashions on that basis would be inconsistent with the maintenance of the distribution system established by Melway which protected the distributors from competition from other distributors within their allocated market segments.

7. A reason proffered by Godfrey and Lane for the refusal of supply to Auto Fashions was that Auto Fashions was no longer an appointed distributor of Melway street directories as Beyond Auto Pty Ltd had replaced it as a distributor in the automotive parts market segment. However, Godfrey conceded that there were no reasons in his mind for refusing supply to Auto Fashions other than that he did not want competition on the part of Auto Fashions for the customers of existing distributors. Godfrey also said that he refused to supply Melway street directories to Auto Fashions as the supply would be basically dismantling the existing wholesale distribution system. Lane was not prepared to concede that either concession represented his view which was that the "prime reason" for the refusal was that he was satisfied with the existing distribution system.

8. The order by Auto Fashions for 30,000 to 50,000 directories was acknowledged by Lane to be a "big order" for Melway. It is unlikely that supply would have been refused if Auto Fashions had agreed not to compete with the current Melway distributors by only selling directories to retailers which were not in any of the segments allocated to those distributors. Lane conceded that he would be delighted to sell 50,000 directories to a person who would not be competing with his existing distributors.

9. Melway did not intend, and refused to supply Auto Fashions with Melway street directories after the termination of its distributorship, as it did not want Auto Fashions to compete for customers with its appointed distributors in their allocated market segments.

Definition of the Market

Section 46(4)(b) provides that a reference in the section to a market is a reference to a market for goods or services. Section 4E defines a market as follows:

"For the purposes of this Act, unless the contrary intention appears, "market" means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services."

Recently R D Nicholson J in Regents Pty Ltd v Subaru (Aust) Pty Ltd [1998] ATPR 41-647 considered the concept of market in the context of s 46. I agree with his Honour's analysis (at 41,168 to 41,171) of the concept of a market for the purposes of s 46 which, for present purposes, may be summarised as follows.

1. Although the word "market" is not susceptible of precise or comprehensive definition it may be fairly described as an area of actual and potential close competition in particular goods and/or services and their substitutes: see Queensland Wire Industries at 195 per Deane J and Regents at 41,169.

2. The market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance and cost and price incentives; see Re Queensland Co-Operative Milling Association Ltd (1976) 25 FLR 169 at 190 (approved in Queensland Wire Industries at 188 per Mason CJ and Wilson J; Dawson J at 199-200 and Toohey J at 210).

3. On the issue of substitution the Tribunal in Re Tooth & Co Ltd; Re Tooheys Ltd [1979] ATPR 18,174 at 18,196 said:

"[C]ompetition may proceed not just through the substitution of one product for another in use (substitution in demand) but also through the substitution of one source of supply for another in production or distribution (substitution in supply). The market should comprehend the maximum range of business activities and the widest geographic area within which, if given a sufficient economic incentive, buyers can switch to a substantial extent from one source of supply to another and sellers can switch to a substantial extent from one production plan to another. In an economist's language, both cross-elasticity of demand and cross-elasticity of supply are relevant."

The notion of substitutability requires the ascertainment of the cross-elasticities of both supply and demand which reveal the degree to which one product may be substituted for another in response to price changes: see Queensland Wire Industries at 199 per Dawson J.

4. The process of defining a market by substitution involves both including competitive products and excluding those, which because of differentiating characteristics, do not compete: see Queensland Wire Industries at 187 per Mason CJ and Wilson J. Definition of the relevant market (ie the field of relevant connected activity) will commonly involve assessment of the relative weight to be given to demand and supply substitutability, the significance of competition between traders, the pattern and structure of trading, barriers to entry and related matters: see Queensland Wire Industries at 196 per Deane J, Australian Meat Holdings Pty Ltd v Trade Practices Commission [1989] ATPR 40-932 and Regents at 41,170.

5. Although it is uncommon for dealings in a particular product to constitute a market whether such dealings can do so will depend upon whether substitutability in demand and supply and the other factors referred to above lead, in reality and in the long run, to require the market to be more broadly delineated. In that regard greater difficulty is experienced in determining whether a single brand market, rather than a market in a particular product, may exist: see Regents at 41,170-41,171 and Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd (1987) 75 ALR 581 at 589 per Wilcox J.

6. The concept of a sub-market refers to the area of closest competition which is therefore narrower than a market for the purposes of the TPA: see Regents at 41,170.

