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Federal Court of Australia - Full Court Decisions |
Last Updated: 17 July 2002
Rural Press Ltd v Australian Competition & Consumer Commission
TRADE PRACTICES - exclusionary provision - ss 45(2) and 4D of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") - alleged arrangement between regional newspaper publishers for one to withdraw its newspaper from the area of the other in return for the other not competing elsewhere - whether evidence sufficient to support a finding that the parties had made or given effect to an "arrangement" - whether the arrangement had the purpose of preventing or limiting the supply of services to "particular ... classes of persons" within the meaning of s 4D(1)(b)(i) of the Trade Practices Act.
TRADE PRACTICES - whether a party to an arrangement had taken advantage of a substantial degree of power in a market for a purpose proscribed by s 46(1) of the Trade Practices Act - whether a party takes advantage of a substantial degree of power in market A by threatening to compete in market B where it has no power - whether the party making the threat would have been able to act in the same way if it had not had a substantial degree of power in market A.
TRADE PRACTICES - whether arrangement between newspaper publishers for one to withdraw from the territory of the other contains a provision which has the purpose or effect of substantially lessening competition - whether degree of competition in the relevant market was too slight to justify conclusion that competition had been substantially lessened.
TRADE PRACTICES - definition of market - whether the relevant market had been correctly identified as the Murray Bridge newspaper market - whether market should have been defined to include regional commercial radio stations as well as the regional newspaper.
TRADE PRACTICES - accessory liability - whether alleged accessories must know that actions constitute a breach of the Trade Practices Act - whether finding that individuals had been knowingly concerned in or party to contraventions of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Trade Practices Act was supported by the evidence.
TRADE PRACTICES - penalties - whether primary Judge correct to take into account the manner in which the litigation was conducted - appropriate penalties for less serious breach of s 45(2) of the Trade Practices Act - whether primary Judge should have required contraveners to enter a trade practices compliance program.
Trade Practices Act 1974 (Cth), ss 4A(5), 4D, 4E, 4G, 45, 46(1), 75B, 76, 155
A New Tax System (Trade Practices Amendment) Act 1999 (Cth)
Trade Practices Revision Act 1986 (Cth)
Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661, applied.
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954; (1999) 92 FCR 375, cited.
Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344, cited.
Morphett Arms Hotel Pty Ltd v Trade Practices Commission [1980] FCA 46; (1980) 30 ALR 88, cited.
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460, distinguished.
South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456, applied.
News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 577, cited.
South Sydney District Rugby League Football Club v News Ltd [2000] FCA 1541; (2000) 177 ALR 611, applied.
Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169, applied.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1989] HCA 6; (1989) 167 CLR 177, applied.
Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1991] FCA 621; (1991) 33 FCR 158, applied.
Davids Holdings Pty Ltd v Attorney-General (Cth) (1994) 49 FCR 211, cited.
Australian Competition and Consumer Commission v Boral Ltd [2001] FCA 30; (2001) 106 FCR 328, cited.
Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313, applied.
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833, cited.
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1982] FCA 206; (1982) 62 FLR 437, applied.
Tillmans Butcheries Pty Ltd v Australasian Meat Industry Employees' Union [1979] FCA 84; (1979) 42 FLR 331, cited.
Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd [1982] FCA 178; (1982) 64 FLR 238, cited.
Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) 13 ATPR ¶41-076, cited.
Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1, applied.
Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978) 33 FLR 294, cited.
Crocodile Marketing Ltd v Griffith Vinters Pty Ltd (1989) 28 NSWLR 539, cited.
Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121, cited.
Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd [1999] FCA 1161; (1999) 95 FCR 302, applied.
Johnson v Youden [1950] 1 KB 544, cited.
Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222; (1994) 123 ALR 681, cited.
Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 630, cited.
Pereira v Director of Public Prosecution [1988] HCA 57; (1989) 82 ALR 217, cited.
Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1, cited.
Trade Practices Review Committee Report (1976)
Clarke & Corones, Competition Law and Policy (1999)
Explanatory Memorandum to the Trade Practices Revision Act 1986 (Cth)
Robertson, "The Primacy of Purpose in Competition Law - Part 1" (2001) 9 Competition & Consumer Law Journal 101
McMahon, "Church Hospital Board or Board Room?" (1997) 5 Competition & Consumer Law Journal 129
Areeda & Kaplow, Antitrust Analysis (1988)
Brunt "Market Definition Issues in Australian and New Zealand Trade Practices Litigation" (1990) 18 Aust Bus LR 86
Kaysen and Turner, Antitrust Policy: An Economic and Legal Analysis (1959)
RURAL PRESS LTD & ORS v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION & ORS
S 141 of 2002
WHITLAM, SACKVILLE & GYLES JJ
16 JULY 2002
SYDNEY (HEARD AT ADELAIDE)
IN THE FEDERAL COURT OF AUSTRALIA |
|
SOUTH AUSTRALIA DISTRICT REGISTRY |
|
JUDGES: |
WHITLAM, SACKVILLE & GYLES JJ |
DATE OF ORDER: |
16 JULY 2002 |
WHERE MADE: |
SYDNEY (HEARD AT ADELAIDE) |
1. The appeal of the first, second, third and fourth appellants be allowed in part.
2. The appeal and cross-appeal of the Australian Competition and Consumer Commission be dismissed.
3. The following orders and declarations of the primary Judge made on 23 March 2001 ("the Orders") be set aside:
(a) the declarations made in pars 1 and 2 of the Orders;
(b) the order made in par 3 of the Orders;
(c) the declaration made in par 4 of the Orders, insofar as it affects the first and second appellants;
(d) subpar (i) of the order made in par 6 of the Orders, insofar as subpar (i) affects the first and second appellants;
(e) the declaration made in par 7 of the Orders, insofar as it refers to ss 46(1)(a), 46(1)(c), 45(2)(a)(i) and 45(2)(b)(i) of the Trade Practices Act 1974 (Cth) and pars 1, 2 and 4 of the Orders;
(f) the order made in par 8 of the Orders;
4. The appellants file and serve written submissions on the costs of the appeals and cross-appeal within fourteen days.
5. The respondents file and serve written submissions on the costs of the appeals and cross-appeal within seven days from the filing of the appellants' submissions.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
SOUTH AUSTRALIA DISTRICT REGISTRY |
S 141 of 2002 |
BETWEEN: |
RURAL PRESS LIMITED FIRST APPELLANT BRIDGE PRINTING OFFICE PTY LIMITED SECOND APPELLANT IAN LAW THIRD APPELLANT TREVOR McAULIFFE FOURTH APPELLANT |
AND: BETWEEN: AND: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION FIRST RESPONDENT WAIKERIE PRINTING HOUSE PTY LIMITED SECOND RESPONDENT PAUL TAYLOR THIRD RESPONDENT AUSTRALIAN COMPETITION AND CONSUMER COMMISSION CROSS APPELLANT RURAL PRESS LIMITED FIRST CROSS RESPONDENT BRIDGE PRINTING OFFICE PTY LIMITED SECOND CROSS RESPONDENT IAN LAW THIRD CROSS RESPONDENT TREVOR McAULIFFE FOURTH CROSS RESPONDENT |
JUDGES: DATE: PLACE: |
WHITLAM, SACKVILLE & GYLES JJ 16 JULY 2002 SYDNEY (HEARD AT ADELAIDE) |
THE COURT:
THE PROCEEDINGS
1 This is an appeal from a judgment given by a Judge of this Court on 1 March 2001 and a cross-appeal from a judgment given in the same proceedings on 7 August 2001 and orders and declarations made on 23 March 2001.
2 The proceedings were instituted in this Court by the Australian Competition and Consumer Commission ("ACCC") as applicant. The proceedings arose out of events occurring during the latter part of 1997 and the first half of 1998. The ACCC sought declarations, injunctions, pecuniary penalties and other relief against seven respondents, namely Rural Press Ltd ("Rural Press"), Bridge Printing Office Pty Ltd ("Bridge Printing"), Ian Law, Trevor McAuliffe, Waikerie Printing House Pty Ltd ("Waikerie Printing"), Paul Taylor and Darnley Taylor. (We refer to Paul Taylor and Darnley Taylor by their full names in order to distinguish between them.)
3 Bridge Printing, a wholly owned subsidiary of Rural Press, published in Murray Bridge, South Australia, a regional newspaper known as the Murray Valley Standard ("the Standard"). Waikerie Printing published a regional newspaper called the River News, which was distributed mostly in the area around the township of Waikerie in the Riverland area of South Australia. Mr Law was the General Manager of Rural Press, while Mr McAuliffe was Rural Press's Regional Manager for South Australia. Darnley Taylor and Paul Taylor were directors of Waikerie Printing.
4 The ACCC alleged that during the period between July 1997 and May 1998:
(a) Rural Press and Bridge Printing contravened s 46(1)(a) and s 46(1)(c) of the Trade Practices Act 1974 (Cth) ("TP Act"), by taking advantage of the substantial degree of power which they enjoyed in the market for the supply of regional newspapers in the Murray Bridge market, either for the purpose of eliminating Waikerie Printing as a competitor in that market or for the purpose of deterring Waikerie Printing from engaging in competitive conduct in that market.
(b) Mr Law and Mr McAuliffe was each a person who was knowingly concerned in the contraventions referred to in (a).
(c) Rural Press, Bridge Printing and Waikerie Printing each contravened
(i) s 45(2)(a)(i) of the TP Act, by making an arrangement or arriving at an understanding containing one or more "exclusionary provisions" within the meaning of s 4D of the TP Act;
(ii) s 45(2)(b)(i) of the TP Act, by giving effect to the arrangement or understanding referred to in (i);
(iii) s 45(2)(a)(ii) of the TP Act, by making an arrangement or arriving at an understanding having the purpose and/or likely effect of substantially lessening competition in the market for the supply of regional newspapers in the Murray Bridge market; and
(iv) s 45(2)(b)(ii) of the TP Act, by giving effect to the arrangement or understanding referred to in (iii).
(d) Mr Law, Mr McAuliffe, Darnley Taylor and Paul Taylor was each a person who was knowingly concerned in the contraventions referred to in (c).
5 In a judgment delivered on 1 March 2001, the primary Judge held that the ACCC had established the contraventions of the TP Act alleged by the ACCC: Australian Competition and Consumer Commission v Rural Press Ltd (2001) 23 ATPR ¶41-804 ("ACCC v Rural Press (No 1)").
6 On 23 March 2001, his Honour made declarations against all respondents other than Darnley Taylor, who had apparently died after the hearing. His Honour made orders restraining each of the six remaining respondents, for a period of three years, from engaging in similar conduct in breach of the TP Act. In addition, his Honour made a direction, pursuant to Federal Court Rules ("FCR") O 52 r 15(1)(a)(iii), that any notice of appeal from the orders already pronounced should be filed within twenty-one days from the Court making orders in relation to penalty and costs. His Honour also made directions for a hearing on penalty and on the ACCC's application for mandatory injunctions relating to the implementation of compliance programs and costs.
7 In a separate judgment delivered on 7 August 2001, the primary Judge imposed pecuniary penalties pursuant to s 76 of the TP Act upon the respondents other than Darnley Taylor: Australian Competition and Consumer Commission v Rural Press Ltd (2001) 23 ATPR ¶41-833 ("ACCC v Rural Press (No 2)"). Rural Press was ordered to pay a penalty of $400,000, while Bridge Printing and Waikerie Printing were ordered to pay $200,000 and $60,000 respectively. The individual respondents, Mr Law and Mr McAuliffe and Paul Taylor, were ordered to pay $40,000, $30,000 and $15,000 respectively. The primary Judge rejected the ACCC's submission that orders should be made under s 80 of the TP Act requiring each of Rural Press, Bridge Printing and Waikerie Printing to implement a trade compliance program.
8 On 27 August 2001, Rural Press, Bridge Printing, Mr Law and Mr McAuliffe ("the appellants") filed a notice of appeal expressed to be an "appeal from the whole of the Judgment of ... Justice Mansfield given on 1 March 2001". The notice of appeal named the ACCC, Waikerie Printing and Paul Taylor as respondents. It sought orders setting aside the declarations and orders made by the primary Judge on 23 March 2001 and, in lieu thereof, an order that the ACCC's application be dismissed with costs.
9 On 14 September 2001, the ACCC filed a notice of cross-appeal expressed to be an appeal "from the orders of ... Justice Mansfield made against the Cross Respondents on 7 August 2001". The notice of cross-appeal named the appellants as cross-respondents. It sought orders setting aside the penalties imposed on the appellants and substituting more substantial penalties, as well as orders that Rural Press and Bridge Printing each undertake a trade practices compliance program.
10 The appellants submitted that the cross-appeal was incompetent because it did not constitute an appeal from "a part of a judgment" within the meaning of FCR O 52 r 22(1) (which provides that a respondent who desires to appeal from a part of a judgment need not institute a substantive appeal, but may file a notice of cross-appeal). They contended that the purported "cross appeal", in substance, was an appeal against the whole of the judgment on penalty delivered on 7 August 2001 and was therefore out of time (see FCR O 52 r 15(1)(a)).
11 To guard against the possibility that the appellants' argument was correct, the ACCC filed, pursuant to FCR O 52 r 15(2), an application for an extension of time in which to file and serve a notice of appeal from the judgment on penalty (including the primary Judge's refusal to order the implementation of compliance programs). After hearing argument, the Court made an order granting the ACCC, to the extent necessary, an extension of time in which to file the notice of appeal from the judgment on penalty. For convenience and without resolving the question of construction to which the appellants' submissions gave rise, we shall refer to the ACCC's appeal on the question of penalty as "the cross-appeal". The ACCC was given leave at the hearing to amend the notice of cross-appeal and it is that document which sets out the grounds of challenge to the primary Judge's decision on penalty.
12 Waikerie Printing and Paul Taylor submitted to any order of the Court on the appeal save as to costs. In substance, therefore, the appeal and cross-appeal involves the ACCC, on the one hand, and the appellants, on the other.
THE LEGISLATION
13 Section 45 is in Pt IV of the TP Act. Section 45, in so far as relevant, provides as follows:
"(2) A corporation shall not:(a) make a contract or arrangement, or arrive at an understanding, if:
(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:
(i) is an exclusionary provision; or
(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition.
(3) For the purposes of this section and section 45A, competition, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services."
14 The expression "exclusionary provision" is defined in s 4D(1) of the TP Act as follows:
"(1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if:(a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and
(b) the provision has the purpose of preventing, restricting or limiting -
(i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or
(ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions;
by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate."
15 The TP Act also defines "market". Section 4E provides 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."
16 Section 4G provides that, for the purposes of the TP Act, references to the lessening of competition are to be read as including references to preventing or hindering competition.
17 Section 46 is also in Pt IV of the TP Act. It provides as follows:
"(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of:(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;
(b) preventing the entry of a person into that or any other market; or
(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.
...
(3) In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the Court shall have regard to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of:
(a) competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or
(b) persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market.
(4) In this section:
(a) a reference to power is a reference to market power;
(b) a reference to a market is a reference to a market for goods or services; and
(c) a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market."
18 Section 76 of the TP Act provides for pecuniary penalties. Section 76(1), prior to its amendment by the A New Tax System (Trade Practices Amendment) Act 1999 (Cth), Sch 1 [7], provided as follows:
"(1) If the Court is satisfied that a person:(a) has contravened a provision of Part IV;
...
(e) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision;
...
the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters...".
The maximum pecuniary penalty that could be imposed on a body corporate by reason of s 76(1) for the alleged contraventions was $10,000,000, while the maximum penalty that could be imposed on an individual was $500,000: s 76(1A)(b), (1B).
19 Section 76(3) of the TP Act provides as follows:
"If conduct constitutes a contravention of two or more provisions of Part IV, a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct."
20 Section 80(1) of the TP Act empowers the Court, if satisfied that a person has engaged in conduct that constitutes a contravention of Pt IV of the TP Act (s 80(1)(a)), or has been knowingly concerned in, or party to the contravention (s 80(1)(e)), to grant an injunction in such terms as it thinks appropriate.
