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Federal Court of Australia - Full Court Decisions |
Last Updated: 11 July 2003
Australian Competition & Consumer Commission v Australian
Safeway Stores Pty Limited [2003] FCAFC 149
TRADE PRACTICES - Trade Practices Act 1974 (Cth) s 46(1)(a), (c) - operator of statewide supermarket chain acquiring bread from three large bakers - bakers supplying discounted bread to some retail competitors of operator - operator stopping acquisition of that baker's bread for its supermarket in competition with the retailer - whether operator had taken advantage of its power in the wholesale market for the acquisition of bread for the purpose of damaging competitors in the retail market or of preventing each of the bread manufacturers engaging in competitive conduct - whether contravention of s 46(1)(a) or (c) of the Trade Practices Act 1974 (Cth)
PRACTICE & PROCEDURE - appeal - trial conducted on the basis that a request by the supermarket operator to the baker for a discount on proprietary bread products prior to the deletion was incompatible with a proscribed purpose under s 46(1) of the Trade Practices Act 1974 (Cth) - whether Commission should be permitted to change its case on appeal
TRADE PRACTICES - primary Judge finds that in some incidents the supermarket operator had a proscribed purpose in deleting the bakers' products and in others that its purpose was competitive - whether findings should stand
TRADE PRACTICES - identification of market - whether the primary Judge erred in identifying the relevant market as the wholesale market for the acquisition of bread products - no close competition between wholesale and retail markets - no error of principle
TRADE PRACTICES - market power - whether supermarket operators had a substantial degree of market power in the wholesale market as a purchaser of bread products - monopsony power - whether supermarket operator had taken advantage of its market power - whether conduct was materially facilitated by the existence of the power - relevance of excess capacity - relevance of barriers to entry
TRADE PRACTICES - exclusive dealing - expression "to a limited extent" concerned with a condition relating to quantity of goods to be supplied - primary Judge correct in finding no contravention of ss 47(4) and 47(5) of the Trade Practices Act 1974 (Cth)
TRADE PRACTICES - Trade Practices Act 1974 (Cth), ss 45(2)(a)(ii), 45A - allegation that supermarket operator had made an arrangement or reached an understanding with a baker selling bread by retail to fix or control retail prices of bread - whether arrangement or understanding had been proved - whether primary Judge applied a more rigorous standard of proof than required - whether inference should be drawn whether particular person with relevant authority within corporation had authorised entry into arrangement or understanding
Trade Practices Act 1974 (Cth) ss 4E, 4F(1)(b), 45, 45A, 46, 47, 48, 75B
Evidence Act 1995 (Cth), ss 59(1), 60
Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 cited Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344 cited
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1 varied
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 cited
Australian Competition and Consumer Commission v Boral Ltd [2001] FCA 30; (2000) 106 FCR 328 applied Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 cited
Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; (2003) 195 ALR 609 cited
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 cited
British Basic Slag Ltd's Agreement, Re [1963] 2 All ER 807 cited
Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 cited
Crampton v The Queen [2000] HCA 60; (2000) 206 CLR 161 cited
Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 cited
Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 cited
Ermogenous v Greek Orthodox Community of South Australia Inc [2002] HCA 8; (2002) 209 CLR 95 cited Fox v Percy [2003] HCA 22; (2003) 197 ALR 201 cited
Immigration, Local Government and Ethnic Affairs, Minister for v Hamsher (1992) 35 FCR 359 cited