7. The market will require a description of the relevant goods or services, the market's functional levels and its geographic scope: see Re Tooth at 18,197 and Regents at 41,171.

The parties in the present matter were in dispute over the scope of the relevant market. Ultimately, the market contended for by Auto Fashions was the wholesale market for street directories for Melbourne and its metropolitan area. The markets contended for by Melway were a market for automotive accessories and parts (within which the market for street directories constituted no more than a sub-market) or a national market for street directories.

The evidence demonstrates that a street directory for a major capital city, including the metropolitan area surrounding it, is a unique product with a single function which is closely linked to the geographic area which the directory serves. The only product or service that is substitutable for, or competitive with, a directory is another directory which has the same or a similar function. As a consequence, demand for a Melbourne street directory is confined to Melbourne and its metropolitan area. Similarly, demand for a Sydney street directory is confined to Sydney and its metropolitan area. As one leaves the area serviced by a directory demand for it evaporates.

It seems fairly clear that there is little substitutability on the demand side for a city based directory. Street directories for one capital city are not substitutable for, or competitive with, street directories for any other capital city. In reality, if the price of a new edition of a directory rises to an unacceptable level, then buyers may buy a different directory for the relevant area or retain their previous directory rather than buy the new edition.

There is also no discernible substitutability on the supply side. The main companies that prepare, publish and supply directories, such as Universal Press and Melway, are specialists in that area. Their major products are directories which are time consuming and costly to prepare but, once prepared, can easily be printed by the publishers or third parties.

The major structural barrier to entry into the directory market is copyright, which prevents a directory from being copied by a competitor with the consequence that the drawing and preparation of the necessary materials for a directory is expensive, time consuming and labour intensive. The considerable cost and effort required in preparing a competing directory will be met with little prospect of reward as the market in the major capital cities is well catered for by directories, at least one of which, by brand name, will have a significant or entrenched brand loyalty and appeal. Thus, the real barrier to entry into the directory market in any of the major capital cities is that the difficulty for a new competitor in eroding the market share of the established directories is such that the time and expense involved in producing, publishing and marketing a competing directory will be commercially unattractive.

Universal Press and Melway compete in Melbourne and Sydney, but each has had great difficulty in making any inroad on the market share of the other in the other's traditional territory.

In my view, directories are not a part or an incident of the car or car accessory market. Neither at the demand or the supply level can it be realistically contended that a directory is substitutable for, or competitive with, automotive accessories or parts. It may be contended that the complementarity and interconnection between a street directory and cars and car accessories result in directories being an incident of the market for cars and car accessories: cf Regents at 41,182-41,184. However, the mere fact that a directory is usually or often used in a car does not make it dependent upon, interconnected with or part of the car or the car accessory market. As was pointed out by Professor Officer, an economist called on behalf of Auto Fashions, it does not follow that as tyres are used on cars they are part of the car market. Nor is it relevant that some Melway wholesalers also sell car accessories.

In my view, the relevant market in the present case is a market for street directories. The wholesale and retail activities in that market are closely linked; retail prices have tended to influence wholesale prices and whether publishers sell to wholesale distributors or directly to retailers is a matter of choice. Further, some wholesalers also sell directories by retail and the barriers between the wholesale and retail activities are minimal. In reality, there is no retail market for directories as such; they are sold in diverse retail segments as an integral part of a more general product range in each segment. In these circumstances, the relevant functional market for the purposes of s 46 is the wholesale and retail market for street directories.

There is greater difficulty in determining whether the geographic scope of the market is national or city based. The lack of substitutability or competition between directories for each city at the demand and supply levels and the barriers to entry in each city, suggest a city based market. Both Professor Officer and Professor Norman (the economist called by Melway) accepted that the difficulty for each competitor in entering the city market of the other suggested a city based rather than a national barrier to entry. Yet, the competition that has developed between the two major competitors in relation to the wholesaling and retailing of directories in Melbourne and Sydney tended to support a national market approach. The importance of the substitutability criterion (see s 4E) and the barriers to entry in the city based markets lead me to prefer the view that there is a separate directory market in each major city.

Does Melway have a substantial degree of power in the Melbourne directory market?

Melway accepted that if the relevant market is a market for Melbourne street directories then it has a substantial degree of power in that market. However, as the issues arising under s 46 in relation to the market, market power and taking advantage of market power are interrelated it is appropriate to briefly consider the nature and extent of Melway's power in the Melbourne directory market.