THE FACTS
21 The proceedings brought by the ACCC arose out of a decision in April 1998 by Waikerie Printing, the publisher of the River News, to "withdraw" (to use the primary Judge's word) from actively promoting circulation of the newspaper in the Mannum area of South Australia and to revert to its previous "prime circulation area", stopping at a line some forty kilometres north of Mannum. The expression "prime circulation area" refers to an area served by a regional newspaper in which the vast majority of its newspapers are circulated and from which most of its advertising revenue is derived. The following account of the events leading up to and concerning the withdrawal is drawn largely from the primary Judge's reasons.
22 The ACCC alleged that Rural Press and Bridge Printing caused Waikerie Printing to withdraw from the Mannum area. Rural Press is, in the primary Judge's words, "a very large corporate entity". The primary Judge found, as appears from his reasons in ACCC v Rural Press (No 2), that it published 30 agricultural magazines and 147 regional newspapers throughout Australia. Through its subsidiaries, it published half the regional newspapers in South Australia. In the 1999-2000 financial year it had revenues of $438 million and its operating profit before tax was $99 million. It had net assets at 30 June 2000 of $410 million. Bridge Printing earned revenues of $8.6 million in the same financial year and had an operating profit before tax of $3 million. Its net assets at 30 June 2000 were $2.3 million.
23 It is convenient at the outset to identify the principal participants in the events leading up to the withdrawal of the River News from Mannum.
Company |
Position |
Rural Press Ian Law |
General Manager, Regional Publishing Division (from 1 Jan 1998) |
Trevor McAuliffe |
Regional Manager, South Australia. Reported to Mr Watson or (from 1 Jan 1998) to Mr Law. |
Brian McCarthy |
Managing Director |
Beryl Price |
General Manager, the Standard (since 1995); Regional Accountant for South Australia (since 1996). Reported to Mr McAuliffe. |
Gregory Watson |
General Manager, Special Projects (until 1 Dec 1997). Reported to Mr McCarthy. |
Waikerie Printing Duncan Emmins |
Engaged by Mr Pick as the River News' correspondent in Mannum. |
John Pick |
Managing Director; Editor of River News |
Darnley Taylor |
Chairman, Board of Directors |
Paul Taylor |
Director |
Leader Newspapers Pty Ltd Anthony Robinson |
Managing Director, Editor of the Leader; brother-in-law of Paul Taylor |
The primary Judge rejected important aspects of the evidence given by Mr Law, Paul Taylor and Darnley Taylor. Neither Mr McAuliffe nor Ms Price gave evidence at the trial, although transcripts of their examinations held pursuant to s 155(1)(c) of the TP Act were admitted into evidence. The primary Judge found that Mr Robinson and Mr Emmins were credible witnesses and accepted their evidence.
24 It was common ground at the trial that publishers of regional newspapers in South Australia for many years had circulated their respective newspapers within more or less well-defined geographic areas. The only exception to the rule that the circulation of each newspaper was so limited concerned newspapers published in the Barossa Valley.
25 At the relevant times, Bridge Printing published the Standard in Murray Bridge, a township east of Adelaide with a population of about 13,000. The Standard was published twice weekly, on Tuesdays and Thursdays, at a price of 90 cents. Its circulation was 4,000 to 4,500 on Tuesdays and about 4,500 on Thursdays. The Standard covered local news occurring in the Murray Bridge district and solicited advertising mainly from that district.
26 The prime circulation area for the Standard extended north upstream along the Murray River to include the township of Mannum (population about 2,000), thirty kilometres from Murray Bridge. That area included some smaller townships and rural settlements north of Murray Bridge and extended to areas around Murray Bridge in other directions. The primary Judge found that, although a few copies of other regional newspapers were sold in the Murray Bridge district, including Mannum, there was effectively no competition to the Standard in the Murray Bridge district before July 1997.
27 Waikerie (population about 1,800) is in the Riverland area of South Australia, upriver from Murray Bridge. The River News was published weekly by Waikerie Printing, at a price of 60 cents, and had a circulation of about 2,000 to 2,500. Prior to the relevant events the River News was circulated in the township of Waikerie and in areas west and south, to Nildottie and Swan Reach, about half-way between Murray Bridge and Waikerie. A few copies were sold in Mannum, a little south of Nildottie, but Mannum was not regarded as part of the prime circulation area of the River News. The River News was printed at Renmark, under an agreement with Murray Pioneer Ltd, a company (like Waikerie Printing) controlled by the Taylors which published the Murray Pioneer.
28 The precipitating event which altered the position we have described above was the establishment of the Mid-Murray Council on 1 July 1997 in consequence of changes in council boundaries brought about pursuant to the Local Government Act 1934 (SA). In effect, several district councils were amalgamated into one. One consequence was that the previous Mannum Council area, which was in the Standard's prime circulation area, became part of Mid-Murray Council.
29 In these circumstances, Mr Pick considered it would benefit the River News if it circulated through the whole of the Mid-Murray Council area. He put in place arrangements to procure newsworthy material and advertisements from Mannum and smaller townships that were within the Standard's prime circulation area. Mr Pick did this as part of a twelve-month trial to see how the extended circulation turned out. He did not consult the Taylors before implementing his plan.
30 In late June or early July 1997, Mr Pick arranged for two successive editions of the River News to be delivered to all householders in Mannum. From July 1997, the River News expanded by four pages, from twenty to twenty-four or twenty-four to twenty-eight pages, in order to carry material relating to the Mannum area. In September 1997, Mr Pick engaged Mr Emmins on a casual basis as a correspondent to procure news and advertising in Mannum, a position that became permanent part-time in January 1998. The primary Judge found that the extended circulation of the River News in the Mannum area increased its sales in the order of 100 to 180 copies per week.
31 Rural Press and Bridge Printing, through Mr McAuliffe and Ms Price, were unhappy with the move of the River News into Mannum. Both expressed their concerns to Mr Pick and the Taylors in a series of communications. According to the findings made by the primary Judge, they indicated that unless Waikerie Printing reconsidered its decision, Rural Press would have to respond commercially and that response might include publishing a newspaper in the Riverland area (that is, in an area including the prime circulation areas of the River News and the Murray Pioneer).
32 On 1 August 1997, Ms Price wrote to Mr McAuliffe as follows:
"During July John Pick of the River News (Waikerie) has made a concerted push to have the River News circulating in Mannum and the smaller marginal towns of Cambrai, Walker Flat, Nildottie, Bowhill and Swan Reach....
To combat the push into Mannum the editorial department at the Standard are focussing on Mannum making sure we give Mannum very good coverage.
...
The above action is really only protecting our circulation area. John Pick has broken longstanding, established circulation boundaries and I am concerned that we should not be seen to accept his intrusion without a whimper.
We should consider distributing the Murray Valley Standard in his area particularly Morgan and also consider the publication of a Murraylands Bulletin to be distributed free throughout Waikerie/the Riverland."
33 Despite the expressions of concern, Mr Pick continued to promote the River News in the Mannum area and, as already noted, appointed a local correspondent. On 21 November 1997, Ms Price sent a memorandum to Mr McAuliffe, proposing the publication of a Murraylands Bulletin in Waikerie and the surrounding towns in the lead-up to Christmas. The memorandum concluded with this observation:
"The profit is only minimal but it should show Pick and Darnley and Paul Taylor that we are serious and won't accept the River News' push into Mannum without some form of response."
No action was taken on this memorandum.
34 Ms Price again wrote to Mr McAuliffe on Christmas Eve, urging a move into the Waikerie market in the new year. She noted that Mr Pick was "certainly continuing to push into the Mannum area". Ms Price's monthly report dated 22 January 1998 noted that the River News was continuing to make "a very deliberate push into our traditional circulation area".
35 On 28 January 1998, Mr Law sent a note to Mr McAuliffe asking for advice on the position of the River News in Mannum. Mr Law offered to "call Darnley Taylor if they are still active". The primary Judge found, on the basis of contemporaneous notes, that Mr Law had a conversation with Darnley Taylor in which he asked the latter to rethink Waikerie Printing's strategy in relation to Mannum. Darnley Taylor said that he would do so.
36 The primary Judge further found that on 30 January 1998, Mr McAuliffe spoke to Paul Taylor at a function. A memorandum from Mr McAuliffe reported the conversation in these terms:
"We went over your conversation - just to make sure we understood each other. He indicated that Darnley understood as well - but they have not spoken to Pick yet - and didn't sound like he was looking forward to it.... Four weeks to go! - We will continue with our planning."
His Honour found that the reference to "Four weeks to go!" was prompted by the fact that Mr Law had told both Mr Pick and Mr McAuliffe that if the issue was not resolved by the end of February, Rural Press would consider taking further action.
37 On 3 February 1998, Ms Price reported to Mr McAuliffe that she intended to publish a "Murraylands Bulletin type publication" for the Riverland area, with a proposed circulation of 13,500 per month, to be distributed free of charge. That memorandum came to the attention of Mr Law who told Mr McAuliffe on 4 February 1998 that he assumed Ms Price would do nothing until "we contact Paul Taylor at the end of Feb". As the primary Judge observed, it was "obvious that the end of February was somehow seen as a watershed date".
38 On 2 March 1998, Ms Price reported to Mr McAuliffe that the River News was showing no signs of pulling out from distribution in Mannum. She confirmed that the River News' correspondent in Mannum was still reporting. She added this comment:
"Are we serious about our threat to enter the Riverland market?"
39 On 3 March 1998, Mr Law made notes of a telephone conversation with Paul Taylor. In that conversation, Paul Taylor told Mr Law that Waikerie Printing was no longer selling advertising in Mannum and was "gradually pulling out altogether". Paul Taylor promised to keep an eye on Mr Pick, by which Mr Law understood him to mean that there would be no editorial push in Mannum.
40 That conversation was discussed within Rural Press. On 13 March 1998, Ms Price reported to Mr McAuliffe that, contrary to the conversation, the River News showed no sign of the "agreement" not to solicit advertising in Mannum. (The word "agreement" appears in the memorandum in inverted commas). Ms Price concluded that "we are looking like wimps".
41 On 20 March 1998, Mr Law wrote to Paul Taylor at the River News as follows:
"Thank you for taking the time to talk to me recently.I was keen for you to understand our concern about the move of the River News into the Mannum are [sic] - which is a prime readership and circulation area for the Murray Valley Standard.
I note that John Pick (or Duncan [Emmins] - see attached advertisement) is still selling advertising in Mannum (Mannum Club, private motoring classified, image makers and Mannum agricultural). I hope you can convince him to stick to the prime circulation area of the River News."
42 At a Country Press Australia meeting in Sydney on 3 April 1998, Mr Law had a conversation with Mr Robinson (whom Mr Law knew to be a relative of Paul Taylor). In that conversation, Mr Law asked whether Paul Taylor lacked the nerve "to face us". Mr Law also said that Rural Press was not happy about what Waikerie Printing was doing in Mannum and observed that the Taylors could face an opposition newspaper in the Riverland. Mr Robinson understood the conversation as a threat and conveyed his understanding of the threat to Mr Pick and Paul Taylor.
43 Shortly after this meeting, Mr Law drafted a letter to be sent to Paul Taylor at the River News. The letter was in the following terms:
"The attached copies of pages from the River News was [sic] sent to me last week. The Mannum advertising was again evidence [sic], which suggests your Waikerie operator, John Pick, is still not focussing on the traditional area of operations.I wanted to formally record my desire to reach an understanding with your family in terms of where each of us focuses our publishing efforts.
If you continue to attack in Mannum, a prime readership area of the Murray Valley Standard, it may be we will have to look at expanding our operations into areas that we have not traditionally services [sic].
I thought I would write to you so there could be no misunderstanding our position. I will not bother you again on the subject."
44 Mr Law did not send the letter in that form. He sent the draft to Mr McCarthy on 7 April 1998 inviting comments, indicating that he would post the letter on 9 April if Mr McCarthy made no alterations. Mr McCarthy returned the letter with a notation saying that he was "concerned about any TPC implications in what's written" and suggested alterations. The altered letter was not sent. Nonetheless, the primary Judge found that the terms of the draft letter reflected Mr Law's state of mind at the time.
45 On 9 April 1998, Mr McAuliffe sent a memorandum to Mr Law concerning the River News. The memorandum, which was prepared in consequence of a discussion between Mr McAuliffe and Paul Taylor, was in the following terms:
"Okay to draw a line forty kilometres north of Mannum. No ads will be sort [sic] from that area - some papers are sold into that area but that has been the case for a long time ..."
The memorandum included this comment:
"If I don't hear from you Beryl [Price] will approach Duncan next week for a chat."
46 On 15 April 1998, the ACCC wrote to Mr Emmins acknowledging a telephone conversation in which Mr Emmins appears to have complained about the conduct of Rural Press. The involvement of the ACCC in the matter can therefore be dated from 15 April 1998. The evidence did not make clear, however, the date on which Rural Press's officers became aware of the ACCC's involvement.
47 Ms Price made a record on 21 April 1998 of a telephone conversation she had held with Mr Pick. The document noted that
"... J Pick won't run any more Mannum news and will tell the newsagent that the River News won't be available in Mannum."
Ms Price also recorded that she had spoken with Mr Emmins who had told her that he would not be prepared to work with Rural Press. It would seem that Mr Emmins did not tell Ms Price of the ACCC's interest in the matter.
48 The primary Judge found that it was about this time that the River News "withdrew" from Mannum. It terminated its engagement of Mr Emmins as its Mannum correspondent and ceased promoting circulation in the Mannum area and gathering Mannum news. It also ceased seeking advertising revenue in Mannum. In effect, it reverted to its previous prime circulation area. As it happens, that was at a line about forty kilometres north of Mannum. Its circulation in the Mannum area dropped (albeit from an already low base) very significantly in the following months.
THE PRIMARY JUDGMENTS
THE JUDGMENT ON LIABILITY: ACCC v RURAL PRESS (No 1)
The Reasons for the Withdrawal
49 After making the factual findings to which we have referred, the primary Judge considered why the River News had been withdrawn from Mannum. He rejected evidence given by the Taylors, which was inconsistent with Mr Pick's account, that the reason for the withdrawal was that the incursion into Mannum was not financially viable. His Honour also rejected a suggestion made by the Taylors that one reason for the withdrawal was the fact that Waikerie residents had complained about the new focus on Mannum.
50 The primary Judge found (at [68]; 42,727): that Waikerie Printing withdrew circulation and promotion of the River News from Mannum in April 1998 because the Taylors feared that their businesses would suffer if Rural Press retaliated. His Honour expressed his finding this way (at [72]; 42,728):
"[G]iven the terms of the communications between Law and McAuliffe and the Taylors, and the finding I have made about the terms of the communication between Law and Robinson and Law's purpose in undertaking that communication, the reason that Waikerie Printing withdrew circulation and promotion of the River News from the Mannum area was the Taylors' fear of the consequences of not doing so. Those apprehended consequences were that Rural Press and Bridge [Printing] might introduce into the Riverland area where the Taylors' newspapers had their prime circulation areas, or into some part of the Riverland area, a new regional newspaper in competition with them. They did not want that competition. They were aware that a subsidiary of Rural Press was publishing the Herald as a free regional newspaper in the Barossa Valley area in competition with the Leader, published by Robinson's company. They were aware that Rural Press had significant financial resources and that it had printing facilities at Murray Bridge capable of producing such a newspaper. They thought such a newspaper would be very detrimental to the profitability of Waikerie Printing or of their other companies."
Exclusionary Provision
51 The primary Judge then addressed the ACCC's contention that Rural Press and Bridge Printing had entered into an arrangement with Waikerie Printing, in the period leading up to April 1998, containing provisions the purpose of which was to prevent or restrict Waikerie Printing from supplying, circulating and promoting the River News in the Mannum area (including an area to about forty kilometres north of Mannum) in competition with the Standard.
52 His Honour observed that the ACCC's case was that there were mutual commitments between Waikerie Printing, on the one hand, and Rural Press and Bridge Printing, on the other. The ACCC had alleged that Waikerie Printing had committed itself to withdraw the River News from circulation in the Mannum area in competition with the Standard, while Rural Press and Bridge Printing had committed themselves not to pursue the introduction into the Riverland area of any newspapers in competition with those published by the Taylors. The primary Judge noted that there was no issue that
* Waikerie Printing, on the one hand, and Rural Press and Bridge Printing, on the other, had been competitors with each other in the Mannum area; and
* each entity, through the River News and the Standard, respectively, provided or supplied services, including local news, to readers of newspapers, as well as to advertisers wishing to promote their businesses.