Klor's Inc v Broadway Hale Stores Inc, 359 US 207 (1959) cited
Lennard's Carrying Company Ltd v Asiatic Petroleum Company Ltd [1978] UKHL 2; [1915] AC 705 distinguished
Media Council of Australia, Re [1996] ATPR 41-497 cited
Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1 applied
Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 cited
Peacock v Human Rights and Equal Opportunity Commission [2003] FCA 50 cited
Queensland Co-operative Milling Association Ltd, Re (1976) 25 FLR 169 cited
Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Co Ltd [1989] HCA 6; (1989) 167 CLR 177 cited
Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 213 cited
Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The Palitana) (1924) 20 L1 L Rep 140 cited
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd [1999] HCA 3; (1999) 160 ALR 588 cited
Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 applied
Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 cited
Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153 cited
Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286 cited
Trade Practice Commission v Service Station Association Ltd [1993] FCA 405; (1993) 44 FCR 206 distinguished
United States v Griffith, 334 US 100 (1947) cited
R D Blair and J L Harrison, "Antitrust Policy and Monopsony" (1990-1991) 76 Cornell L Rev 297
M Brunt, "`Market Definition' Issues in Australian and New Zealand Trade Practices Litigation" (1990) 18 Aust Bus L Rev 86
J I H Jacob and I S Goldrein, Bullen & Leake & Jacob's Precedents of Pleading (13th ed 1990)
D Robertson, "The Primacy of `Purpose' in Competition Law - Part 1" (2001) 9 CCLJ 101
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v AUSTRALIAN SAFEWAY STORES PTY LIMITED AND MARK JONES
V95 of 2002
HEEREY, SACKVILLE & EMMETT JJ
30 JUNE 2003
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA |
|
VICTORIA DISTRICT REGISTRY |
|
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
1. The appeal be allowed in part;
2. The appellant file and serve short minutes of order giving effect to the reasons for judgment and making submissions as to the costs of the appeal within 14 days;
3. The respondents file and serve written submissions as to the form of orders and the costs of the appeal within 14 days of the appellant's submissions being filed and served.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
VICTORIA DISTRICT REGISTRY |
|
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
HEEREY AND SACKVILLE JJ:
PAR
1. INTRODUCTION [1]
1.1 THE APPEAL [1]
1.2 A BRIEF OVERVIEW [8]
2 LEGISLATIVE FRAMEWORK [24]
3 CONDUCT OF THE CASE [33]
3.1 MR BROOKES' POLICY [35]
3.2 PUNITIVE VERSUS COMPETITIVE [47]
3.3 CASE DEALS [50]
3.4 PLEADING ISSUES [62]
4 FINDINGS AS TO THE NINE INCIDENTS [71]
4.1 BUTTERCUP [72]
4.1.1 Frankston [74]
4.1.2 Cheltenham [87]
4.1.3 Vermont/Forest Hill [100]
4.2 SUNICRUST [113]
4.2.1 Traralgon [116]
4.2.2 Lalor and Thomastown [131]
4.2.3 Geelong [149]
4.3 TIP TOP [163]
4.3.1 Albury (May 1995) [166]
4.3.2 Albury (November 1995) [181]
4.3.3 Ferntree Gully [194]
5 THE COMMISSION'S CHALLENGES TO THE FINDINGS THAT SAFEWAY HAD SOUGHT CASE DEALS [207]
5.1 THE PRIMARY JUDGE'S METHODOLOGY [209]
5.2 THE COMMISSION'S CONTENTION THAT THE REQUESTS FOR CASE DEALS WERE SHAMS OR PUNITIVE [214]
5.3 THE COMMISSION'S CHALLENGES TO THE FINDINGS THAT CASE DEALS WERE SOUGHT [222]
5.3.1 Traralgon [222]
5.3.2 Lalor [225]
5.3.3 Geelong [233]
5.3.4 Albury (November 1995) [235]
5.3.5 Ferntree Gully [239]
5.4 THE COMMISSION'S CHALLENGE TO THE FINDINGS CONCERNING CHELTENHAM AND VERMONT [242]
6 SAFEWAY'S CHALLENGES TO THE FINDINGS THAT NO CASE DEALS WERE SOUGHT [248]
6.1 Frankston [249]
6.2 Albury (May 1995) [260]
7. MISUSE OF MARKET POWER: TRADE PRACTICES ACT, s 46 [272]
7.1 HOW THE ISSUE ARISES [272]
7.2 INTER-RELATIONSHIP BETWEEN THE ISSUES [278]
7.3 THE MARKET [281]
7.3.2 Analysis [291]
7.4 SUBSTANTIAL DEGREE OF MARKET POWER [298]
7.5 TAKING ADVANTAGE OF MARKET POWER [325]
7.6 PURPOSE [335]
8. EXCLUSIVE DEALING [347]
8.1 THE COMMISSION'S CASE [347]