The factors to be taken into account in defining and identifying market power in a particular case were summarised in Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109 at 138 by Lockhart J and in Eastern Express v General Newspapers (1992) 35 FCR 43 at 62-63 by Lockhart and Gummow JJ. Their Honours observed that the fundamental point made in Queensland Wire Industries was that the primary consideration in determining market power was barriers to entry. As market power

"is concerned with power which enables a corporation to behave independently of competition and of the competitive forces in a relevant market" (Eastern Express at 62)

the barriers to entry will be critical in determining the extent to which those with market power are subject to "competitive forces". Thus, an important question is to what extent it is "rational or possible for new entrants to enter the market...?": (Eastern Express at 62).

As has been pointed out above, the barriers to entry into the Melbourne directory market are substantial. Absent some form of new technology, it is neither rational or likely that a new entrant would enter that market. Melway's market share (in excess of 80%-90%), whilst not determinative of its market power, is also of relevance in the present setting by reason of the entrenched customer loyalty that has enabled Melway to retain that market share.

In the present case the following factors are also indicia of Melway's market power in the Melbourne directory market.

1. The ability of Melway to set and maintain its wholesale prices in a manner which is not based on supply or cost efficiencies and which is not constrained by the conduct of actual or potential competitors: see s 46(3)(a).

2. The ability of Melway to establish and maintain a distributorship system under which it is able to require commitment and loyalty from wholesalers, whilst retaining unto itself contractual freedom to terminate the appointment of a wholesaler at will, fix and alter wholesale prices as it deems fit and allocate and re-allocate the retail segments within which wholesalers are free to sell. Further, retailers have had little influence upon Melway's ability to fix its wholesale prices or to segment the wholesale market. Thus, Melway is not significantly constrained by the conduct of those to whom its product is supplied: see s 46(3)(b).

"Substantial" in the context of s 46 has been regarded as meaning "a considerable or large" degree of such power: see Dowling at 139 per Lockhart J and Eastern Express at 63 per Lockhart and Gummow JJ. Wilcox J has said that for the purposes of s 46 the power is substantial when it is "real or of substance" and "more than trivial or minimal": see Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd (1987) 75 ALR 581 at 591-592 and Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385 at 412.

In my view, on the basis of either definition, Melway clearly has a substantial degree of power in the Melbourne directory market.

I would add that I would come to the same conclusion concerning the market power of Melway, even if the appropriate market was the national, rather than a city, directory market. Whilst it is correct to say that Melway's market power is confined to the Melbourne directory market, the nature and extent of its power in that market and that market's significance (ie at least 50% of the national market) would lead me to conclude that Melway's market power in the national market was also substantial.

Has Melway, in refusing to supply, taken advantage of its market power?

Queensland Wire Industries established that taking advantage of market power meant "using" market power and did not require that the use involve predatory, unfair or any other kind of morally or socially undesirable conduct: see Mason CJ and Wilson J at 190-191, Deane J at 194-195, Dawson J at 202 and Toohey J at 213-214. Since Queensland Wire Industries the words "take advantage of" have been accepted as being "morally indifferent": see Chan Cuong Su v Direct Flights International Pty Ltd and Ors (Federal Court of Australia, Lehane J, 14 October 1998) at 13. In Queensland Wire Industries BHP's ultimate objective of preserving its sales and business did not immunise it from liability for anti-competitive conduct under s 46(1) when it refused supply. In that context, all members of the High Court in Queensland Wire Industries concluded that a refusal to supply can be a taking advantage of market power. Accordingly, if the refusal of supply by Melway is for a commercial reason (eg to preserve its distributorship system and the sales it derives from that system) that will be to no avail to Melway if the refusal constitutes a taking advantage of market power for a proscribed purpose.

The theme running through the judgments in Queensland Wire Industries is that taking advantage of market power involves a corporation using power in a manner made possible by the absence of competitive conditions: see Mason CJ and Wilson J at 192, Deane J at 198, Dawson J at 202-203 and Toohey J at 216.