53 The present appellants had argued that the alleged arrangement, even if made out, did not infringe s 45(2)(a)(i) of the TP Act because it was an arrangement for market sharing. It was said that such an arrangement lacked the particularity required to satisfy s 4D of the TP Act, since it did not have the purpose of preventing, restricting or limiting the supply of the services to "particular ... classes of persons". The primary Judge held, however, that there was (at [80]; 47,230):
"...a sufficient degree of particularity in the class of persons to be deprived of the services of the River News, to attract the application of s 4D of the Act. It is true that it would be difficult to identify exactly all members of the class at any particular time. But, whether the arrangement was in respect of the Mannum area, or in respect of those persons in the Mannum area and extending to a line about forty kilometres north of Mannum, that group of persons is an identifiable class. They were the persons who, by reason of the alleged arrangement, were to be deprived of the services otherwise available to them from the River News."
54 The appellants had also disputed that there had been any meeting of the minds between Mr Law and Mr McAuliffe of Rural Press, on the one hand, and the Taylors, on the other, so as to give rise to the alleged arrangement. The primary Judge acknowledged that, despite his findings as to the reasons for the withdrawal of the River News from Mannum, the Taylors may have made the withdrawal decision independently of any arrangement. In other words, the Taylors may simply have responded to their perception of the potential threat presented by Rural Press in view of the concerns expressed by Mr McAuliffe and Mr Law.
55 The primary Judge referred to some of the communications between Mr Law and the Taylors and to the draft letters prepared by Mr Law in early April 1998. His Honour also referred to evidence given by Paul Taylor as to assurances he had given to Mr Law about taking a lower profile in Mannum. His Honour considered (at [90]; 42,733) that, on the evidence:
"Waikerie Printing did come to an arrangement with Rural Press and Bridge [Printing] of the nature alleged by the ACCC, and I further find that that arrangement contained an exclusionary provision, so as to contravene s 45(2)(a)(i) of the Act. I consider that Rural Press and Bridge [Printing] through Law and McAuliffe desired to procure Waikerie Printing's commitment to withdraw the circulation and promotion of the River News from the Mannum area, and to revert to its previous prime circulation area ending about forty kilometres north of Mannum, and in exchange they were prepared not to countenance the introduction of a newspaper into the prime circulation areas of the Taylors' newspapers in the Riverland. That was, I find, the clear effect and intent of the various communications from McAuliffe and Law in January and culminating in their communications in March 1998. Waikerie Printing was clearly slow to respond positively to their communications....
There was a degree of procrastination by the Taylors because of their relationship with Pick before Waikerie Printing internationally [sic] committed itself in the way I have found. However, in the face of the risk to their business which they perceived from the communications referred to, I consider that they committed Waikerie Printing to withdraw the River News from the Mannum area."
In his Honour's view, the commitment of Waikerie Printing to withdraw was made or conveyed to Rural Press and Bridge Printing ultimately by Paul Taylor's discussions with Mr McAuliffe on 9 April 1998. The decision was not simply one made in the face of a perceived commercial threat without any arrangement having been reached. Moreover, Waikerie Printing did withdraw from Mannum and Rural Press and Bridge Printing had given no further consideration to competing with the Taylors' newspapers. In short, Waikerie Printing, Rural Press and Bridge Printing had given effect to the arrangement which they had made.
56 The primary Judge further found that the relevant subjective purpose existed on the part of Mr Law and Mr McAuliffe as officers of Rural Press and on behalf of Bridge Printing and on the part of the Taylors as directors of Waikerie Printing (at [91]; 42,733):
"I consider the arrangement had the subjective purpose, common to each of them, of preventing or restricting or limiting the supply of services to the particular class or classes of persons, being those in the Mannum area (or in that area and extending to a time [sic] about forty kilometres north of Mannum) who could otherwise receive the information and news in the River News or who could otherwise advertise in the River News or take advantage of advertising in the River News. If the relevant purpose is an objective one, in my view the same conclusion would be reached in the particular circumstances of this case."
The Market
57 The primary Judge pointed out that, for the purpose of considering whether Rural Press and Bridge Printing had contravened s 45(2)(a)(ii), s 45(2)(b)(ii), s 46(1)(a) or s 46(1)(c) of the TP Act, it was necessary to determine the market in which the Standard competed. The ACCC had identified the relevant market as that for the provision of services by the publication of regional newspapers containing news and advertising, and offering the opportunity for advertising, in the Murray Bridge area (the "Murray Bridge newspaper market"). The present appellants characterised this identification of the market as too narrow, because it did not reflect the competition between regional newspapers and radio. There was, however, no real dispute before the primary Judge that the relevant geographical market was the Murray Bridge area, in effect the prime circulation area for the Standard.
58 His Honour identified the critical question as whether the services supplied by commercial radio stations broadcasting to the Murray Bridge area were substitutable for the services provided by the Standard. He pointed out that the nature of information provided by local radio stations was different from that presented by the Standard, since it was provided in ephemeral form and was free to the consumer. The evidence showed that there was some competition for advertisers between the Standard and the local radio station, Radio 5MU. His Honour considered, however, that the choice of advertising medium was not driven by price but by the advertiser's preference for one particular medium over the other, or a view as to the appropriate mix for that advertiser. The evidence also showed that the target audience of local commercial radio stations was different from and wider than the target consumers or readers of regional newspapers. In particular, Radio 5MU broadcast in an area covered by eleven regional newspapers.
59 The primary Judge concluded, on the evidence, that the relevant product market was the Murray Bridge newspaper market (at [108]; 42,737 - 42,738):
"I think that advertising in local commercial radio is not sufficiently linked either in supply or in demand terms to be included in that product market. It is of a different character, and it serves a different and wider community group. The evidence does not indicate to me that the selection of advertising in one or other of those media is price sensitive, but rather it is driven by the perception of advertisers as to the nature and effectiveness of the communication and the scope of the targeted market. That is, it is driven more by the sorts of considerations which indicate the differences in the form of the advertising product. There is nothing to suggest that readers of the Standard would cease purchasing the Standard, if its price were increased, by reason of a choice then made to obtain information or advertising information from Radio 5MU rather than the Standard. There is also no evidence to suggest that a change in advertising rates in the Standard, or in a regional newspaper, would result in any local commercial radio station starting itself to supply advertising through the written medium of a regional newspaper, or that the reverse situation might also arise. There is significant capital expenditure and resources required to do so. Effectively, there is no real competition for readers or listeners between the Standard and Radio 5MU."
Did the Arrangement Have the Purpose or the Effect of Substantially Lessening Competition?
60 A finding had already been made that the purpose of the parties to the arrangement was to secure the withdrawal of the River News from Mannum in exchange for Rural Press refraining from publishing a regional newspaper in the Riverland area. The immediate effect of the arrangement was that Waikerie Printing ceased actively circulating and promoting the River News in the Mannum area. The conduct in question had removed the only competition, limited as it was, to the Standard in the Murray Bridge newspaper market. The introduction of that competition into the market had been significant enough to prompt Rural Press and Bridge Printing to take steps to remove the source of the competition. Had the arrangement not been made (so the primary Judge found) Mr Pick would have continued to publish and promote the River News in Mannum in competition with the Standard.
61 In these circumstances, his Honour concluded that the arrangement had the purpose or effect of substantially reducing competition in the Murray Bridge newspaper market. While the sales of the River News in the Mannum area were modest, the result of the arrangement was that the residents in the area who wished to read or advertise in the River News had been effectively deprived of those opportunities.
Did Rural Press Take Advantage of its Market Power in Contravention of s 46 of the TP Act?
62 The appellants accepted at trial that Bridge Printing, as the printer and publisher of the Standard, had a substantial degree of power in the Murray Bridge newspaper market. They also accepted that the two corporations were related to each other for the purposes of the TP Act (s 4A(5)) and that, accordingly, Rural Press was deemed to have a substantial degree of power in the relevant market (s 46(2)(a)).
63 The appellants contended, however, that neither Rural Press nor Bridge Printing had taken advantage of its market power for the proscribed purpose. The factor which gave substance to the threats made to Waikerie Printing was that Rural Press had significant economic and financial resources. Bridge Printing itself had done nothing.
64 His Honour accepted that for a breach of s 46 to be established, there must be a causal connection between the conduct and the market power. It was therefore necessary to consider whether, even without the substantial market power, Rural Press and Bridge Printing would have been able to act in the same way. In this connection, the power of Rural Press and Bridge Printing in the relevant market was to be measured as including the financial resources and strength of Rural Press, as well as its publishing resources and expertise. His Honour observed that the ACCC's complaint was about the series of private communications between Mr Law and Mr McAuliffe, on the one hand, and the Taylors and Mr Robinson, on the other, whereby the Taylors were given to understand that, if the River News was not withdrawn from active circulation in the Mannum area, Rural Press or Bridge Printing would publish a competitive regional newspaper in the Riverland area. He found that the conduct of Rural Press and Bridge Printing did amount to them taking advantage of their market power in the relevant market (at [131]; 42,742):
"The undertaking of such private communications is not routine nor conduct commonly involving the exercise of competitive rights. It was conduct which carried significance to the Taylors not simply because Rural Press was a substantial and well-resourced corporation, but because it and Bridge [Printing] had immediate and ready access to a printing press and to the necessary administrative and professional structure to publish a competing newspaper. Those factors had significance by reason of the relevant market power of Rural Press and Bridge [Printing]. That market power rendered it a matter of marginal cost only to fulfil that threat. The threats were made only because that market power existed, and they were made to maintain and preserve that market power. The threats made had significance because of that fact. That too, in my judgment, is a matter tending to show that in the particular circumstances, the conduct of Rural Press and Bridge [Printing] did involve them taking advantage of their market power in the Murray Bridge market for regional newspapers."
65 The primary Judge also found that the private communications made to the Taylors amounted to Rural Press and Bridge Printing taking advantage of their market power in the Murray Bridge newspaper market. He said this (at [132]; 42,742):
"It was the private and conditional nature of the communications, in conjunction with the fact that Waikerie Printing had something to give, that is the withdrawal of the River News from the Mannum area, which involved taking advantage of the market power which existed in the Murray Bridge newspaper market where that market power included the financial and physical resources of Rural Press, and of Bridge [Printing]. But for the existence of that market power, in my judgment Rural Press and Bridge [Printing] would not have acted in the way in which they did. The credibility of the threats contained in the communications existed or was enhanced by reason of the market power in the Murray Bridge newspaper market which was enjoyed by Rural Press and by Bridge [Printing]."
66 The findings already made by the primary Judge led his Honour to conclude that the purpose of the communications by Mr Law and Mr McAuliffe over the relevant period was to deter or prevent Waikerie Printing from engaging in competitive conduct in the Murray Bridge newspaper market and for the purpose of eliminating it from that market. It followed that Rural Press and Bridge Printing had contravened s 46(1)(a) and s 46(1)(c) of the TP Act.
The Individual Parties
67 The test to be applied, in determining whether the individual parties were knowingly concerned in or were parties to the contravention of ss 45 and 46 of the TP Act, was whether each of them had participated in, or assented to, the contraventions with actual knowledge of the essential elements constituting the contraventions: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661, at 670, per Mason ACJ, Wilson, Deane and Dawson JJ. On this test, the primary Judge found that each of Mr Law and Mr McAuliffe had been knowingly concerned in the contravention by Rural Press and Bridge Printing and that each of the Taylors had been knowingly concerned in the contravention by Waikerie Printing.
The Primary Judge's Conclusions
68 In the result, the primary Judge found that Rural Press and Bridge Printing had contravened s 46 of the TP Act in the manner alleged by the ACCC. He further found that Rural Press and Bridge Printing, of the one part, and Waikerie Printing, of the other, entered into and gave effect to an arrangement as alleged by the ACCC, in contravention of s 45(2)(a)(i) and (ii) and s 45(2)(b)(i) and (ii) of the TP Act. In the case of each contravention, his Honour found that each of Mr Law, Mr McAuliffe and the Taylors was a person who had been knowingly concerned in or party to the contravention.
THE JUDGMENT ON PENALTIES: ACCC v RURAL PRESS (No 2)
69 In ACCC v Rural Press (No 1), the primary Judge made declarations giving effect to his findings and also granted injunctions restraining each of the parties in respect of whom declarations were made from engaging in conduct of that kind for a period of three years. In ACCC v Rural Press (No 2), his Honour considered the penalties to be imposed pursuant to s 76 of the TP Act. He also addressed the ACCC's submission that Rural Press, Bridge Printing and Waikerie Printing should be required to implement a trade practices compliance program. In this summary, we address the reasoning only insofar as it relates to the appellants.
70 The primary Judge said (at [15]; 43,290) that it was
"necessary to fix the level of the pecuniary penalties having regard to the maxima prescribed in s 76 and to all the circumstances relevant to the nature and circumstances of the contraventions and of each of the respondent's individual circumstances. In doing so, the Court must bear in mind the two deterrent objectives, namely deterrence of the respondents and deterrence of others in the community from failure to comply with ss 45 and 46 of the Act, which the pecuniary penalties are directed to securing. In relation to the respondents, even though it may be unlikely that a respondent will contravene a provision of Part IV of the Act in the proximate future, it is desirable to impose a penalty to ensure that the respondent, as well as the public generally, is reminded of the consequences of contravention".
71 It was common ground that a single penalty should be imposed against each of the appellants in respect of its or his various contraventions. His Honour accepted this approach, although he considered that s 76(3) of the TP Act would permit separate penalties to be imposed for the contraventions of ss 45 and 46 of the TP Act.
72 The primary Judge first considered whether Rural Press and Bridge Printing should be required to undertake a compliance program. After a careful review of the authorities, his Honour noted that they had left open whether it is appropriate to order the implementation of a trade practices compliance program over the opposition of a contravener. On the assumption that such an order might be appropriate, he took the view that no order should be made against Rural Press or Bridge Printing. In his opinion, they were unlikely to repeat their conduct and it was difficult to see any benefit to the public in a compliance program. Injunctive orders were in place and pecuniary penalties would emphasise the Court's disapproval of the conduct of all respondents. Moreover, Rural Press and Bridge Printing, on the orders of independent solicitors, had implemented their own compliance programs.
73 So far as pecuniary penalties were concerned, the ACCC sought a penalty of $6,500,000 to be imposed on Rural Press and $1,500,000 on Bridge Printing. The primary Judge accepted that it was necessary to impose penalties having a deterrent effect, taking account of the size of each corporation. He also accepted that the deliberate nature of the contraventions by Rural Press and Bridge Printing were factors which weighed in favour of significant financial penalties.
74 On the other hand, the primary Judge considered that the contraventions were "not at the serious end of the spectrum of contraventions of s 45 and s 46 of the [TP Act]". The section of the regional newspaper market that had been affected was small both in terms of geography and population. In his Honour's view (at [43]; 43,295) it was
"appropriate to have regard to the size of the relevant market, the extent of the planned and actual participation in the market by Waikerie Printing which, by the contravening conduct, ceased to be carried on, and the nature and extent of the detriment to the public by reason of the contraventions."
On these scores, the contraventions were at the lower end of the scale. It was also necessary to take into account the fact that neither Rural Press nor Bridge Printing had previously contravened the TP Act, although this factor was somewhat "diluted" by the absence, prior to the contraventions, of a "positive culture of compliance".
75 Rural Press and Bridge Printing were also to be given credit (at [51]; 43,296) for
"their meaningful co-operation in the investigation of the ACCC and in the conduct of the hearing.... Their conduct has facilitated the investigation and enabled the trial to be conducted efficiently".
76 Noting that fixing the level of pecuniary penalties is not an exact science, the primary Judge ordered Rural Press to pay a penalty of $400,000 and Bridge Printing a penalty of $200,000.
77 The primary Judge considered that "a severe penalty" was called for in relation to Mr Law and Mr McAuliffe. Each was in a senior position and had been directly involved in the contraventions. Since Mr Law was the more senior, he warranted a more severe penalty. On the credit side of the ledger, both had co-operated with the ACCC and shared "the credit for the focussed conduct of the trial". Neither had benefited personally from the contraventions or had previously contravened the TP Act. The primary Judge ordered Mr Law to pay a pecuniary penalty of $40,000 and Mr McAuliffe a penalty of $30,000.