8.2 THE FINDINGS OF THE PRIMARY JUDGE [348]
8.3 THE APPEAL [354]
8.4 CONCLUSION AS TO EXCLUSIVE DEALING [362]
9. PRESTON MARKET [363]
9.1 THE ISSUE [363]
9.2 THE FINDINGS [374]
9.3 THE PRIMARY JUDGE'S REASONING [389]
9.4 THE SUBMISSIONS [397]
9.4.1 The Commission's Contentions [397]
9.4.2 Safeway's Contentions [400]
9.5 THE SCOPE OF THE PLEADING [403]
9.5.1 The Pleaded Case on Price Collusion [403]
9.5.2 Do the Pleadings Embrace the Case as Presented? [407]
9.6 CHALLENGES TO FINDINGS [414]
9.6.1 The First and Second Findings [414]
9.6.2 The Third and Fourth Findings [420]
9.6.3 The Fifth Finding [425]
9.6.4 The Sixth Finding [429]
9.7 WAS THERE AN ARRANGEMENT OR UNDERSTANDING? [432]
10. DISPOSITION OF THE APPEAL [450]
1.1 THE APPEAL
1 This is an appeal by the Australian Competition and Consumer Commission ("the Commission") from orders made by a Judge of this Court delivered after a trial lasting ninety days: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1. The primary Judge dismissed a claim under Part IV of the Trade Practices Act 1974 (Cth) ("the Act") for pecuniary penalties, injunctions and other relief against the first respondent ("Safeway") and the second respondent ("Mr Jones"), a category manager for Safeway in Victoria at the time the relevant events occurred. The Commission also sought relief against Mr Bernie Brookes, Safeway's Victorian Merchandise Manager at that time, but the proceedings against him were dismissed by consent during the trial and he is not a party to the appeal.
2 In 1994 and 1995, Safeway was a member of the Woolworths Limited group of companies and operated some 130 supermarkets in Victoria. At that time, other supermarkets were operated by the major chains (Coles, Franklins, Davids and Composite Buyers) and, importantly for the present case, by independent retailers.
3 The Commission's case involved ten separate incidents. In nine of them ("the nine incidents"), Safeway was said to have imposed, or attempted to impose, a condition on individual bread manufacturers preventing them from supplying cheap wholesale bread to certain independent retailers who were undercutting Safeway's retail prices for bread products. In the tenth, referred to as the Preston Market incident, the Commission alleged that Safeway, through Mr Jones, had made an arrangement or reached an understanding with George Weston Foods Ltd (to which we refer by its trading name "Tip Top") to fix or control the retail prices of bread sold by Tip Top at its Preston Market stall.
4 The Commission also claimed relief against Tip Top. Tip Top, however, admitted contraventions of the Act and, at a separate hearing before the primary Judge, was ordered to pay pecuniary penalties in respect of a number of contraventions, including its part in the Preston Market incident: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238.
5 The Commission put its case against Safeway in a variety of ways. By its Fifth Further Amended Statement of Claim filed on 23 June 1999 ("the Statement of Claim"), the Commission alleged, in relation to the nine incidents, that Safeway had
* engaged or attempted to engage in resale price maintenance, contrary to s 48 of the Act;
* made or attempted to make an arrangement containing a provision having the purpose of substantially lessening competition, contrary to s 45(2) of the Act;
* taken advantage of its power in the wholesale market for the acquisition of bread products for the purpose of damaging competitors in the retail market and of deterring or preventing each of the bread manufacturers from engaging in competitive conduct, contrary to s 46(1) of the Act; and
* engaged in exclusive dealing, contrary to s 47 of the Act.
The primary Judge dismissed the claims founded on resale price maintenance contrary to s 48 and the making of anti-competitive arrangements contrary to s 45(2). The Commission does not challenge these conclusions on the appeal, but contends that the primary Judge erred in finding that contraventions of ss 46 and 47 of the Act had not been established.