In Queensland Wire Industries the respondent, BHP, the sole Australian producer of Y-bar, only sold the Y-bar to its subsidiary Australian Wire Industries Pty Ltd ("AWI"). Y-bar was used to produce star picket fencing posts which were the most popular fencing posts used for rural fencing. Imports of Y-bar existed but were insignificant. Queensland Wire Industries ("QWI") produced and sold fencing wire in competition with AWI. QWI sought supply of Y-bar from BHP as it wished to make and sell its own star picket fence in competition with BHP. BHP's policy was to refuse supply of Y-bar or to offer supply at an excessively high price, because it wished to preserve the business of manufacturing and wholesaling star picket fences to itself. Although QWI had some 27% of the Queensland and Northern New South Wales rural fencing market, its main ability to compete lay in its ability to sell wire in competition with BHP or its subsidiaries. QWI's failure to obtain the Y-bar from BHP hindered its ability to compete with BHP in the market for star picket fence posts and also in the rural fencing market. As Toohey J said (at 204) QWI by being required to buy star picket fence posts from its competitor, BHP, could not resell those posts competitively.

QWI successfully argued in the High Court that BHP had misused its market power in refusing supply of the Y-bar to it. All members of the court concluded that in refusing supply BHP had taken advantage of its market power for the purpose of preventing QWI from engaging in competitive conduct with it or its subsidiaries.

Mason CJ and Wilson J (at 192), in discussing BHP's taking advantage of its market power, said:

"In effectively refusing to supply Y-bar to the appellant, B.H.P. is taking advantage of its substantial market power. It is only by virtue of its control of the market and the absence of other suppliers that B.H.P. can afford, in a commercial sense, to withhold Y-bar from the appellant. If B.H.P. lacked that market power - in other words, if it were operating in a competitive market - it is highly unlikely that it would stand by, without any effort to compete, and allow the appellant to secure its supply of Y-bar from a competitor."

A similar analysis can be applied in the present case. It is only by virtue of its dominant position in the Melbourne directory market and the absence of a competitive market that Melway can afford, in a commercial sense, to withhold from supplying 30,000-50,000 directories at its usual wholesale price and terms to Auto Fashions. If Melway lacked substantial market power - in other words, if it were operating in a competitive market - it is highly unlikely that it would stand by, without any effort to compete, and allow Auto Fashions to secure its significant supply of directories from a competitor. Put another way, one would not expect to observe a refusal to supply 30,000-50,000 directories in a competitive market. Accordingly, in refusing supply Melway has taken advantage of its market power.

Is the refusal to supply for a proscribed purpose?

The concept of purpose in s 46 has been considered in several cases. In Queensland Wire Industries Toohey J at 214 said:

"The reference to `for the purpose of' carries with it the notion of an intent to achieve the result spoken of in each of the paragraphs in s 46(1)."

In Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 at 66 Lockhart and Gummow JJ, observed that the purpose of a corporation is to be ascertained by reference to the intent of the corporation engaging in the relevant conduct. Their Honours said (at 66):

"`Purpose' in s 46 is not concerned directly with the effect of conduct, but with "purpose" in the sense of motivation and reason..."

Further, in General Newspapers Pty Ltd v Telstra Corporation [1993] FCA 473; (1993) 45 FCR 164, Davies and Einfeld JJ at 187 regarded "purpose" in s 46 as relating to the effect which is sought to be achieved, the end in view or the result aimed at.

Section 4F(1) provides:

For the purposes of this Act -

(a) ...

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

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

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

Evidence of the purpose actuating particular conduct may be given directly by those responsible for the conduct said to constitute a breach of s 46 or it may be inferred: see s 46(7).

At the outset it is appropriate to consider the relevant context in which the refusal to supply has occurred. That context is Melway's taking advantage of market power in maintaining and, where necessary, enforcing its distribution system. Two prior instances of a use of market power by Melway are relevant in that regard. The first relates to Repco which was a significant wholesaler of car accessories. Paul and David Auto and Repco competed in wholesaling products to the service station segment. Yet, under Melway's distribution system Repco was required to purchase Melway directories for resale from its competitor, Paul and David Auto. Repco negotiated and obtained more competitive wholesale supply prices for Melway directories from Auto Fashions. After Paul and David Auto ascertained that Auto Fashions was wholesaling directories to a wholesaler for resale into the service station segment Melway was called in to resolve the matter, which it did. Notwithstanding that Repco had become a substantial customer of Auto Fashions during 1992-1993 Auto Fashions was required by Melway to relinquish that account after Melway's intervention.