THE ISSUES ON THE APPEAL
78 The appellants relied on a number of grounds in support of their appeal.
1. The evidence did not support the primary Judge's finding that Waikerie Printing and Rural Press and Bridge Printing had made or given effect to an arrangement or understanding for the purposes of s 45 of the TP Act.
2. Any arrangement or understanding did not include an exclusionary provision, since the arrangement or understanding did not have the purpose of preventing, restricting or limiting the supply of services to, or the acquisition of services from, "particular persons or classes of persons" within s 4D of the TP Act. Specifically, the persons who were deprived of the services otherwise available to them through the River News, could not be regarded as "particular persons or particular classes of persons" targeted for the purposes of s 4D of the TP Act.
3. The primary Judge had erred in identifying the relevant market as the Murray Bridge newspaper market. The appellants' written submissions on the appeal asserted that the geographic extent of the relevant market was wider than the Murray Bridge area, but that contention was not developed in argument. Their principal submission was that the primary Judge should have defined the relevant product market so as to include commercial radio stations which (so it was argued) competed vigorously with regional newspapers. The relevant market was that for the supply of information, news and advertising by regional newspapers, other printed media and radio in rural areas of which Murray Bridge formed part.
4. The primary Judge had erred in finding that any contract, arrangement or understanding had the purpose of, or the effect or likely effect of, substantially lessening competition. The degree of competition between the River News and the Standard, in the context of the whole Murray Bridge newspaper market, was extremely slight on a quantitative approach and any reduction in competition in the market did not amount to a substantial lessening of competition.
5. Rural Press and Bridge Printing had not taken advantage of their market power for any of the purposes proscribed by s 46 of the TP Act. The case as pleaded by the ACCC was that Rural Press and Bridge Printing had taken advantage of their market power in the Murray Bridge newspaper market so as to deter or prevent Waikerie Printing from engaging in competitive conduct in that market. While the primary Judge had asked the correct question (whether even without the substantial power Rural Press and Bridge Printing might have been able to act in the same way), it had never been answered. The private nature of the communications, the significance of which the primary Judge had emphasised, could not transform a competitive response into an anti-competitive use of market power. Nor could the use, or threatened use of financial resources of itself constitute a use of market power.
6. The evidence fell short of establishing that either Mr Law or Mr McAuliffe had the purpose of preventing or deterring Waikerie Printing from engaging in competitive conduct.
7. The primary Judge made no finding that either Mr Law or Mr McAuliffe had actual knowledge that the purpose or effect, or likely effect, of any arrangement or understanding would be a substantial lessening of competition in the Murray Bridge newspaper market. Nor was there a finding that they had actual knowledge of the market power of Rural Press or Bridge Printing. Thus the finding that they were knowingly concerned in the contraventions could not stand.
REASONING
WAS THERE AN ARRANGEMENT?
79 The appellants did not dispute that the primary Judge had applied the correct legal principles in reaching the finding that there was a contract, arrangement or understanding between Rural Press (treating it as encompassing Bridge Printing), on the one hand, and Waikerie Printing, on the other, for the purposes of s 45 of the TP Act. In Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954; (1999) 92 FCR 375, Lindgren J, in a passage cited by the primary Judge, summarised the effect of the authorities as follows (at 408):
"The cases require that at least one party `assume an obligation' or give an `assurance' or `undertaking' that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party. In the present case, for example, each individual who attended the meeting may have expected that as a matter of fact the others would return to their respective offices by car, or, to express the matter differently, each may have been expected by the others to act in that way. Each may even have `aroused' that expectation by things he said at the meeting. But these factual expectations do not found an `understanding' in the sense in which the word is used in ss 45 and 45A. The conjunction of the word `understanding' with the words `agreement' and `arrangement' and the nature of the provisions show that something more is required." (Emphasis in original.)
See also Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344, at 359-360, per Sackville J. Indeed, the primary Judge went further than the authorities require, at least arguably, by interpreting the ACCC's case as alleging mutual commitments on the part of Waikerie Printing and Rural Press and Bridge Printing: cf Morphett Arms Hotel Pty Ltd v Trade Practices Commission [1980] FCA 46; (1980) 30 ALR 88, at 91-92, per Bowen CJ.
80 The appellants attacked the factual finding that there was an arrangement or understanding between Waikerie Printing and Rural Press involving mutual commitments between the parties. Mr Douglas QC, who appeared with Mr Blackburn on behalf of the appellants, contended that no findings had been made as to precisely when or between whom the arrangement had been made. He also submitted that the evidence was inadequate to support the finding that Waikerie Printing had undertaken to act, or given an assurance that it would act, in a particular way in response to the representations made on behalf of Rural Press. The draft letter prepared by Mr Law on about 7 April 1998 was of limited probative value, so it was argued, having regard to the positive intervention by Rural Press's managing director, Mr McCarthy.
81 These criticisms do not do justice to the primary Judge's careful analysis of the evidence. His Honour found, as the evidence plainly entitled him to do, that the representatives of Rural Press had threatened to expand into the Riverland area unless the River News was withdrawn from Mannum. He also found, contrary to the evidence of the Taylors, that the reason for the withdrawal of the River News was the fear that otherwise Rural Press would establish a competing newspaper. There was no challenge to this finding. The primary Judge explicitly recognised that his rejection of the Taylors' evidence as to their reasons for withdrawing the River News from Mannum did not entitle him to infer that they had made a commitment to Rural Press to take that action. His Honour acknowledged that Waikerie Printing's decision to withdraw might have been reached independently of any arrangement with Rural Press.
82 The primary Judge then considered whether the evidence supported the conclusion that the parties had made mutual commitments. He accepted the evidence of the Taylors that Mr Robinson's communication to them of the threat made by Mr Law in the conversation of 3 April 1998 forced them to make a decision about withdrawing from Mannum. The making of this threat had to be understood in the context of the conversation between Mr Law and Paul Taylor held on 3 March 1998. The cross-examination of Mr Law included this passage concerning the conversation of 3 March 1998 (cited by his Honour at [86]; 42,731 - 42,732):
"Yes, of course they could do what they wanted to do but you hoped - and your purpose in talking to him was that following your talking to him he would be induced into not only thinking again but, as a result of having thought again, withdrawing from Mannum?---I hoped that's what he would do.
And that's the reason you rang him?---No, I think as primary a reason was to put it on the record, so that if something happened further down the track - I was seeking to put it on the record, if you like, that we were concerned about the Mannum situation.
Let me say to you Mr Law, that I accept that you wanted to put things on the record as well, but I want to put to you that it wasn't just a matter of having things on the record, as it were; that you would never actually have to look at the record because by reason of your communicating with him he would be induced to see the error of his ways and that he would withdraw?----I don't know that I could necessarily agree with that wording.
What's wrong with the wording?---Well, I think I was just trying to say to him, `This could be a problem and I just wanted you to know where Rural Press stood on it,' and it was of concern to our local people and I just asked him would he look at it again.
And you asked him to have a look at it again and you also hoped and wanted that once he had looked at it again he could withdraw?---I hoped that he would, yes.
And that's why you spoke to him. Is that right?---Yes."
For his part, Paul Taylor accepted that he had given a "mild assurance" that the River News would be pulled out of Mannum in perhaps a month (cited by his Honour at [87]; 42,732):
"You gave him a mild sort of assurance that you may be pulling out perhaps in a month, Isn't that so?---Yes, that would be reasonable to say.
And you told him that you would no longer sell advertising in the Mannum market?---That would have been a third of the whole thing, yesYou said that to him?---Well, I don't remember specifically but that certainly would have been the gist of our company decision over Mannum.
That you were only selling a few papers in Mannum?---Yes. Yes, that would be right.
That you were curtailing and gradually pulling out altogether? Did you tell him that?---I don't remember that specifically but that certainly would have been our - yes, that would have been the developments at that time."
83 The primary Judge considered that Mr Law's draft letter could be used to determine Mr Law's state of mind at the time, namely that he wished to reach an understanding with Waikerie Printing in relation to the withdrawal of the River News from Mannum. That an understanding was reached on 9 April 1998 is supported by Mr McAuliffe's memorandum of the same date which, as his Honour found, recorded a conversation in which Paul Taylor told Mr McAuliffe that Waikerie Printing had decided to withdraw the River News from the Mannum area and restore a line forty kilometres north of the township. Paul Taylor did not dispute that such a conversation had occurred. To regard that conversation as simply a "notification" by Paul Taylor of a decision independently reached (as Mr Douglas submitted) ignores the context in which the communication took place.
84 The evidence before the primary Judge suggested strongly that
* over a period of time Rural Press threatened Waikerie Printing that if it did not withdraw from the Mannum area it would expand its operation so as to compete with the Taylors in the Riverland area;
* the communications and threats were made on behalf of Rural Press in the hope that Waikerie Printing would indeed withdraw from the Mannum area;
* Waikerie Printing responded by giving a "mild assurance" that it would withdraw;
* in consequence of the threats made by Mr Law on 3 April 1998, the Taylors, after some procrastination, finally decided to withdraw from the Mannum area;
* their decision to withdraw was communicated by Paul Taylor to Mr McAuliffe on 9 April 1998; and
* thereafter Waikerie Printing did in fact withdraw and Rural Press took no further action to expand its operation in the Riverland area.
In the light of this evidence, the primary Judge's conclusion that there was an arrangement or understanding between Waikerie Printing and Rural Press for the purposes of s 45 of the TP Act was amply justified.
DID THE ARRANGEMENT CONTAIN AN EXCLUSIONARY PROVISION?
85 It will be recalled that by virtue of s 4D(1)(b) of the TP Act a provision of a contract, arrangement or understanding is an exclusionary provision if, inter alia,
"the provision has the purpose of preventing, restricting or limiting(i) the supply of ... services to, or the acquisition of ... services from, particular persons or classes of persons; or
(ii) the supply of ... services to, or the acquisition of ... services from, particular persons or classes of persons in particular circumstances or on particular conditions".
86 The words "or classes of persons" were added to s 4D(1) by the Trade Practices Revision Act 1986 (Cth) ("the 1986 Act"). The appellants' argument on this branch of the case commenced with an attack upon the identification of the class of persons who, on the finding made by the primary Judge, would have been deprived of services. It was put that the effect of the primary Judge's finding was to define the class by reference to those who were excluded by the alleged provision. This was said to be a circular identification which did not result in a class of persons as required by s 4D. It was submitted by Mr Douglas that if the observations of the Full Court in ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460, at 487-488, stand in the way of this argument, the Court should reconsider that decision.
87 The appellants advanced an alternative argument to the effect that, even if a "particular" class of persons can be defined by reference to those excluded from the supply of services, the provision nonetheless must be aimed at the relevant class. That requires, so they argued, that the parties to the contract, arrangement or understanding have the purpose of targeting the relevant class at the time the contract, arrangement or understanding is made or reached.
88 As the argument for the appellants developed, it quickly appeared that identification of the class of persons was one aspect of a fundamental question as to the application of s 4D. Section 4D, picked up by s 45(2)(a)(i) and s 45(2)(b)(i) of the TP Act, is one of the two per se prohibitions of arrangements between competitors (or horizontal arrangements). The other is price fixing (s 45A). Any arrangement caught by s 4D is prohibited regardless of how insignificant the effect or likely effect of it upon competition in any market. These per se prohibitions were introduced together in 1977, following the 1976 Trade Practices Review Committee Report ("the Swanson Report").
89 The following extracts from the Swanson Report are relevant to an understanding of s 4D:
"4.14 In our view, the competitive effects of most agreements and practices should be tested by reference to a market for goods or services (the present test of sub-sec 47(5)).... We consider that there are certain agreements in respect of which competitive effects will basically be felt between parties to the agreement, or particular competitors thereof (eg collective boycotts, which often affect small business). These latter-mentioned competitive effects should, in our view, be tested according to effect on competition between the parties and other persons (the present test of sub-sec 45(4)). We consider that unless the Trade Practices Act recognizes these distinctions it will be ineffectual and discredited in many circumstances in which it should have force....
4.59 The Committee recommends that, subject to exceptions relating to joint venture and joint acquisition pricing (see para 4.63), there should be an absolute prohibition of agreements between competitors, having the purpose or effect, or likely to have the effect, of fixing or controlling, or providing for the fixing or controlling of the price for, or any discount, allowance, or rebate, in relation to, any goods or services supplied by the parties, or any of them, in competition with each other, to persons not being parties to the agreement. They should be incapable of authorisation. The Committee considers that these price agreements between competitors are at the very heart of anti-competitive behaviour and should be clearly prohibited. It is our firm belief that such agreements will so rarely be in the public interest that the costs in time and money, both for industry and Government, involved in allowing attempts to justify such agreements far outweigh the social benefits which might flow from the possibility of an occasional successful justification in terms of the de minimis exception stated in the present sub-sec 45(3).
...
4.116 We consider that a collective boycott, ie an agreement that has the purpose of or the effect of or is likely to have the effect of restricting the persons or classes of persons who may be dealt with, or the circumstances in which, or the conditions subject to which, persons or classes of persons may be dealt with by parties to the agreement, or any of them, or by persons under their control, should be prohibited if it has a substantial adverse effect on competition between the parties to the agreement or any of them or competition between those parties or any of them and other persons.
4.117 In our view such matters are appropriate to be tested by reference to their competitive effect between parties and other persons, and not by reference to a market.
4.118 Lastly, with respect to all other restrictions on competition which may be accepted by parties to an agreement, we consider that there should be a general prohibition upon an agreement which prevents or restricts or is likely to prevent or restrict, the engaging in of competitive conduct by all or any of the parties to the agreement, whether among themselves or with other persons, where that agreement has, or is likely to have, a substantial adverse effect on competition in the market or markets in which any of the parties to the agreement operate or, but for the existence of the agreement, would or would be likely to operate.
4.119 It will be seen from the recommendation of the preceding paragraph that for the remainder of matters presently within sec 45, we consider that the test of effect on competition in a market is the appropriate test."
90 The Second Reading Speech by the Minister for Business and Consumer Affairs for the Trade Practices Amendment Bill 1977, when first introduced, included the following:
"The law on anti-competitive agreements is altered by this Bill, substantially as recommended by the review committee. ... The Bill prohibits collusive price agreements and collective boycotts. However, except for price agreements for goods, which are prohibited outright, these matters may be granted authorisation if a net public benefit is shown to exist."
When reintroduced, the Minister said:
"Boycotts
The Government has given close attention to the problems of both primary and secondary boycotts. It has decided that the provisions in the previous Bill dealing with these matters were not appropriate. The Government's views on this matter are based on two fundamental principles. First, it is considered that boycotting the commercial activities of particular persons is generally undesirable conduct, and that the Trade Practices Act should take a firm line on these matters. Accordingly, the Bill prohibits collective primary boycotts where they have the purpose of restricting or limiting the trade of particular persons. Collective secondary boycotts are prohibited where they have both the purpose and effect of either substantially damaging a particular business or substantially lessening competition in a market. Secondly, the Government believes that the Trade Practices Act should take an even handed approach to secondary boycotts and apply, so far as possible, to both business and employees alike. Primary boycotts by employees are not, of course, dealt with by this Act."
91 Paragraph 10 of the Explanatory Memorandum said this:
"The Bill contains special provisions for the prohibition of collective boycotts. Collective primary boycotts (where the boycott seeks to restrict the dealings of the parties with the target person) are prohibited as `exclusionary provisions' (defined in new section 4D (clause 6) - new section 45(2)(a)(i) and 45(2)(b)(i). Collective secondary boycotts (where the boycott seeks to restrict the dealings of persons, other than the parties, with the target person) are prohibited where they have or are likely to have a prescribed effect - new section 45D."
92 It is worthy of note that Parliament did not follow the Swanson Report recommendation in one important respect. The Committee had recommended that the prohibition relate to arrangements having the relevant purpose or effect. The legislation only refers to purpose, and not to effect. We shall return to the significance of this distinction later ([104] below).