6 The Commission's principal case in relation to the Preston Market incident was that Safeway had made an arrangement containing a provision that had the purpose or effect of substantially lessening competition in a market, in contravention of s 45(2)(a)(ii) of the Act. The Commission relied on s 45A(1) of the Act, which provides that a provision of an arrangement is deemed to have the purpose or effect of lessening competition if it has the purpose or effect of price fixing. The Commission put its case in other ways as well, but they played little part in the argument on the appeal.
7 We have concluded that the Commission's appeal should be allowed insofar as it relates to four of the nine incidents and to the Preston Market incident. In relation to the four incidents, we conclude that his Honour erred in not finding that Safeway had taken advantage of its market power in the wholesale bread market for a proscribed purpose, in contravention of s 46(1) of the Act. In relation to the Preston Market incident we conclude that his Honour erred in not finding that Safeway had made an arrangement that contained a provision having the purpose or effect of substantially lessening competition in contravention of s 45(2)(a)(ii) of the Act. Emmett J dissents in relation to the four incidents on the grounds that, contrary to our view, Safeway did not have a substantial degree of power in the relevant market. We think it appropriate to record, with his Honour's concurrence, that Emmett J contributed substantially to this joint judgment save for Section 7 ("Misuse of Market Power").
1.2 A BRIEF OVERVIEW
8 In 1994 and 1995, bread in Victoria was produced by three major firms, referred to as "plant bakers", and by independent bakers and hot bread shops. The three plant bakers, who together supplied some 80 per cent of all plant-baked bread sold in Victoria, were Tip Top, Quality Bakers Australia Limited, which carried on business under the name of "Buttercup Bakeries" ("Buttercup") and Sunicrust Bakeries Pty Ltd ("Sunicrust"). Apart from sales by Tip Top at its Preston Markets stall, the three plant bakers' entire production was sold by wholesale.
9 On the retail side, bread was also sold by hot bread stores, which baked bread on their retail premises, and by "in-store bakeries". The latter were set up within supermarkets as an attempt to replicate hot bread shops. In some instances bread was baked, or at least partly prepared for sale, in the in-store bakeries; more frequently, in what were called "cold spots", the bread was acquired from a wholesale supplier wrapped and ready for retail sale. Finally there was the "route trade" consisting of small retailers, such as milk bars.
10 Bread has a significance for a supermarket that goes beyond its character as a staple food. As the primary Judge found, it is a "communicable" product: that is to say, in a consumer's mind, it is indicative of a retailer's general price competitiveness.
11 At the relevant times, bread was marketed under different brands. Each plant baker had premium brand, or proprietary, bread and also a secondary brand bread. Premium brand bread was sold under a brand that was heavily advertised and promoted, such as Tip Top's "Sunblest", Sunicrust's "Suni" and Buttercup's "Wonder White". Secondary brand bread was sold under a brand that received little or no advertising or promotion, such as Thwaites or Tip Top's Eureka, the latter being sold in a plain-wrap package with minimal brand promotion. A further category of secondary bread was referred to as `price-fighting' bread. Safeway entered into contracts with plant bakers to supply bread under a particular brand, such as Sunicrust's "Captain Cutless" and Buttercup's "Budget Family Fresh". The "price-fighting" bread was brought in at short notice in order to meet competitive threats.
12 A major retailer could also have its own "generic" brands. A generic brand was owned by the retailer and was applied to many items in addition to bread. In the case of Safeway, its generic brand was "Home Brand", which was supplied by Sunicrust. Buttercup supplied the Davids group of supermarkets with its "Black & Gold" generic bread.
13 Notwithstanding the importance attached to brands by bakers, retailers and consumers, and the substantial price differentials involved between premium, secondary and generic brand breads, the bread itself was essentially the same product. The most popular size of loaf sold was a 680g white sandwich loaf, referred to as "Code C". A "Code D" loaf was more expensive and was usually a 900g loaf. A white 680g premium brand loaf, for example, was the same bread as a white 680g secondary brand made by the same plant baker, although the secondary brand might be produced earlier in the day than the premium brand and would therefore be some hours older when delivered to the retailer. The only other differences between them were the price of the product and the manner in which each was marketed.