The second example related to a tender sought from Waymore Distributors, On-Tel Australia and Burson Automotive by Target and K-Mart (which were both subsidiaries of Coles Myer Limited) for the supply of 70,000 Melway street directories over twelve months. Neither Target or K-Mart was in Burson's allocated segment. Target was in Waymore Distributors' allocated segment and K-Mart was in On-Tel Australia's allocated segment. Accordingly, the proposed tender required the three distributors to supply outside of their allocated retail segments. At a meeting with Target and K-Mart representatives, who claimed they were not obtaining wholesale prices consistent with the quantities ordered, Melway agreed to the tender. However, after agreeing to the tender Melway wrote to each of the distributors in an endeavour to persuade them not to tender on the basis that the tender was inconsistent with the established distribution system. Melway reminded the distributors that their appointments were terminable at will and that wholesale pricing could be changed at will by Melway. The letter did not deter Waymore Distributors and On-Tel from proceeding with the tender, however, it did deter Burson Automotive, which feared that if it proceeded with the tender it may have lost its distributorship.

Both instances are examples of Melway using its market power in order to prevent competitive conduct between its wholesalers in order to maintain its distribution system.

I now turn to consider the purpose of Melway's refusal to supply directories to Auto Fashions. Melway contended that the reason for the refusal to supply was that Beyond Auto had replaced Auto Fashions as the distributor of Melway street directories for the automotive parts segment. However, as was appreciated by Godfrey and Lane, the request for supply by Auto Fashions and the subsequent refusal to supply were not made on the basis that Auto Fashions was proposing to confine its wholesaling of Melway directories to retailers in the automotive parts segment. In Industrial Equity Ltd v The Deputy Commissioner of Taxation [1990] HCA 46; (1990) 170 CLR 649 at 661, a distinction was drawn between the reason for performing an act and the purpose sought to be achieved by the doing of the act. In the present case, it could be contended that the reason for the refusal of supply was that Melway, after appointing Beyond Auto, was satisfied with its existing distributorship network. However it does not follow that the purpose, in the sense of the end sought to be achieved, was not to protect the existing distributors from competition.

In my view, whether expressed in terms of Melway's motivation for the refusal or the end sought to be achieved by the refusal, the purpose of Melway in refusing to supply was to prevent Auto Fashions from engaging in competitive conduct in respect of Melway directories with existing Melway distributors. Of particular significance in that regard is the evidence given by Godfrey, the Melway director responsible for the decision to refuse to supply, that there were no reasons in his mind for refusing supply other than that he did not want competition with customers of existing distributors (T 400-401). Although Lane was not prepared to make that concession, I am satisfied that the same consideration motivated him in his agreement with the decision of Godfrey to refuse supply to Auto Fashions.

My conclusion is reinforced by the evidence relating to Melway's use of its market power to maintain and enforce its exclusive distributorship system. The Repco incident and the Target/K-Mart tender are both examples of Melway's use of market power for the purpose of preventing or deterring competitive conduct between existing distributors in respect of Melway directories. I am satisfied that the refusal to supply Auto Fashions was similarly motivated except that its purpose was to prevent competitive conduct by a new distributor with existing distributors.

It could be accepted that the objective to be achieved was also the maintenance of the existing distribution system and to that extent that end was also a purpose. In my view that purpose is indistinguishable from the purpose of preventing competition by a new distributor with existing wholesalers. Put colloquially, it is the reverse side of the same coin. However, if and to the extent that it is a different purpose to the anti-competitive purpose, that does not result in the anti-competitive purpose falling outside s 46(1)(c) as I am satisfied that:

* the two purposes are closely related;

* the refusal to supply was the means by which both purposes were to be achieved simultaneously;

* the anti-competitive purpose was a substantial purpose within the meaning of s 4F(1).

It follows from the foregoing that Auto Fashions has established that the purpose of the refusal to supply by Melway was to prevent Auto Fashions from engaging in competitive conduct in the market for Melbourne directories.