93 What is the special feature marking out this particular form of restraint between competitors for such draconian treatment, compared with the myriad of other anti-competitive agreements that might be arrived at between competitors, which are to be judged according to their effect upon competition in a market? It must, we think, lie in the abhorrence of a boycott, namely, an intentional shutting-out of particular persons or classes of persons from access to goods or services, where that is the aim or object of the agreement.
94 This notion, which is consistent with the extrinsic material to which we have referred, is well expressed by Clarke and Corones, Competition Law and Policy (1999), at 253:
"One reason for this strict approach to boycotts may be that they are seen as objectionable on non-economic grounds as well as because of their potential to have an adverse impact on competition. In particular, they are disliked because they can be used to take away the freedom of firms and individuals to trade as they wish and because they can be used to threaten the very existence, commercially or professionally, of targets having little or no countervailing economic power. The potential for boycotts to generate and exploit power is seen as inherently objectionable, regardless of whether or not they are used to lessen competition. For this reason, they are seen as being properly the subject of a per se prohibition."
95 The rationale which we favour is pellucid in relation to s 4D as originally framed, since it required the target to be a particular person or persons who would obviously need to be individually identified at the time the prohibited provision came into effect. The issue only arises in the present case because of the addition of the words "or classes of persons" by the 1986 Act.
96 The Explanatory Memorandum for the 1986 Act explained the amendment as follows:
"Clause 6: Exclusionary provisions15. Difficulties arose in TPC v TNT Management Pty Ltd & Ors (1985) ATPR 40-512 [(1985) 6 FCR 1], whether primary boycotts of identified classes of persons are prohibited as distinct from boycotts of particular persons. A primary boycott is, in essence, collective refusal to deal by competitors to the detriment of another competitor or a person from whom the parties to the collective action could or do supply or acquire goods or services."
The Explanatory Memorandum indicates that the 1986 Act was not intended to change or expand the basic conception underlying s 4D(1) of the TP Act. Particular targets were still to be required, but they could be defined by class.
97 Breach of the alleged exclusionary provision is assessed at the time at which the provision comes into effect (South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456 ("South Sydney v News Ltd (No 2)") at 477, per Heerey J). The prohibited purpose must exist at that time. Regardless of the definition of a particular class of persons, the class of persons who are the object of the provision must be identified by all parties to the provision at that time and "aimed at specifically" (News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 ("News Ltd v ARL") at 577, per curiam). Mr Hilton SC, who appeared with Mr Renehan for the ACCC, accepted in principle that s 4D can properly be described as a primary boycott provision, and that breach of it requires that there be a target aimed at by the provision. He submitted, however, that the section should not be read down on this account, but must be given full effect according to its terms. If that is done, so he argued, the class identified by the primary Judge could be said to be the target of a boycott.
98 It was accepted by the parties that the weight of current authority favours the view that the purpose referred to in s 4D is subjective. We have not been invited to reconsider that conclusion. The appellants, however, formally took the point that purpose is to be judged objectively in order to preserve their position in the event of an appeal. In this connection, we merely observe that there are particular difficulties in applying a subjective test to the purpose of a provision and to an arrangement that involves more than one party: see Robertson, "The Primacy of Purpose in Competition Law - Part 1" (2001) 9 Competition & Consumer Law Journal 101, at 124-125; McMahon, "Church Hospital Board or Board Room?" (1997) 5 Competition & Consumer Law Journal 129, at 134-135, 149-150. There has also been much inconclusive debate about the proper construction of "substantial" in s 45(2), taking account of s 4F (eg News Ltd v ARL, at 576; Merkel J in South Sydney v News Ltd (No 2), at 519), but we need not consider that issue in the present case.
99 It will be apparent from what we have said that we agree generally with the construction of s 4D outlined by Finn J at first instance in South Sydney District Rugby League Football Club v News Ltd [2000] FCA 1541; (2000) 177 ALR 611 ("South Sydney v News Ltd (No 1)") at 659-661, an approach which broadly accords with that taken by Heerey J in the Full Court (South Sydney v News Ltd (No 2), at 471-474). In particular, we agree with the comments of Finn J at 661:
"For the class to have significance for s 4D purposes it must be the intended object of the discrimination envisaged by the section. If it is not so `aimed at' specifically (News Ltd v [ARL], at FCR 577) the members of the alleged class do not constitute a `particular class' for s 4D(1) purposes though they may otherwise be said to constitute a class because they happen to share some differentiating characteristic be this the fact of exclusion or otherwise."
100 This passage is consistent with the judgment of the Full Court in News Ltd v ARL, esp at 558, 576-580. Although Heerey J was in dissent in the Full Court in South Sydney v News Ltd (No 2) as to the result and the decision of Finn J was reversed by the Full Court, nothing in the majority judgments is inconsistent with the approach of Finn J and Heerey J on this point. Moore J preferred (at 505) a construction of the word "particular" in s 4D(1), when qualifying "persons", as intended
"to limit the operation of s 4D to an apparently exclusionary provision which is proposed by the colluding competitors to operate on identified or identifiable persons known to the competitors although it would not be material whether it might operate on other persons as well". (Emphasis added.)
Merkel J spoke of a class "aimed at" by those who give effect to an exclusionary purpose (at 531).
101 The specific argument of the appellants which was addressed by the primary Judge was that the alleged arrangement did not infringe s 45(2)(a)(i) because it was an arrangement for market sharing on a geographic basis. This was said not to be an exclusionary provision, as such an arrangement did not have the purpose of preventing, restricting or limiting the supply of the services to particular classes of persons. Prior to making findings relevant to that submission, the primary Judge set out the important passage from the judgment of the Full Court in ASX Operations v Pont Data at 488, per curiam as follows:
"However, in a submission having an unpleasing resonance of the class-closing rules and of distinctions between general, special and `hybrid' powers of appointment, the appellants contended that the restraints upon the use of the Signal C information by persons other than those bound into the Dynamic Agreement as `Licensees' could not have the purpose of preventing, restricting or limiting the supply of services to a `particular' class of persons, or the acquisition of services by a `particular' class of persons. It was said that the persons or classes excluded must still be `identified' if s 4D is to apply. That may be conceded, but they are identified, in the present case, by the characteristic that they may not be supplied with the information in question, unless they accept and become bound by the restraints imposed by the Dynamic Agreement. Such persons come within a particular category or description defined by a collective formula: cf Pearks v Moseley, Re Moseley's Trusts (1980) 5 App Cas 714 at 723. They ordinarily would be treated as constituting a particular class, even though at any one time the identity of all the members of the class might not readily be ascertainable. What distinguishes the class and makes it particular is that its members are objects of an anti-competitive purpose, with which s 4D is concerned."
102 We have already referred to the relevant paragraphs of the primary judgment. It is apparent that the primary Judge's findings were based upon the view that if there were an arrangement for geographic market sharing (or, more particularly, zoning), that would be a breach of s 45(2)(a)(i) because it would deprive persons in that area of services otherwise available to them from one of the participants. His Honour came to that view because of his reading of the relevant passage from the judgment in ASX Operations v Pont Data quoted above.
103 There was no discussion by his Honour of any evidence which would point to any of the persons involved in the arrangement having the actual purpose of specifically targeting the persons in the nominated geographic area or communicating such a purpose among themselves. We have not been referred to any evidence to that effect. On the findings of fact made by the primary Judge, the purpose of Rural Press and Bridge Printing was to maintain their market power in Murray Bridge by preserving the absence of competition in that market. They also intended to preserve their general position in the industry by demonstrating to observers elsewhere that they could not be trifled with by competitors, who should "keep off their grass". Waikerie Printing and Paul Taylor succumbed to the pressure exerted by Rural Press and Bridge Printing, and went along with the geographic zoning in order to prevent an attack by Rural Press and Bridge Printing upon their commercial position elsewhere. It would not be expected that those involved in making such an arrangement would give a thought to the interests of the residents of the Mannum area in coming to the arrangement, and certainly not a second thought. It is hardly surprising that there is no finding that the arrangement was aimed at the class of persons defined by his Honour, or that they were specifically targeted by any of the parties to the arrangement. For the parties to act in this way would make no sense. The class of persons identified by the primary Judge simply consisted of customers or potential customers of the River News. They were not direct or indirect competitors of either party to the arrangement. There is no reason to suppose that either party should have had any purpose to injure or disadvantage those persons.
104 It is, of course, obvious that the provision for geographic zoning would limit the ability of persons in the area to have access to a second local newspaper. But that is the effect of the arrangement rather than its purpose. The potential customers suffered what, in other contexts, is called collateral damage. In this field of discourse there is a clear distinction between purpose and effect, recognised in the express terms of s 45 itself. The difference is not eliminated in the case where the effect either is or could be predicted (Robertson, [98] above, at 120-121). Indeed, as we have pointed out, Parliament chose not to adopt the recommendation that s 45 should prohibit collective boycotts having the effect of restricting etc the supply of services. It needs to be borne in mind that any market sharing, zoning or other "non-compete" provision will be a breach of s 45(2)(a)(ii) if it has the purpose, or would be likely to have the effect, of substantially lessening competition in a market. If a provision does not have that effect, it may be assumed that competing substitutable goods or services will be actually or potentially available in that market. The TP Act does not guarantee that customers will have access to the goods or services provided by a particular supplier. Pushing the concept of an exclusionary provision too far will have that consequence. In our opinion, market sharing or zoning of the kind involved in the present case, without more, is not an exclusionary provision, and the primary Judge fell into error in rejecting the appellants' argument to that effect.
105 The question of the definition of the particular class is an aspect of the proper understanding of s 4D as a boycott provision. As we have discussed, at the time the arrangement is entered into the parties must have a common purpose which is aimed at a particular class of persons which is the target. As the test is subjective, it is hardly possible to define that class unless the parties at least advert to the question at that time. The passage from ASX Operations v Pont Data to which we have referred has caused much controversy, illustrated by the difference of opinion as to its effect in South Sydney v News Ltd (No 2). There is, no doubt, a question mark as to the reasoning of the Full Court in ASX Operations v Pont Data in that passage, particularly if it is looked at in isolation from the facts of the case.
106 One of the difficulties in ASX Operations v Pont Data was that the trial Judge in that case did not deal with the exclusionary provision aspect of the matter. The Full Court came to that aspect of the case de novo, in a situation where it had already upheld findings of liability on other bases. The point was dealt with in a fashion which was concise, and, to some extent, cryptic. The facts fell within s 4D because ASX Operations and Pont Data were competitors in the reseller market. A critical earlier finding of the Full Court was as follows (at 488):
"(iii) Having regard to the finding of the primary judge as to purpose, when dealing with s 46(1)(c), it is clear that those provisions had the purpose of preventing or restricting or limiting the supply of services by Pont to any person other than a Licensee who was a party to the agreement in question. In this connection, Pont pointed to cl 3(2), and 3(6) of the Dynamic Agreement; no complaint was made as to the provisions dealing with price."
That incorporated by reference what their Honours had earlier said about the findings in relation to breach of s 46, to the following effect (at 484):
"Further, we accept the submissions for Pont that it was well open to his Honour to find, as he did, the existence of the purpose of preventing the `wholesaling' of the Signal C data and of deterring competition to JECNET. His Honour's finding in this respect was in the following terms ((1990) 21 FCR 385 at 417-418):
`As I have already pointed out, this purpose was expressed by Mr Udovich and the members of G4. It is the explanation, in whole or in part, for several of the contractual terms. It is no doubt true, as their counsel submit, that [ASX and ASXO] were motivated by self-interest rather than by malice towards their competitors. But that does not matter. If one of the purposes of the relevant conduct was to deter or to prevent competitive conduct, s 46(1)(c) is offended. If follows that, once it appears that a purpose of the imposition of particular contractual terms was to prevent competition by others with JDS in the wholesale information market, or to deter competition with JECNET in the retail market, this aspect of the case is established.'
We have dealt with the earlier passages in the judgment in which his Honour explained that in the setting of this case, wholesaling and retailing were treated as different aspects or sub-markets of the information market.
His Honour's conclusion as to purpose, in relation to the stock exchanges market, was expressed as follows ((1990) 21 FCR 385 at 417):
`The evidence clearly shows that it was a purpose of [ASX and ASXO] to prevent anyone else entering the stock exchanges market. As the background documents show, this is a matter which exercised both Mr Udovich and G4 from time to time. The desire to prevent such an entry was conceded to be a reason for insisting upon a tripartite agreement. It is the only logical explanation for the drastic limitations on data use set out in cl 3(2)(b)(i) and the prohibitions contained in cl 3(5). Having regard to the fact that ASX was able to impose those terms only because of its market power, a breach of s 46(1)(b) is established.'
Whilst s 46(1)(c) speaks of `deterring or preventing a person from engaging in competitive conduct in that market or in any other market', par (b) speaks of `preventing the entry of a person into that market or into any other market'." (Emphasis added.)
107 Viewed in this way, the circumstances in that case can be seen as a conventional boycott situation where competitors come to an arrangement in order to prevent other competitors entering the market. Whilst this does not dispose of all of the difficulties inherent in attributing the purpose of ASX Operations to Pont Data (or to the provision), or in what is said as to the definition of the class, it clearly distinguishes that case from the present.
108 In our opinion, the lack of any finding by the primary Judge that the parties agreed upon a particular class at the time the arrangement came into effect, and the lack of any evidence upon which such a finding could have been based, means that no particular class was identified as required by s 4D of the TP Act. It follows that the primary Judge's findings that breaches of s 45(2)(a)(i) and s 45(2)(b)(i) of the TP Act had been established cannot be sustained. In view of this conclusion, it is unnecessary for us to come to a final view as to the argument that there is a lack of particularity in the class of persons identified by the primary Judge by reason of circularity. That issue, and related issues, are likely to be addressed in the forthcoming appeal to the High Court in News Limited & Ors v South Sydney District Rugby League Football Club Limited & Ors, S 164/2001 (special leave granted 15 February 2002). It is therefore not appropriate for us to undertake a comprehensive review of the issue ourselves, including the reconsideration of ASX Operations v Pont Data, which was suggested by the appellants.
THE MARKET
109 As the primary Judge observed, the definition of the relevant market in the present case is important for two purposes:
* first, to define the market in which Rural Press and Bridge Printing competed through the Standard, to determine whether a provision of the arrangement or understanding, or of the proposed arrangement or understanding, had the purpose or likely effect of substantially lessening competition (TP Act, s 45(2)(a)(ii) and s 45(2)(b)(ii)); and
* secondly, to determine whether Rural Press and Bridge Printing had a substantial degree of power in a market and whether they had taken advantage of that power for a proscribed purpose (TP Act, s 46(1)).
110 The appellants did not suggest that the primary Judge had misstated the principles governing the definition of the appropriate market. Their contention was that his Honour had erred in identifying the Murray Bridge newspaper market as the relevant market in this case. In particular, they contended that the primary Judge had failed to consider, or had given insufficient weight to evidence that suggested that there was "fierce competition" for advertising between regional newspapers and commercial radio stations in regional South Australia, including in the area served by the Standard. The primary Judge should have concluded, so it was argued, that the product market included local commercial radio stations broadcasting to the Murray Bridge area. The appellants also submitted, but without developing the contention, that the geographic extent of the relevant market was wider than the Murray Bridge area. It was not contended before the primary Judge that, if there were a newspaper market, it was wider than a market for regional newspapers.
111 Section 4E of the TP Act directs attention not merely to the alleged infringer's product but to products which are "substitutable for, or otherwise competitive with" that product. Although pre-dating the enactment of s 4E in 1977, the approach taken by the Trade Practices Tribunal in Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169, at 190, in a passage quoted by the primary Judge in the present case, has been frequently invoked:
"A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them. (If there is no close competition there is of course a monopolistic market.) Within the bounds of a market there is substitution - substitution between one product and another, and between one source of supply and another, in response to changing prices. So a 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. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm's product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives.It is the possibilities of such substitution which set the limits upon a firm's ability to `give less and charge more'. Accordingly, in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were to `give less and charge more' would there be, to put the matter colloquially, much of a reaction? And if so, from whom? In the language of economics the question is this: From which products and which activities could we expect a relatively high demand or supply response to price change, ie a relatively high cross-elasticity of demand or cross-elasticity of supply?"
See Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1989] HCA 6; (1989) 167 CLR 177 ("Queensland Wire"), at 188, per Mason CJ and Wilson J; at 200, per Dawson J; at 210, per Toohey J. Dawson J pointed out in Queensland Wire, at 199, that the basic test for setting the limits of a market involves ascertaining cross-elasticities of both supply and demand, that is the extent to which the supply of a product or service responds to changes in the price of another product or service.
112 The cases recognise that substitutability is a matter of degree. In Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1991] FCA 621; (1991) 33 FCR 158, French J (with whom Spender and O'Loughlin JJ agreed) quoted (at 178), with approval, the following passage from P Areeda and L Kaplow, Antitrust Analysis (4th ed 1988), at 572:
"A vast number of firms might have some actual or potential effect on a defendant's behaviour. Many of them, however, will not have a significant effect and we attempt to exclude them from the relevant market in which we appraise a defendant's power. We try to include in the relevant market only those suppliers - of the same or related product in the same or related geographic area - whose existence significantly restrains the defendant's power. This process of inclusion and exclusion is spoken of as market definition."
The passage was also cited with approval by von Doussa J (with whom O'Loughlin and Drummond JJ agreed) in Davids Holdings Pty Ltd v Attorney-General (Cth) (1994) 49 FCR 211, at 234; see, also, Queensland Wire, at 199, per Dawson J.
113 That the application of the apparently well settled principles can lead to differences of opinion is illustrated by the recent decision of the Full Court in Australian Competition and Consumer Commission v Boral Ltd [2001] FCA 30; (2001) 106 FCR 328 (the High Court has reserved judgment on the appeal pursuant to a grant of special leave). There the members of the Full Court preferred a significantly narrower definition of the relevant market than that adopted by the primary Judge. In this case the appellants argued for a wider market than that found by the primary Judge. While the focus of the debate was on the evidence, it is convenient to restate the relevant principles.
114 As Professor Brunt has observed, (M Brunt, "`Market Definition' Issues in Australian and New Zealand Trade Practices Litigation" (1990) 18 Aust Bus LR 86, at 126-127):
"market definition is but a tool to facilitate a proper orientation for the analysis of market power and competitive processes - and should be taken only a sufficient distance to achieve the legal decision. The elaborateness of the exercise should be tailored to the conduct at issue and the statutory terms governing breach....There can be more than one `relevant market' for a particular case, in the sense of markets that will attract liability".
See also Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313, at 328, per curiam. Professor Brunt's observations reflect the comment by Mason CJ and Wilson J in Queensland Wire, at 187-188, that a s 46 case
"necessarily begins with a description of the market in which the defendant is thought to have a substantial degree of power. In identifying the relevant market, it must be borne in mind that the object is to discover the degree of the defendant's market power. Defining the market and evaluating the degree of power in that market are part of the same process, and it is for the sake of simplicity of analysis that the two are separated.... After identifying the appropriate product level, it is necessary to describe accurately the parameters of the market in which the defendant's product competes: too narrow a description of the market will create the appearance of more market power than in fact exists; too broad a description will create the appearance of less market power than there is."
115 It is necessary to bear in mind not only that there might be more than one market relevant to a particular case but, as Deane J said in Queensland Wire (at 195), the word "market"
"is not susceptible of precise comprehensive definition when used as an abstract noun in an economic context. The most that can be said is that `market' should, in the context of the Act, be understood in the sense of an area of potential close competition in particular goods and/or services and their substitutes".
Deane J went on to note (at 196) that the identification of the relevant market for the purposes of s 46 of the TP Act:
"involves value judgments about which there is some room for legitimate differences of opinion. The economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted. One overall market may overlap other markets and contain more narrowly defined markets which may, in their turn, overlap, the one with one or more others. The outer limits (including geographic confines) of a particular market are likely to be blurred: their definition will commonly involve assessment of the relative weight to be given to competing considerations in relation to questions such as the extent of product substitutability and the significance of competition between traders at different stages of distribution."
116 The primary Judge made a number of findings of significance to the market question. These included the following:
* The package of information and advertising provided by the Standard to its customers was presented in printed form, readily accessible as required. The information provided by the local or community radio stations was ephemeral and not stored for later use, although it might have been repeated.
* The target audience of local commercial radio stations was different from and wider than the target consumers or readers of regional newspapers. In particular, Radio 5MU had a permitted broadcast area that was much broader than the prime circulation area of the Standard. Indeed, Radio 5MU broadcast in an area covered by eleven regional newspapers.
* While there was competition for advertisers between the publishers of regional newspapers and the operators of local radio stations, the choice of advertising medium was not generally driven by price, but by the advertiser's preference for one advertising medium over the other or by a view as to the appropriate mix of advertising required to reach the desired audience.
* The selection of advertising on radio rather than the regional newspaper, or vice versa, was not price sensitive, but was driven by the perceptions of advertisers as to the nature and effectiveness of the communication and the scope of the targeted market. That is, the choice was driven by the considerations reflecting differences in the form of the respective products.
* There was no evidence that a change in advertising rates for the Standard would result in a local radio station supplying advertising in printed form.
* There was nothing to suggest that readers of the Standard would cease purchasing it if its price were increased and elect to rely on radio for their local news and advertising information.
* In effect, there was no real competition for readers or listeners between the Standard and Radio 5MU.
117 The Rural Press parties directly challenged only the last of these factual findings, which was said to be against the weight of the evidence. But the principal evidence relied on to support the challenge (that of Mr Pope, a director of a company operating a hardware store) suggested that the local newspaper and radio station provided complementary rather than competing services to residents of the Murray Bridge area. There was other evidence to similar effect. For example, there was evidence that the different form in which newspapers and radio convey information and advertising made it difficult to say that the Standard and Radio 5MU competed for readers and listeners in the area where their operations overlapped. In addition, Professor Findlay, an economist whose evidence the primary Judge appeared to regard as having some value on this issue, expressed the opinion that radio and print advertising were complementary rather than competitive. It cannot be said that his Honour's finding, that there was no real competition between the Standard and Radio 5MU for readers or listeners, was against the weight of the evidence.
118 The primary Judge was conscious that the judgment he was required to make involved questions of degree. He made that judgment having regard to the matters identified in Re Queensland Co-Operative, particularly customer attitudes, technology (including the form in which information and advertising were conveyed) and the likely impact of price changes both on the demand and the supply side. The factual findings, especially those indicating that significant increases in advertising rates by the Standard would have relatively little impact upon local advertisers' choice of media or on the habits of readers, support the conclusion reached by the primary Judge.
119 We were taken by Mr Douglas to passages in the evidence where particular witnesses said that they considered that there was fierce competition for advertisers between regional newspapers and commercial radio stations. The primary Judge was well aware, however, that witnesses had expressed a range of views as to the extent of competition between regional newspapers and local radio stations for advertising. He referred to the various opinions that had been expressed and concluded that the selection of one medium rather than the other by particular advertisers was not driven by price. He could also take into account evidence of behaviour, such as the statement of Ms Price, who was responsible for promoting the Standard, that she had never inquired about advertising rates on Radio 5MU. In our opinion, it was open to his Honour to interpret the evidence as he did.
120 It is true that the evidence indicated some advertisers might select the Standard rather than Radio 5MU in which to advertise on certain occasions but choose the radio station on others. As the Full Court pointed out in Arnotts v Trade Practices Commission, at 331-332, however, the fact that on some occasions consumers (in this case local advertisers) choose one product rather than another does not establish that the two products are substitutable within a single market. Evidence of this kind may suggest that there is an overlap or blurring of different markets (see Queensland Wire, at 196, per Deane J). But it does not demonstrate that the primary Judge fell into error in making what Deane J in Queensland Wire referred to as the value judgment required in identifying the relevant market.
121 In our opinion, the findings of fact made by the primary Judge supported his conclusion that the relevant market for the purposes of ss 45 and 46 of the TP Act was the Murray Bridge newspaper market. In a case of this kind, where questions of judgment or degree are involved, it may be appropriate to recognise the particular advantages enjoyed by the primary Judge in evaluating the evidence (even though the volume of evidence on the market question was relatively modest): Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833, at [24]-[25], per Allsop J (with whom Drummond and Mansfield JJ agreed); cf ACCC v Boral, at 377-379, per Beaumont J. Whether or not this is so, the primary Judge has not been shown to have erred on the market issue.
DID THE ARRANGEMENT HAVE THE PURPOSE OR EFFECT OF SUBSTANTIALLY LESSENING COMPETITION?
122 The appellants attacked the primary Judge's finding that a provision of the arrangement to which Rural Press, Bridge Printing and Waikerie Printing were parties had, or was likely to have the effect of, substantially lessening competition in the Murray Bridge newspaper market, thereby contravening s 45(2)(a)(ii) of the TP Act. They made a similar attack on the finding that Rural Press and Bridge Printing had given effect to a provision of the arrangement which provision had, or was likely to have, the effect of substantially lessening competition in the Murray Bridge newspaper market, thereby contravening s 45(2)(b)(ii) of the TP Act.
123 Mr Douglas, on behalf of the appellants, did not suggest that his Honour had misapplied the concept of "substantially" lessening competition. The primary Judge quoted the well-known observations of Lockhart J in Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1982] FCA 206; (1982) 62 FLR 437, at 444:
"The word `substantial' is imprecise and ambiguous. Its meaning must be taken from its context. It can mean considerable or big... It can also mean not merely nominal, ephemeral or minimal. Sometimes it is used in a relative sense, and at other times to indicate an absolute size or quantity.In the context of s 45, the word `substantial' is used in a relative sense. The very notion of competition imports relativity. One needs to know something of the business carried on in the relevant market and the nature and extent of the market before one can say that any particular lessening of competition is substantial."
Lockhart J went on to observe that the TP Act:
"is concerned to promote and stimulate competition between business people and to discourage and remove unfair business practices which inhibit competition. Parliament cannot have intended trivial or insubstantial interferences with competition to fall within the prohibition of s 45."
Later (at 445) he pointed out that in Tillmans Butcheries Pty Ltd v Australasian Meat Industry Employees' Union [1979] FCA 84; (1979) 42 FLR 331, a Full Court construed the word "substantial", as used in s 45D of the TP Act, as meaning something more than trivial, minimal or nominal.
124 Lockhart J, in a passage (at 445) also cited by the primary Judge, did not find it necessary to reach a final conclusion on the point "except to say that the lessening of competition must be at least real or of substance". He did say, however, that the word as used in the context of s 45 of the TP Act means "considerably". It would seem that the primary Judge, having referred to this passage, adopted that meaning.
125 It may be, as Smithers J suggested in Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd [1982] FCA 178; (1982) 64 FLR 238, at 260, that it would be better not to substitute other adverbs for "substantially" which is
"a word the meaning of which in the circumstances in which it is applied must, to some extent, be of uncertain incidence and a matter of judgment".
In any event, it has not been suggested that the primary Judge applied a standard unduly unfavourable to the appellants.
126 The appellants submitted that the primary Judge had paid insufficient attention to what were said to be several facts, namely that
* the River News had made only a minor incursion into a small portion of the relevant market;
* the geographical markets for regional newspapers in South Australia were such that it was highly unlikely that a second newspaper in the same market would survive; and
* the degree of competition between the River News and the Standard, when viewed in the context of the whole Murray Bridge newspaper market, was slight.
In view of these matters, so it was argued, there was no significant competition at the time that the River News withdrew, or largely withdrew, from the Murray Bridge newspaper market and thus no substantial lessening of competition in that market.
127 The appellants' submissions, in important respects, are difficult to reconcile with the findings made by the primary Judge. Contrary to Mr Douglas' suggestion that the River News' incursion into the Murray Bridge newspaper market was "doomed", the primary Judge found (at [64]; 42,726) that the River News had been well received by people in the Mannum area and that there had been a progressive increase in its sales and advertising revenue. His Honour also found (at [115]; 42,739) that but for the arrangement between Rural Press, Bridge Printing and Waikerie Printing, Mr Pick would have continued to publish and promote the River News into Mannum in competition with the Standard. These findings were based in part upon documentary evidence, but also on a preference for Mr Pick's evidence over that of the Taylors, whose claim that the expansion of River News into Mannum was unprofitable his Honour considered to be "unconvincing". There is no basis for challenging these findings in this Court.
128 It is true that the incursions by the River News into the Murray Bridge newspaper market were confined to a relatively small area, coinciding with the new boundaries of the Mid-Murray Council. It is also true that the number of copies of the River News sold in the area was, in raw numbers, modest. But this does not mean that the level of competition introduced into the market by the River News can be dismissed as trivial or insubstantial. The circulation of the Standard itself was not large, reflecting the small population of the geographic area constituting the market. The River News was effectively the only competition in that market. The evidence of Mr Pick was that the River News was offering cheaper advertising rates than the Standard (although rates must be judged by reference to the audience likely to be reached) and was taking steps to increase circulation. And as Mr Douglas correctly accepted, an assessment of the competition offered by River News has to take into account the potential to expand its operations. As was said by the Full Court in ASX Operations v Pont Data, at 478, in asking whether the provisions of an agreement or an arrangement have, or would be likely to have, the effect of substantially lessening competition, one looks not so much at the position of particular competitors "as to the state or condition constituting the market ... in question, actually and potentially".
129 What Rural Press and Bridge Printing did was to nip the actual and potential competition in the Murray Bridge newspaper market "in the bud": Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) 13 ATPR ¶41-076, at 52,145, per French J. Not only did their actions effectively snuff out the services actually provided by the River News to readers and advertisers in Mannum, but also the potential for the River News to expand those services and compete more effectively with the Standard on price and quality. The section of the public that might have benefited from the competition in a market previously (and subsequently) dominated by a single player was denied that opportunity.
130 In assessing whether there was a substantial lessening of competition in the market, the primary Judge was entitled to take into account the response of Rural Press and Bridge Printing to the competitive conduct of Waikerie Printing. His Honour found that the outbreak of competition "prompted Rural Press and Bridge [Printing] to respond in a quite specific and firm way". This action reflected Mr Law's concern, expressed to Mr Robinson, that things had the potential to get "messy", by which he said that he meant the "potential for some competition or conflict". In other words, Rural Press and Bridge Printing did not regard Waikerie Printing's competitive conduct in the Murray Bridge newspaper market to be trivial or insubstantial.
131 In Dandy Power v Mercury Marine, Smithers J observed (at 260), in relation to the expression "substantially lessened in a market":
"it is the degree to which competition has been lessened which is critical, not the proportion of that lessening to the whole of the competition which exists in the total market. Thus a lessening in a significant section of the market, if a substantial lessening of otherwise active competition may, according to circumstances, be a substantial lessening of competition in a market."
This passage was quoted with approval by French J, with whom Spender and O'Loughlin JJ agreed, in Singapore Airlines Ltd v Taprobane Tours WA, at 181.
132 In the present case, an arrangement was made between the dominant player in a market and, in effect, its only direct competitor. A provision of the arrangement had the effect of removing the only competitor from the market. The only effective competition in that market was thereby snuffed out. Even though the competitor operated in only one geographical component of the market, an appellate court in these circumstances will be slow to overturn a finding that the provision had the effect of substantially lessening competition in the market.
133 In our view, no error has been shown in the primary Judge's conclusion that Rural Press and Bridge Printing each contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act.
DID RURAL PRESS AND BRIDGE PRINTING TAKE ADVANTAGE OF THEIR MARKET POWER FOR A PROSCRIBED PURPOSE?
134 We have upheld the primary Judge's finding that the Murray Bridge newspaper market was the relevant market for the purposes of determining whether Rural Press and Bridge Printing had a substantial degree of power in a market and whether they had taken advantage of that power for a proscribed purpose. In these circumstances, there is no challenge to the finding that Rural Press and Bridge Printing had a substantial degree of power in that market.
135 The primary Judge also found that Rural Press and Bridge Printing had acted for the purpose of deterring or preventing Waikerie Printing from engaging in competitive conduct in the Murray Bridge newspaper market. We are prepared to assume that that finding, too, should be upheld. The question is then whether Rural Press and Bridge Printing took advantage of their power in the Murray Bridge newspaper market for the relevant purpose, so as to contravene s 46(1)(a) or s 46(1)(c) of the TP Act.
136 Several points should be made at the outset. First, the concept of "market power" is not defined in the TP Act. Although there is no issue that Rural Press and Bridge Printing had substantial market power in the Murray Bridge newspaper market, it is useful to identify what the concept means. In Queensland Wire, Mason CJ and Wilson J defined "market power" as (at 188):
"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".