14 In the nine incidents, an independent retailer near a Safeway supermarket commenced selling bread of a particular plant baker at a discounted price. Safeway then "deleted" (that is, ceased to stock, display and sell) bread of that plant baker. Safeway adduced evidence that, before a deletion, it sought from the plant baker a "case deal" and only made deletions when the case deal was refused. The term "case deal" was an expression used to refer to an arrangement whereby a supplier provided a discount, rebate or special deal in connection with the supply of its products. Historically, the expression was derived from a practice in the grocery business whereby products were purchased by the case, presumably at a reduced price.
15 The evidence concerning requests for case deals was challenged by the Commission. The primary Judge found affirmatively that, in five of the nine incidents, there had been such a request and that in another two the evidence did not enable him to determine whether a request had or had not been made. In the remaining two incidents his Honour found that no request for a case deal had been made.
16 Three further aspects of the nine incidents should be mentioned. First, the bread that the independent retailers were discounting was secondary brand bread. However the bread for which Safeway sought case deals was the plant bakers' premium brand bread. Secondly, in each of the nine incidents there were "over-deletions" by Safeway; that is to say, Safeway deleted a wide range of the plant bakers' bread and related products and not just the same kind of bread as the independent stores had been discounting. Thirdly, following a deletion Safeway always brought in price-fighting bread supplied by a plant baker other than the one whose bread had been deleted.
17 The Commission alleged that there was a market in Victoria for the supply of bread products on a wholesale basis to retailers, that Safeway had a substantial degree of power in that market and that Safeway had taken advantage of that power for the purposes of damaging competing independent stores by denying them access to cheap bread (s 46(1)(a)). The Commission also alleged that Safeway had taken advantage of its market power for the purpose of deterring or preventing the plant bakers and the independent retailers from engaging in competitive conduct in, respectively, the wholesale market and the retail markets in which the independent stores were located (s 46(1)(c)).
18 The primary Judge found that in two of the nine incidents, at Frankston and at Albury in May 1995, where no case deals were sought, Safeway's purpose was to punish the plant bakers concerned (Buttercup and Tip Top, respectively) and to deter them from continuing to sell bread to the independent retailer at a discounted price. But he held that because the Commission had pleaded its case by reference to a policy formulated by Mr Brookes and because the policy so pleaded had not been made out, the Commission was precluded from succeeding in its claim that Safeway had contravened s 46(1)(c) of the Act. Apart from the pleading point, the Commission's case failed. While his Honour found that Safeway had a substantial degree of power in the wholesale bread market, he held that it had not taken advantage of its power for a proscribed purpose. While Safeway had used its market power, in the sense that it had engaged in conduct that was available to it, there was no necessary connection between its market power and the conduct in which it had engaged.
19 The Commission also alleged that Safeway contravened s 47 of the Act by engaging in exclusive dealing. According to the Commission, Safeway had offered to acquire bread from the plant bakers on condition that they not supply bread to independent retailers except where the independent retailers did not sell such products at prices cheaper than Safeway's competing retail prices. Also, Safeway had refused to acquire bread products from plant bakers because they had supplied bread to independent retailers who had sold bread at prices cheaper than Safeway's retail prices.
20 The primary Judge concluded that there was no contravention of s 47(4). His Honour characterised the critical issue that arose under s 47(4) as whether the condition imposed by Safeway was that the plant baker in each instance only supplied bread to the relevant independent retailer "to a limited extent". His Honour considered that the expression did not sit easily with a condition that a supplier would supply whatever quantity of goods were required by a purchaser, but only if the purchaser did not sell them below a particular price.