Counsel for Melway contended that Auto Fashions' reliance upon Queensland Wire Industries in the present case is misplaced as that case concerned quite different facts to those arising in the present case. However, the principles that led the High Court to conclude that BHP's refusal to supply constituted a taking advantage of market power and that its purpose in doing so was to prevent a competitor from engaging in competitive conduct, are applicable to the present case. In my view, it is of no significance for the purposes of a claim under s 46(1)(c) that BHP's purpose was to prevent competitive conduct against it rather than, as in the present case, with distributors. Section 46(1)(c) is concerned with preventing competitive conduct in a market which can include, but is not confined to, competitive conduct with a respondent which is a participant in the market. Nor is it significant that, as with QWI, Auto Fashions was nevertheless able to wholesale a less competitive product. As has been pointed out, it is the purpose rather than the effect of the conduct that is ultimately determinative in respect of liability under s 46(1): see Eastern Express at 66. It is also to be noted that BHP's commercial objective to preserve or maximise its sales of fence posts, was to no avail as s 46(1)(c) does not permit that objective to be achieved by taking advantage of market power for a proscribed purpose.

Accordingly, I do not accept Melway's contention that the factual distinctions suggested by its counsel, between Queensland Wire Industries and the present case, have the consequence that a different result is to be arrived at.

It was also strongly submitted by counsel for Melway that "it simply cannot be correct" that s 46 of the TPA operates to:

* prevent a corporation from appointing its own exclusive distributors and establishing its own distributorship system to the exclusion of others;

* require a supplier to sell to all who can buy its products.

Section 46 does not operate to produce either of the two consequences suggested by Melway's counsel. The section's operation is only attracted in relation to a corporation which has a substantial degree of power in a market. The section does not impede or limit distributorship systems established by suppliers of goods or services which do not have a substantial degree of power in a relevant market. In such circumstances the provisions of s 46 simply have no role.

However, under s 46, where a corporation does have a substantial degree of power in a market a different situation applies if it takes advantage of its power for a proscribed purpose. The required link between the power, its use and the proscribed purpose achieves the sections object of promoting a competitive environment and competitive conduct. As pointed out above, taking advantage of a power involves use of the power in a manner made possible only by the absence of competitive conditions or a competitive market: see Queensland Wire Industries at 202 per Dawson J. Thus, if a distributorship system is maintained by a corporation by conduct which satisfies the requisite elements of s 46, the prohibition of such conduct is consistent with and gives effect to the objects sought to be achieved by s 46.

A taking advantage of power for a proscribed purpose links two aspects which are of particular significance in achieving the objectives of s 46. As was pointed out in the discussion of refusal to supply in the CCH Trade Practices Reporter at para 5-510, not every supplier with substantial market power is required by s 46 to supply all persons who seek supply if it is not to the commercial advantage of the supplier to do so. Thus, a corporation may specify certain criteria to be met by distributors which are based on particular characteristics of the products being distributed (eg the technically sophisticated nature of the products may require special skills or facilities relating to their sales or servicing) or other matters, that might result in the need for sales to occur under special conditions. Where distributorship systems are based on such requirements, the maintenance of that system will not result in a breach of s 46 as the purpose of a refusal to supply will not be for a proscribed anti-competitive purpose; rather it will be for an unrelated purpose. Similarly, a restrictive distribution policy based on criteria established in order to achieve particular cost or distribution efficiencies may likewise justify a refusal to supply by a corporation with substantial market power if the refusal is established to be for that, and not an anti-competitive purpose. Each case will have to be considered by reference to its own special facts for the purpose of determining whether the criteria set out in s 46 have been satisfied: see for example Australian Performing Right Association Ltd v Ceridale Pty Ltd (1990) ATPR 41-042. Section 46 does not require that a supplier of goods or services supply to all who wish to acquire the goods or services; rather the section prohibits a refusal of supply which constitutes a use of market power for a proscribed purpose by a corporation with substantial power in a market.

Relief

For the reasons set out above I have concluded that Auto Fashions has established each of the elements required under s 46. Consequently, Melway's refusal to supply, which has continued since 7 April 1995, has constituted a contravention of s 46(1)(c) of the TPA. In the circumstances Auto Fashions is entitled to orders enabling it to recover to any loss and damage suffered by reason of the contravention pursuant to s 82 of the TPA and to appropriate injunctive relief under s 80(1) of the TPA.

The issue of injunctive relief raises a difficult question. The form of order where a breach of s 46 has been established was considered by Brennan J in Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd [1978] FCA 27; (1978) 33 FLR 294 at 315-316:

"It was submitted that, as s 46 prohibited conduct only if it be engaged in for one of the specified purposes, the injunction should not forbid absolutely the conduct mentioned in the injunction, but forbid it only if it be engaged in for a specified purpose. It is, of course, something of a novelty to determine the character of conduct by reference to the purpose held by the person who engages in the conduct, and the enforcement of an injunction against conduct of the proscribed kind is inevitably attended with difficulty if a change of purpose is asserted. The moulding of an injunction in such a case may conceivably be in one of three forms: an absolute prohibition against engaging in the conduct, a prohibition qualified so as to apply only if the proscribed purposes is held by the party enjoined, or a prohibition qualified so as to apply unless the party enjoined proves a change of purpose to one that is innocent."