Dawson J in Queensland Wire, in a passage cited with approval by the majority in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1, at 21, said this (at 200):
"The term `market power' is ordinarily taken to be a reference to the power to raise price by restricting output in a sustainable manner.... But market power has aspects other than influence upon the market price. It may be manifested by practices directed at excluding competition such as exclusive dealing, tying arrangements, predatory pricing or refusal to deal.... The ability to engage persistently in these practices may be as indicative of market power as the ability to influence prices."
Dawson J went on to quote from Kaysen and Turner, Antitrust Policy: An Economic and Legal Analysis (1959), at 75:
"A firm possesses market power when it can behave persistently in a manner different from the behaviour that a competitive market would enforce on a firm facing otherwise similar cost and demand conditions."
137 Section 46(1) of the TP Act does not prohibit the acquisition of market power as such. Nor does it necessarily prohibit conduct by a corporation with the requisite degree of market power for a proscribed purpose. As was said by the majority in Melway Publishing v Hicks, at 21:
"Section 46 of the Act requires, not merely the co-existence of market power, conduct, and proscribed purpose, but a connection such that the firm whose conduct in question can be said to be taking advantage of its power".
A corporation may, however, take advantage of market power without doing anything reprehensible or hostile: Queensland Wire, at 190-191, per Mason CJ and Wilson J; at 194, per Deane J; at 202, per Dawson J. The question is simply whether the corporation has used its market power for a proscribed purpose, thereby undermining competition: Queensland Wire, at 191, per Mason CJ and Wilson J; Melway Publishing v Hicks, at 17.
138 Care must be taken not to proceed too quickly from a finding about purpose to a conclusion that the corporation with the proscribed purpose has taken advantage of its market power: Melway Publishing v Hicks, at 18. In Melway Publishing v Hicks itself, the High Court upheld a finding that Melway's refusal to continue to supply its street directories to one of its distributors was for a proscribed purpose, but overturned a finding that the refusal amounted to a use of Melway's market power in the wholesale and retail market for street directories.
139 The test to be applied in determining whether a corporation has taken advantage of its market power is to ask how it would have been likely to behave in a competitive market. This, generally speaking, involves a process of economic analysis having regard to the purpose of s 46, namely to promote competition rather than the private interests of particular persons or corporations: Melway Publishing v Hicks, at 20-24. But the process does not require it to be assumed that the corporation is operating in a perfectly competitive market. The comparison is between what has been done with what it might be thought the corporation would do if the corporation lacked substantial market power: Melway Publishing v Hicks, at 21.
140 In Melway Publishing v Hicks itself, Melway's refusal to supply its former distributor with its street directories was held to be "a manifestation of [its] distributorship system". In these circumstances, the majority stated (at 26) that:
"the real question was whether, without its market power, Melway could have maintained its distributorship system, or at least that part of it that gave distributors exclusive rights in relation to specified segments of the retail market."
The High Court answered that question in the affirmative, because Melway's segmented distribution system had predated its position of market dominance and there was no reason to believe that it would not be willing and able to continue its system in a competitive market.
141 The case pleaded by the ACCC was that Rural Press and Bridge Printing took advantage of their market power in the Murray Bridge newspaper market so as to deter or prevent Waikerie Printing from engaging in competitive conduct in that market or, alternatively, for the purpose of eliminating or substantially damaging Waikerie Printing in that market. This case was upheld by the primary Judge. The operative conduct of Rural Press was found to be a threat to compete with Waikerie Printing in the Riverland market in which Rural Press and Bridge Printing had no market power (or, indeed, presence).
142 In our opinion, the finding that that conduct constituted taking advantage of market power in the Murray Bridge market within the meaning of s 46 cannot be supported. Of course, market power in one market may be used to deter competition in another market. For example, the sole supplier of goods in a market might threaten to cut off supplies of goods in that market to a customer in order to deter that customer from competing with the supplier in another market. However, there is no allegation here that Rural Press and Bridge Printing threatened to do anything in the Murray Bridge newspaper market in which they held market power. On the contrary, they threatened action in a market in which there is no suggestion that they had market power.
143 Mr Hilton endeavoured to support the primary judgment by reference to the circumstance that Rural Press and Bridge Printing had immediate and ready access to a printing press and to the necessary administrative and professional structure to publish a competing newspaper. He submitted that because they were present in Murray Bridge, with the power to produce and distribute a rival publication at marginal cost, the threat to compete in the Riverland was made credible. That may be a reasonable conclusion. However, it does not involve any use of market power in the Murray Bridge newspaper market. Precisely the same reasoning would apply to a new entrant to that market who had no market power but had all of the required facilities and expertise which were under-utilised in the Murray Bridge newspaper market. On the other hand, a party with market power in a market might have all its resources occupied in servicing that market.
144 An essential element in the reasoning of the primary Judge was that the market power of Rural Press and Bridge Printing in the Murray Bridge newspaper market included their general financial and other resources. It was conceded by Mr Hilton that use of (or the threat to use) financial resources, of itself, cannot be a use of market power. The proposition that financial resources may be relevant to the existence of market power is debatable, although supported by some authorities which may fall to be considered in the appeal to the High Court from the decision of the Full Court in ACCC v Boral Ltd. Even if correct, the proposition is of no importance here, as the existence of market power is not in issue.
145 We have referred to the definitions of market power adopted in Queensland Wire and Melway Publishing v Hicks. In the latter case, the majority said (at 27):
"market power means capacity to behave [in the market] in a certain way (which might include setting prices, granting or refusing supply, arranging systems of distribution), persistently, free from the constraints of competition." (Emphasis added.)
The existence of market power is only relevant in relation to the market being considered (Queensland Wire at 187-188).
146 The relevant point for this case is whether there was conduct which amounted to the use (or abuse) of market power in the market where the power existed. The existence of resources may have been the ultimate cause of the existence of market power, or the result of the existence of market power, but does not constitute the market power or, more particularly, the use of market power. With the possible exception of the interlocutory decision in Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978) 33 FLR 294, no authority was referred to which would support the proposition that the use of resources, whether physical or financial, derived from market A, where market power exists, to facilitate conduct in market B, is taking advantage of market power in market A. Further, reference was not made to any evidence to that effect. In theory, there might be circumstances where the use of facilities devoted to market A by a party which has power in that market, for use in market B, could be said to involve a use of market power derived from market A. For example, if the threat made here by the appellants were carried out, and printing and distribution of the new Riverland paper meant that the appellants could not service the Murray Bridge market because of the diversion of resources to the Riverland, then (depending upon the evidence in the case) it might be said that the appellants could not have acted in this way in the Riverland market if there had been effective competition in the Murray Bridge newspaper market. Nothing like this has been suggested in the present case.
147 Victorian Egg Marketing Board v Parkwood Eggs was an unusual case. The Victorian Egg Board sold eggs in the Australian Capital Territory, at what might have amounted to a predatory price, because it had surplus eggs due to its statutory monopoly and acquisition power in Victoria. It was argued that the purpose of the predatory pricing was to damage Parkwood in retaliation for the activities of an associated company in the Victorian market. The decision was an appeal against the grant of an interlocutory injunction made on a preliminary basis, and, so far as was relevant, only considered whether a prima facie case sufficient for that purpose had been made out. The position was well explained in the judgment of Brennan J (at 314):
"These are questions of importance and difficulty which were not to be solved in a hurried interlocutory proceeding. If his Honour formed the view, as he must have done and as he was entitled to do, that the applicant had a fair chance of success in arguing for a construction of s 46 which would support his claim for an injunction at the hearing of the principal proceedings, that is enough. An appeal does not entitle an unsuccessful respondent to turn the question of a prima facie case into a demurrer to the successful applicant's claim, merely because there is time to develop more fully an argument on appeal. There have been cases (of which the Band of Hope case, supra, is an example) where the appellate court has treated an appeal as a demurrer, but that is not the present case. This court stands, for the purpose of this appeal, in the shoes of the primary judge and makes an assessment as he was required to do of the strength of the case for the injunction.The relevant propositions of law on which Parkwood here relies are propositions which require the construction of provisions of the Trade Practices Act which are drawn in general terms. These provisions will attract much judicial exegesis. The provisions have not hitherto borne such a traffic of litigation as to mark the pathways of precedent. As the meaning of provisions becomes defined, so the test of a prima facie case will become more precise and more confining. In these proceedings, Parkwood showed a prima facie case under s 46 and the court must therefore address itself to the second inquiry, the balance of convenience."
The interlocutory nature of the decision makes it of little value in resolving the present case.
148 In any event, there is a significant distinction between the facts in the present case and those in Victorian Egg Marketing Board v Parkwood Eggs. In the latter, the manner in which the Board acquired ownership of eggs in Victoria was regarded as an important element in its control of the Victorian market. It regulated prices in Victoria and was not required to maximise profit. Bowen CJ considered that it had been established, at least on a prima facie basis, that the manner in which the Board controlled the Victorian market enabled it to engage in price cutting in the Australian Capital Territory: see at 303-304. In other words, but for the Board's dominance of the Victorian market and its unusual powers to control that market, it could not have engaged in price cutting in the Territory. In the present case, Rural Press and Bridge Printing could have threatened credibly to enter the Riverland market and, indeed, actually entered that market regardless of whether they had a substantial degree of market power in the Murray Bridge newspaper market.
149 The matter can be analysed by considering the question which the primary judge posed, (at [128]; 42,741):
"... whether, even without the substantial market power ..., Rural Press and Bridge might have been able to act in the same way."
That this is the correct question is suggested by the majority judgment in Melway Publishing v Hicks. In any event, the ACCC did not dispute that the question was the appropriate one to ask.
150 In our opinion, the answer is plainly yes. Rural Press and Bridge Printing had ample financial and physical resources to make the credible threat that was made, regardless of the market power they held in the small Murray Bridge newspaper market. They may have been motivated by a desire to maintain that market power in making the threat, but they were not taking advantage of that market power in so doing. Even if there had been a perfectly competitive market in the Murray Bridge newspaper market, Rural Press and Bridge Printing could have threatened to launch (and could have actually launched) a foray into the Riverland market. Had there been a perfectly competitive market in the Murray Bridge newspaper market, they may have lacked the motivation to make the threat, but they could have acted in precisely the same way. There is no finding that Rural Press and Bridge Printing could not have continued to service fully the Murray Bridge newspaper market in addition to the Riverland area. On the contrary, the findings rather assume that there was spare capacity.
151 The primary judgment does not analyse the evidence as to the location and operation of the physical resources of Rural Press and Bridge Printing. Evidence led by the ACCC to which we were referred included the following:
"29. From my personal knowledge of the regional newspaper industry in South Australia and my involvement with Country Press South Australia, .... I am aware that there are approximately thirty regional newspapers in the State. Approximately half of those newspapers are published by companies owned by Rural Press Limited (`Rural Press newspapers'). The remainder are independently owned family businesses, except for the newspaper circulated in and around Mt Gambier, owned by the Scott Corporation. The Bunyip and The Mount Barker Courier are both independently owned. The Herald is a Rural Press newspaper.Printing of other Newspapers
30. From my experience in the regional newspaper industry in South Australia, I am aware that Rural Press owns and operates two printing operations in South Australia. They are located at Whyalla and Murray Bridge.
31. To my knowledge, the following newspapers are printed by the Rural Press printing operation at Murray Bridge:
(a) The Islander, published at Kingscote;
(b) The Murray Valley Standard, published at Murray Bridge;
(c) Southern Argus, published at Strathalbyn;
(d) Barossa and Light Herald, published at Tanunda; and
(e) The Times, published at Victor Harbor.
The Southern Argus is the only independent newspaper printed at Murray Bridge. The remainder are Rural Press newspapers.
32. To my knowledge, the following regional newspapers are printed by the Rural Press printing operation at Whyalla:
(a) West Coast Sentinel, published at Ceduna;
(b) Northern Argus, published at Clare;
(c) The Transcontinental, published at Port Augusta;
(d) The Recorder, published at Port Pirie; and
(e) Whyalla News, published at Whyalla.
All of these newspapers are Rural Press newspapers."
The facility at Murray Bridge serviced a number of other areas. In those circumstances, there is no apparent connection between use of that facility to print a newspaper circulating in another area and the existence of power in the Murray Bridge market. The ACCC chose to plead and argue for a very limited market, with the obvious advantages that accrued to it in relation to the existence of market power and the effect of the arrangement upon competition in that limited market (cf Queensland Wire, at 187 per Mason CJ and Wilson J). It cannot put that aside by treating the resources of Rural Press and Bridge Printing, which have no relevant relationship with that narrow market, as resources of or attributable to that market.
152 We agree with the submission for the appellants that the private nature of the communications between the parties, relied upon by the primary Judge (at [130]-[132]; 42,742), is irrelevant to the question at issue. That feature of the conduct is not indicative of the ability to act free from competition.
153 In our opinion, the conclusion that Rural Press and Bridge Printing contravened s 46(1) of the TP Act cannot be sustained.
THE INDIVIDUAL RESPONDENTS: ACCESSORY LIABILITY
154 Mr Law and Mr McAuliffe appealed against the finding that each of them was knowingly concerned in the contraventions by Rural Press and Bridge Printing of s 45 (2)(a)(ii) and s 45(2)(b)(ii) and s 46(1) of the TP Act. Having regard to our conclusion that Rural Press and Bridge Printing did not contravene s 46(1) of the TP Act, the finding that Mr Law and Mr McAuliffe were each knowingly concerned in the contraventions of s 46(1) cannot stand. The only issue is whether the findings of accessorial liability in relation to the contraventions of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act should be set aside. Mr Douglas argued that they should be, on the ground that the primary Judge made no finding, and there was no evidence, that they or either of them had actual knowledge that the purpose or effect, or likely effect, of the arrangement between Waikerie Printing and those companies would be a substantial reduction in competition in the Murray Bridge newspaper market. In particular, it was submitted that this "question was never put to either of them".
155 We have already referred to his Honour's findings on, and to the evidence of, the involvement of Mr Law and Mr McAuliffe in the communications with the directors of Waikerie Printing. In ACCC v Rural Press (No. 1) his Honour dealt with the respondents who were individuals in a discrete section of his reasons for judgment. He specifically held (at [139]; 42,743-42,744) that each of Mr Law and Mr McAuliffe intended by their communications to procure a result whereby Waikerie Printing ceased to provide the information and services of the River News in the Mannum area. The primary Judge expressed himself satisfied (at [140]; 42,744) that those communications were directed to securing the commitment of Waikerie Printing to such a retreat and that "each participated in that process because they perceived the circulation and promotion of the River News in the Mannum area as being in competition with the Standard". His Honour allowed that:
"It may well be that, from the point of view of Law and McAuliffe, the competition to the Standard in its prime circulation area which was presented by the River News circulating in that part of the Standard's prime circulation area around Mannum was not great. But it was, and was perceived by them to be, competition."
Speaking of the arrangement between Waikerie Printing, on the one hand, and Rural Press and Bridge Printing on the other, in the context of the liability of the Taylors as accessories, his Honour found (at [141]; 42,744) that the purpose of the arrangement was that competition between the River News and the Standard around Mannum "should come to an end".
156 The primary Judge had earlier (at [136]; 42,743) identified the principles to be applied as follows:
"It is necessary that each of those persons participated in, or assented to, the contraventions with actual knowledge of the essential elements constituting the contraventions: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670; Crocodile Marketing Ltd v Griffith Vinters Pty Ltd (1989) 28 NSWLR 539. If it is shown that those persons had knowledge of all material circumstances and engaged in conduct which was part of the conduct constituting the commission of Rural Press, Bridge and Waikerie Printing respectively of the contraventions, those persons may be liable as accessories to the contraventions and knowingly concerned in, or party to them: Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 at 128. It is not necessary that the accessory should have appreciated that the conduct was unlawful: Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd [1999] FCA 1161; (1999) 166 ALR 74 at 117. There was no real issue between the parties as to those principles."