21 In relation to its claims based on s 47(5) the Commission said that in each relevant case Safeway refused to stock a plant baker's bread because the particular plant baker had supplied secondary or generic brand bread to an independent retailer. The refusal was constituted by the deletion of the plant baker's products from the relevant Safeway supermarket. His Honour held that s 47(5) does not cover a situation where the reason for the refusal to acquire goods is that the supplier has supplied goods to another person for a particular price. Accordingly, he concluded that the conduct of Safeway in relation to the nine incidents did not contravene s 47(5) of the Act. It was therefore unnecessary for his Honour to make a finding as to whether any condition was imposed or any acquisition was refused for the purpose of substantially lessening competition ( s 47(10)).
22 The Preston Market incident did not involve any independent retailer. Tip Top conducted a stall at the Preston Market at which it sold its bread by retail to members of the public. Tip Top products had been deleted from Safeway's Preston store, which was in competition with Tip Top's stall. The Commission alleged that Safeway and Tip Top, in contravention of s 45 of the Act, entered into an arrangement or understanding to fix the prices at which bread was sold at the Preston Market stall. His Honour found that, although there had been discussions between officers of Tip Top and Safeway relating to the fixing of prices, he was not satisfied that an arrangement or understanding had been entered into between persons with authority to act on behalf of Safeway.
23 Mr Jones was responsible, under the direction of Mr Brookes, for buying and merchandising bread, as well as fourteen other product categories not relevant for present purposes. His duties included marketing issues such as pricing and shelf management. The Commission alleged that Mr Jones was involved in Safeway's contraventions in all ten incidents and was liable by virtue of s 75B of the Act. It is common ground that, to the extent the appeal succeeds, the issue of Mr Jones' liability must be remitted to his Honour.
2 LEGISLATIVE FRAMEWORK
24 All of the Commission's claims are made under Part IV of the Act. Relevantly for present purposes, the Statement of Claim alleges contraventions of ss 45, 46 and 47 of the Act, although it may be necessary to make some mention of s 48.
25 Section 45 is concerned with contracts, arrangements or understandings that restrict dealings or affect competition. Section 45(2) provides as follows:
"45(2) A corporation shall not:(a) make a contract or arrangement, or arrive at an understanding, if:
(i) ...; 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,... if that provision:
(i) ...; or
(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition."
Section 45(3) provides that, for the purpose of s 45, "competition" in relation to a provision of a contract, arrangement or understanding means competition in any market in which the corporation that is a party supplies or acquires or is likely to supply or acquire goods.
26 Section 45A(1) provides that:
"...a provision of a contract, arrangement or understanding... shall be deemed for the purposes of [s 45] to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for... goods... supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding...".
27 Section 46 is concerned with misuse of market power. Section 46(1) relevantly provides as follows:
"46(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of:(a) ...substantially damaging a competitor of the corporation... in that or any other market;
(b) ...; or
(c) deterring or preventing a person from engaging in competitive conduct in that or any other market."
Section 46(4) of the Act makes it clear that market power includes power either as a supplier or as an acquirer of goods and services in a market.
28 Section 46(3) provides that, in determining, for the purposes of s 46, the degree of power that a body corporate has in a market, the Court must have regard to the extent to which the conduct of the body corporate is constrained by the conduct of:
* competitors of the body corporate; or
* persons from whom the body corporate acquires goods in that market.
29 Section 4E addresses the concept of "market" as follows:
"For the purposes of this Act, unless the contrary intention appears, `market' means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services."
30 Section 46(7) of the Act enables the Court to make a finding of the existence of a proscribed purpose on the part of a corporation even though the existence of the purpose is only ascertainable by reference to the conduct of the corporation and its employees or from other relevant circumstances. Further, it is not necessary, in order to establish a contravention of s 46, to find that the relevant purpose was the sole purpose for the conduct. By virtue of s 4F(1)(b) of the Act, it is sufficient that it was one of a number of purposes so long as it was a substantial purpose.