See also Eastern Express (at 72) where Lockhart and Gummow JJ observed that the Court should be vigilant to ensure that its orders do not interfere with normal and legitimate competitive activities. Beaumont J (at 73) also cautioned against orders that involve the Court's supervision of business activities on an ongoing basis.

In a case such as the present where the contravening conduct is a refusal to supply it is appropriate that the injunction granted under s 80(1) of the TPA apply only to restrain conduct engaged in for the proscribed purpose. Auto Fashions does not seek, and is not entitled to, an order for supply, as such. Rather, it seeks an order prohibiting Melway from refusing supply where the purpose, or the substantial purpose, of the refusal is to prevent Auto Fashions from engaging in competitive conduct with distributors of Melway directories in the wholesaling of such directories to retailers. Whilst an injunction in such terms may give rise to difficulties of proof if the refusal to supply is continued, it seems to me that is an inevitable consequence of the application of s 46 to the facts of the present case. I am satisfied that an injunction, broadly in the terms sought by Auto Fashions has the nexus required by s 80(1) between the contravening conduct and the terms of the injunction (see ACCC v Z-Tek (1997) 78 FCR 197 at 202) and is appropriate in all the circumstances.

The expert evidence

In the present case two eminent economists were called by the parties. Professor Officer was called to give evidence on behalf of Auto Fashions and Professor Norman was called to give evidence on behalf of Melway. I directed that the evidence given by the two experts be given in the manner which has now become common practice in the Australian Competition Tribunal: see for example Re Queensland Independent Wholesalers Ltd (1995) ATPR 41-438 at 40,925. In essence, that practice involved the economists submitting their written statements prior to the proceeding but not giving their evidence until the conclusion of the evidence adduced on behalf of both parties. Accordingly, each party was required to close its case subject to the calling of the evidence of its expert witness.

At the conclusion of the hearing, after the experts had an opportunity to be informed of the evidence given, they were then both called to give evidence and sworn in, one after the other, at each end of the bar table. The experts were then given the opportunity to modify the views expressed by them in light of the evidence that had been adduced. Each expert expressed his opinion on the economic issues arising in relation to s 46 in the present case. The experts were then examined and cross-examined by counsel. The expert evidence, which was fairly extensive, was able to be completed by the procedure set out above in the course of one afternoons hearing.

I have not found it necessary to set out the views of the expert witnesses in any detail, although I did find those views to be most helpful in arriving at the conclusions set out in these reasons for judgment. In giving their evidence the differences that previously existed between the experts became fewer and those that remained were able to be explained and, to a large extent, reconciled. Thus, I found that the conclusions at which I have arrived in relation to the significant economic issues in the present case concerning the market, market power and the taking advantage of market power, in substance, were supported by the views expressed by each of the experts. In so far as differences between them remained, I did not find that those differences affected the conclusions at which I arrived.

I am of the view that the procedure adopted as outlined above has significant advantages for the efficient disposition of litigation involving expert evidence and, accordingly, in the administration of justice in such cases. The procedure also overcomes the great disadvantage that is often experienced in cases where expert evidence is given at a time when the issues and the evidence that ultimately are required to be addressed are not fully appreciated by the parties. The procedure obviates that difficulty by ensuring that the experts called have an opportunity to deal with the case on the basis of the evidence adduced and the issues raised by both parties.

I would add that the procedure adopted is also consistent with the endeavour to make issues relating to expert evidence less adversarial in the manner set out in the recent Joint Practice Direction of the Federal Court of Australia and the Law Council of Australia dated 15 September 1998.

I certify that this and the preceding twenty-seven (27) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:

Counsel for the Applicant:	Mr R Garratt QC with Ms S Hinchey
Solicitor for the Applicant:	Freehill Hollingdale & Page
Counsel for the Respondent:	Mr C Golvan
Solicitor for the Respondent:	Marshalls & Dent
Date of Hearing:	28 and 29 September and 1, 2, 5, 6, 12, and 14 October 1998
Date of Judgment:	30 October 1998