In argument before us, Mr Douglas on behalf of the appellants took issue with the proposition in the second last sentence of the above passage (although it was not made the subject of any specific challenge in the grounds of appeal). He submitted that such a statement was contrary to the law laid down by the High Court in Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661. Mr Douglas contended, in effect, that the ACCC had to show that Mr Law and Mr McAuliffe actually knew that what Rural Press and Bridge Printing were doing amounted to a contravention of the TP Act.
157 The issue decided in Yorke v Lucas was whether a person had aided, abetted, counselled or procured a contravention of s 52 of the TP Act, within the meaning of what is now s 75B(1)(a) of the TP Act, or, alternatively, whether the person had been, directly or indirectly, knowingly concerned in, or party to, the contravention within the meaning of s 75B(1)(c). Mason ACJ, Wilson, Deane and Dawson JJ held (at 670) that a person cannot be knowingly concerned in a contravention unless he or she has knowledge of the essential facts constituting the contravention. Their Honours said:
"In our view, the proper construction of par (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention."
They had earlier emphasized that s 75B made use of concepts derived from the criminal law. The words "aided, abetted, counselled or procured" used in par (a) meant in criminal law, according to their Honours (at 667), that:
"... a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it. To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime." (Emphasis added.)
158 In Yorke v Lucas Brennan J also pointed out (at 673) that substantially the same terms are used in ss 75B and 76 of the TP Act and that the meaning of the corresponding terms in those sections is substantially the same. (The relevant provision in this case, so far as pecuniary penalties are concerned, is s 76(1)(e) which corresponds with s 75B(c) under consideration in Yorke v Lucas. The same language is used in s 80(1)(e) of the TP Act, in the context of the power to grant injunctions.) Brennan J said in respect of the requirement of knowledge under s 75B(1)(c) (at 676):
"... a person cannot be made liable under that paragraph as for contravention of a provision of Pt IV or Pt V unless he has knowledge of `the essential matters which constitute the offence'. That phrase is taken from a passage in the judgment of Lord Goddard C.J. in Johnson v. Youden [[1950] 1 KB 544 at 546], which was cited with approval in Giorgianni [v The Queen [1985] HCA 29; (1985) 156 CLR 473 at 481]:`Before a person can be convicted of aiding and abetting the commission of an offence he must at least know the essential matters which constitute that offence. He need not actually know that an offence has been committed, because he may not know that the facts constitute an offence and ignorance of the law is not a defence.'
In Giorgianni, Wilson, Deane and Dawson JJ. held that intentional participation in a crime was necessary to make a person criminally liable for aiding, abetting, counselling or procuring its commission, and said [at 506]:
`The necessary intent is absent if the person alleged to be a secondary participant does not know or believe that what he is assisting or encouraging is something which goes to make up the facts which constitute the commission of the relevant criminal offence. He need not recognize the criminal offence as such, but his participation must be intentionally aimed at the commission of the acts which constitute it.' " (Emphasis added.)
159 The statement by the primary Judge to which the appellants have taken objection paraphrases almost exactly what was said by Lindgren J in Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd (No. 2) [1999] FCA 1161; (1999) 95 FCR 302, at 346: "It is not required that the accessory should have appreciated that the conduct was unlawful." This formulation appears to have been devised by Lindgren J and follows a pithy discussion by his Honour of accessory liability under s 75B(1)(c) of the TP Act, which commences naturally enough with Yorke v Lucas but also includes Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222; (1994) 123 ALR 681. The last-mentioned case contains a full discussion of the authorities by Burchett J, at 692-695, and was approved by a Full Court of this Court in Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 630, to which Lindgren J also referred. In Richardson & Wrench v Ligon, Burchett J set out (at 694) part of the following excerpt from the judgment of the High Court in Pereira v Director of Public Prosecutions [1988] HCA 57; (1989) 82 ALR 217, at 219-220:
"Even where, as with the present charges, actual knowledge is either a specified element of the offence charged or a necessary element of the guilty mind required for the offence, it may be established as a matter of inference from the circumstances surrounding the commission of the alleged offence. However, three matters should be noted. First, in such cases the question remains one of actual knowledge: Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473 at 504-507; [He Kaw Teh v R [1985] HCA 43; (1985) 157 CLR 523, at 570]. It is never the case that something less than knowledge may be treated as satisfying a requirement of actual knowledge. Secondly, the question is that of the knowledge of the accused and not that which might be postulated of a hypothetical person in the position of the accused, although, of course, that may not be an irrelevant consideration. Finally, where knowledge is inferred from the circumstances surrounding the commission of the alleged offence, knowledge must be the only rational inference available. All that having been said, the fact remains that a combination of suspicious circumstances and failure to make inquiry may sustain an inference of knowledge of the actual or likely existence of the relevant matter."
160 In our opinion, Lindgren J's formulation in Giraffe World, which the primary Judge applied in the present case, accords with the principles relating to accessory liability stated by the High Court in the extracts reproduced above. Moreover, it is in line with the recent views expressed (admittedly obiter) in the NSW Court of Appeal in Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1, at 109-112, per Malcolm A-JA 149-150 per McPherson A-JA, and 243, per Ormiston A-JA. In that case Malcolm A-JA said (at 109) of s 75B(1)(c), in the context of a contravention of s 52 of the TP Act:
"In Yorke v Lucas, it was held that for liability to be attracted the person concerned must be an intentional participant and possessed of knowledge of the matters or things constituting the contravention, even if he did not know that they did constitute a contravention. It is enough to know the essential facts."
161 In the present case, the principal contravention of s 45(2) of the TP Act was identified in the declaration made by the primary Judge. The declaration was that each of Rural Press, Bridge Printing and Waikerie Printing
"by themselves, their servants, or agents, contravened sections 45(2)(a)(ii) and 45(2)(b)(ii) of the Act by entering into and giving effect to an arrangement which had the purpose and effect of substantially lessening competition in the market for the provision of regional newspapers in the Murray Bridge district."
162 It may be readily accepted, as the appellants contended in the Court below and before us, that concepts underlying s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act can be elusive. In this case, however, the primary Judge made findings sufficient to establish that Mr Law and Mr McAuliffe were aware of the material facts and circumstances constituting the contraventions of those provisions, even though they may not necessarily have turned their minds to the legal characterisation of those facts or circumstances or to the legality of the conduct. The primary Judge made specific findings about the role of Mr McAuliffe and Mr Law in the communications with the representatives of Waikerie Printing. Indeed, on those findings Mr McAuliffe and Mr Law were instrumental in the making of the arrangement that gave rise to the contraventions of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act. The other findings which we have recounted establish that Mr McAuliffe and Mr Law intended, by means of the arrangement, to cause Waikerie Printing to stop distributing the River News in the Mannum area and that they sought to bring about this result because they perceived that the River News was in competition with the Standard. The primary Judge found that each of them was aware of the general market in which the Standard operated. Plainly they were aware that the Standard was the only regional newspaper circulating in the Murray Bridge area, including Mannum, before the incursion by the River News. They intended that the incipient competition in that area should be brought to an end.
163 It was not, in our view, necessary for the primary Judge to find that Mr McAuliffe and Mr Law knew and appreciated that the purpose or effect of the arrangement was substantially to reduce competition in the market ultimately identified in the judgment. The definition of the market is a mixed question of fact and law involving sophisticated economic and legal concepts. It is not to be supposed that accessory liability is to depend on issues that business people are unlikely to address and, in any event, often cannot be resolved without detailed expert evidence and fine legal analysis. In the present case, the findings and the evidence amply support the conclusion that Mr Law and Mr McAuliffe had actual knowledge of the essential elements of the contraventions by Rural Press and Bridge Printing of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act.
THE ACCC'S CROSS-APPEAL
PENALTIES
164 The ACCC cross-appealed against the pecuniary penalties imposed on the appellants, on the ground that they were so manifestly inadequate as to demonstrate the primary Judge's discretion had miscarried. (There was no cross-appeal against the penalties imposed on Waikerie Printing and Paul Taylor.) The ACCC also submitted that his Honour's discretion on penalty miscarried because he had taken into account an irrelevant consideration, namely the manner in which the trial had been conducted.
165 It is convenient to deal first with the second point, because Mr Hilton accepted that otherwise the primary Judge's remarks as to the fixing of penalties were unexceptionable. As we have explained, in ACCC v Rural Press (No 2), the primary Judge took into account, on the question of penalty, the manner in which the hearing was conducted. The full passage is as follows (at [51]; 43,296-43,297):
"In my view, in this matter, both Rural Press and Bridge [Printing] should be given credit for their meaningful co-operation in the investigation of the ACCC and in the conduct of the hearing. They co-operated in the investigation through the production of documents and by making their employees available for interviews without compulsion and in other ways. They provided through their solicitors a detailed exposition of the communications, and their explanation of them. Their focus in the course of the hearing was directed to the initial issues, as they saw them, and sensibly acquiesced in the tender of much of the evidence and tested witnesses only where that was directly relevant to their case. The majority of cases have dealt with co-operation on behalf of the respondents by way of acknowledgement of liability which has effectively dispensed with litigation (see for example [Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR ¶41-763] at 40,986; [NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 141 ALR 640]; [Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No. 9) (2000) ¶ATPR 41-756], and [Trade Practices Commission v TNT Australia Pty Ltd (1995) ¶ATPR 41-375] ). In my view the factors which I have mentioned should also be taken into account in favour of Rural Press and Bridge [Printing] in fixing pecuniary penalties. Their conduct has facilitated the investigation and enabled the trial to be conducted efficiently." (Emphasis added.)
Later he also said of Waikerie Printing (at [61]; 43,298): "I give it credit for its sensible and focussed conduct of the hearing itself." And, finally, in fixing the penalties for Mr Law and Mr McAuliffe, his Honour said (at [67]; 43,299) that they "also share credit for the focussed conduct of the trial."
166 Mr Hilton submitted that these passages show that the primary Judge's exercise of his penalty-fixing discretion miscarried. He contended that there is no support in the authorities, or in principle, for a penalty to be reduced on account of the way in which litigation is conducted where liability is in issue. Mr Douglas argued in response that these particular remarks did not necessarily mean that his Honour had, in fact, given a discount on penalty by reference to the way in which the trial was conducted. We disagree and think it is quite plain in the context that that was precisely what the primary Judge meant to do. It is true that his Honour may not have made a substantial allowance because of this factor, since he mentioned it together with the parties' cooperation with the ACCC's investigation into the alleged contraventions. Nonetheless, we accept Mr Hilton's submissions that the conduct of the trial should not have been taken into account in fixing penalty, although it is something to which regard might have been had in relation to costs orders.
167 There is, in any event, another reason why the penalties imposed need to be reconsidered, although this consideration favours the appellants rather than the ACCC. For reasons we have given, we propose to set aside the declarations and orders based on what the primary Judge found were contraventions of s 46(1)(a) and s 46(1)(c) of the TP Act. We have also held, contrary to the primary Judge's conclusion that the arrangement did not contain an exclusionary provision and thus there was no contravention of s 45(2)(a)(i) or s 45(2)(a)(ii) of the TP Act. We have sustained only the primary Judge's declarations and orders based on the contraventions of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act. His Honour did not regard the conduct of Rural Press and Bridge Printing which constituted the contraventions of s 45 of the TP Act as the same conduct as that which constituted their contraventions of s 46 of the TP Act, despite the fact that he was prepared to impose a single penalty on each of the appellants. Accordingly, he took into account the fact that there were separate contraventions of ss 45 and 46 in determining the appropriate level of penalties.
168 It is therefore necessary for us to exercise afresh the discretion to fix penalties. That does not mean that we should ignore the carefully considered remarks of the primary Judge. We find ourselves substantially in agreement with his analysis, other than on the two issues we have identified. We do not think it necessary to repeat the factors that must be taken into account in fixing penalties. Nor do we think that this is the occasion for a comprehensive review of the authorities, particularly as the argument before us on penalties took place without the parties being aware of the conclusions we have ultimately reached on liability.
169 Mr Hilton submitted that the penalties in the order of those imposed on Rural Press and Bridge Printing, in particular, would be regarded by the commercial community as "derisory". We do not agree with this characterisation, especially taking into account his Honour's finding, with which we agree, that the contraventions should be regarded at the lower end of the scale. It is also necessary to bear in mind, as we have explained, that his Honour imposed penalties on the basis that the appellants contravened, or were involved in contraventions, of both ss 45 and 46 of the TP Act. As we have held, the appellants contravened, or were involved in contraventions of only s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act.
170 In the particular circumstances of the present case, we think it appropriate to fix penalties at the same levels as those fixed by the primary Judge. That is, Rural Press should be ordered to pay a penalty of $400,000, Bridge Printing $200,000, Mr Law $40,000 and Mr McAuliffe $30,000.
MANDATORY INJUNCTION?
171 That leaves for consideration the ACCC's appeal against the refusal of the primary Judge to grant an injunction requiring Rural Press and Bridge Printing to undertake for a period of five years a "trade practices compliance program". (Once more, there is no cross-appeal against his refusal to make such an order in respect of Waikerie Printing.)
172 Mr Hilton submitted that the primary Judge erred in finding that "the compliance program proposed by Rural Press was adequate in the circumstances". In fact, his Honour made no finding in these terms. On the contrary, his Honour adverted to the fact (at [32]; 43,293) that he had received "only limited evidence as to the quality of the trade practices program being implemented by Rural Press and Bridge [Printing]". After reviewing the evidence, his Honour merely stated he accepted that the program proposed by Rural Press was "genuinely directed to ensuring a culture of compliance with the [TP Act] within its organisation" and that it had been formulated with the advice of independent solicitors. We do not accept that the primary Judge misapprehended the facts in respect of his decision not to grant an injunction.
173 We agree with the reasons given by the primary Judge for refusing to grant a mandatory injunction. In particular, his Honour was correct to draw attention (at [33]; 43,294) to difficulties inherent in the terms of the mandatory injunction sought by the ACCC. It would have obliged Rural Press and Bridge Printing to implement a program that had not yet been developed and which was, in any event, to be approved by a person appointed by Rural Press with "expert knowledge of trade practices law". The Court should not delegate to a third person the task of specifying the obligations that are the subject of injunctive orders. Accordingly, there was no error in the primary Judge's refusal to grant the mandatory injunctions sought under s 80 of the TP Act.
174 Although we have not agreed with all the primary Judge's reasoning on the question of penalties, the ACCC's cross-appeal must be dismissed.
CONCLUSION
175 The appeal should be allowed in part. Those declarations and orders made against the appellants that are premised on contraventions of s 46(1)(a) and s 46(1)(c) of the TP Act should be set aside. Similarly, those declarations and orders against the appellants that are premised on contraventions of s 45(2)(a)(i) and s 45(2)(b)(i) of the TP Act should be set aside. Otherwise, the appeal should be dismissed.
176 The cross-appeal should be dismissed.
177 The following orders and declarations made on 23 March 2001 ("the Orders") should therefore be set aside:
1. The declarations made in pars 1 and 2 of the Orders.
2. The order made in par 3 of the Orders.
3. The declaration made in par 4 of the Orders, insofar as it affects Rural Press and Bridge Printing.
4. Subparagraph (i) of the order made in par 6 of the Orders, insofar as subpar (i) affects Rural Press and Bridge Printing.
5. The declaration made in par 7 of the Orders, insofar as it refers to ss 46(1)(a), 46(1)(c), 45(2)(a)(i) and 45(2)(b)(i) of the TP Act and pars 1, 2 and 4 of the Orders.
6. The order made in par 8 of the Orders.
7. Subparagraph (a) of the order made in par 9 of the Orders.
178 We shall give the parties the opportunity to make submissions as to costs. The appellants should file and serve written submissions on costs within fourteen days from the date of this judgment and the respondents should file and serve their written submissions on costs within seven days from the date the appellants' submissions are filed and served.
I certify that the preceding one hundred and seventy-eight (178) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. |
Associate:
Dated: 16 July 2002
Counsel for the appellants: |
Mr F M Douglas QC with Mr T Blackburn |
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Solicitors for the first, second, third and fourth appellants: |
Blake Dawson Waldron |
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Counsel for the first respondent: |
Mr J S Hilton SC with Mr P Renehan |
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Solicitor for the first respondent: |
Australian Government Solicitor |
Solicitors for the second and third respondents: |
Lynch & Meyer |
Dates of hearing: |
4 & 5 March 2002 |
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Date of judgment: |
16 July 2002 |
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