31 Section 47 is concerned with exclusive dealing. Section 47(1) provides that a corporation must not, in trade or commerce, engage in the practice of exclusive dealing. Sub-sections 47(4) and 47(5) then provide as follows:
" (4) A corporation... engages in the practice of exclusive dealing if the corporation:(a) acquires, or offers to acquire, goods...; or
(b) acquires, or offers to acquire, goods... at a particular price;
on the condition that the person from whom the corporation acquires or offers to acquire the goods... will not supply goods... or goods... of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods... or goods... of a particular kind or description:
(c) to particular persons or classes of persons...;
...
(5) A corporation... engages in the practice of exclusive dealing if the corporation refuses:
(a) to acquire goods... from a person; or
(b) to acquire goods... at a particular price from a person;
for the reason that the person... has supplied, or has not agreed not to supply, goods... or goods... of a particular kind or description:
(c) to particular persons or classes of persons...;
..."
Section 47(10), however, provides that s 47(1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in s 47(4) or s 47(5) unless, relevantly, the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition.
32 Section 48 of the Act provides that a corporation must not engage in the practice of resale price maintenance. The practice of resale price maintenance means the practice of resale price maintenance referred to in Part VIII of the Act (s 4). In Part VIII of the Act, conduct that amounts to the practice of resale price maintenance is described in detail that is not presently relevant.
3 CONDUCT OF THE CASE
33 This appeal raises few issues of principle. The bulk of the argument was taken up with attacks on a very large number of factual findings, many of which were of peripheral significance to the outcome of the case. The parties' determination to debate factual questions was nicely illustrated by their inability to agree on the terms of a document, which the Court had requested, setting out the factual findings actually made by the primary Judge. Each party produced its own lengthy version of the findings of fact. Perhaps not surprisingly, given this degree of disputation, there was also much debate on the appeal as to what matters were or were not covered by the pleadings and were or were not in issue before the primary Judge.
34 In order to place the issues on the appeal in context, some distinctive aspects of these proceedings should be identified. These matters help to explain why, in our view, disproportionate time and effort were devoted both at the trial and on the appeal to tangential questions and why there was disagreement on the appeal as to the issues in the case
3.1 MR BROOKES' POLICY
35 A great deal of evidence and argument at the trial were devoted to determining the elements of a policy formulated by Mr Brookes of Safeway in relation to the stocking and sale of bread manufactured by the three plant bakers. Accordingly, the primary judgment addresses at length the elements of Mr Brookes' policy and his subjective intent in formulating the policy. Indeed, the primary Judge identified (at 50 [173]) the purpose of the policy framed by Mr Brookes as "the most critical issue in the proceeding".
36 The policy formulated by Mr Brookes was never reduced to writing. The primary Judge found that the policy, as finally conceived by Mr Brookes, applied where an independent retailer was discounting bread manufactured by a plant baker, thereby affecting a Safeway supermarket which was in competition with the independent retailer. In those circumstances, Safeway would request the plant baker to supply the affected Safeway supermarket with similar, but premium brand, bread at a price equal to the price charged to the independent retailer that was selling discounted bread. If the plant baker declined to provide bread to Safeway on those terms, the comparable bread of the plant baker was to be deleted from the Safeway store in question until the independent retailer ceased selling that plant baker's bread at the cheap price.
37 The primary Judge considered that the fact that the policy contemplated that "case deals" would be sought before a deletion occurred was inconsistent with an intention on Safeway's part to punish the plant bakers for supplying discounted bread to independent retailers. (The expression "case deal", as the primary Judge found, means no more than a deal or arrangement involving a discount: at 17 [43]; see also at [13] above). Accordingly, his Honour was satisfied that the policy formulated by Mr Brookes was not introduced and did not exist to punish the plant bakers if they sold bread to independent retailers at a cost price that enabled them to undercut Safeway's prices. Moreover, his Honour was also satisfied that the policy was not introduced and did not exist to deter the plant bakers from selling such bread to the independent retailers. Rather the purpose was to enable Safeway to respond to competitive situations in the market place as they occurred.
38 This emphasis on Safeway's "policy" to some extent reflects the way in which the Commission pleaded its case. Paragraph 6D(h) of the statement of claim pleads that
"...Safeway had a policy that if bread products of a manufacturer were being specialled by another retailer other than Coles or Franklins in the vicinity of a Safeway store at a price which was under the price being charged by Safeway at such store, then all that manufacturer's bread product would be delisted from that Safeway store and other Safeway stores in the vicinity while that manufacturer's bread products were being specialled by that other retailer."
The statement of claim, which is a complex document and not easy to follow, incorporates par 6D(h) into a number of substantive allegations. For example, par 19A of the statement of claim pleads that Safeway took advantage of its substantial degree of power in the wholesale bread products market in Victoria for the purpose of deterring or preventing Tip Top from engaging in competitive conduct in that market and alleges that Safeway contravened s 46(1)(c) of the Act in that (among other things) it "implemented the policy referred to in [par] 6D(h)". We shall return later to the significance of a pleading in this form.
39 It is enough at present to say that, as a matter of principle, it is not easy to see how a pleading that Safeway implemented a particular policy materially advances the Commission's case that Safeway contravened s 46(1) of the Act. The critical question posed by s 46(1) of the Act is whether Safeway took advantage of a substantial degree of power in the relevant market for one of the proscribed purposes. That question requires attention to be focussed on Safeway's actions and the purpose or purposes with which those actions were carried out. Clearly enough, the fact that a senior officer of Safeway devised a particular policy and had an identifiable purpose in doing so might have an important evidentiary bearing on the purpose or purposes for which Safeway engaged in conduct carried out in conformity with that policy. But whether Safeway's conduct was or was not by way of implementation of a pre-existing policy cannot be decisive of whether it contravened s 46(1). Certainly it is not a necessary precondition to a contravention of s 46(1) that a corporation has implemented a pre-determined policy of some kind.
40 Whatever assumptions underlie the pleading, the inappropriateness of concentrating on the policy formulated by Mr Brookes becomes clearer when consideration is given to the actual relationship between that policy and Safeway's conduct. The statement of claim, while pleading that Safeway had implemented the policy, also pleads the material facts constituting the nine incidents. The Commission relied on these nine incidents as part of its case under ss 46 and 47 of the Act, although there was disagreement as to whether the pleading required the Commission to prove that what Safeway did was by way of implementation of a pre-existing policy.
41 For present purposes what is significant is that the primary Judge found that Mr Brookes' policy had not been implemented in the form he contemplated in the nine incidents. There were two major differences between the policy as formulated and what actually happened.
* First, Mr Brookes' policy, as he formulated it, required the deletion from a Safeway supermarket of only those products of a plant baker that were competitive with the discounted bread being offered by the independent retailer. In other words, where an independent retailer was discounting secondary or generic brand bread supplied by a plant baker and the plant baker refused to provide similar discount deals to Safeway on the equivalent premium brand bread, the policy called only for the deletion of the plant baker's bread that was comparable with the secondary or generic brand bread being sold by the independent retailer. In fact, as the primary Judge found, in all the incidents a much wider range of the plant baker's bread products was deleted from the Safeway supermarket: at 74 [251]. This phenomenon was referred to in the case as "over-deletions", although the expression is perhaps somewhat misleading as it suggests that the extent of the deletions was invariably a mistake.
* Secondly, the policy formulated by Mr Brookes required the relevant Safeway supermarket to introduce a price-fighting bread manufactured by the plant baker whose bread had been deleted from the store. In fact, the price fighting bread introduced to the Safeway supermarket was invariably manufactured by one of the other plant bakers: at 78 [263].
42 His Honour found that the variations between the policy formulated by Mr Brookes and Safeway's conduct did not justify a conclusion that the policy itself was designed to punish the plant baker who continued to supply discounted bread to the independent retailers. He considered, for example, that some (although not all) of the so-called over-deletions could be explained by reference to mistakes in implementation of the policy or to lack of communication. Similarly, the introduction of a price-fighting bread manufactured by a plant baker other than the plant baker whose products had been deleted, in some instances, may have been the result of communication difficulties or vagueness in instructions.
43 Yet in view of the differences between Mr Brookes' policy and Safeway's conduct in the nine incidents, it might be thought (putting to one side the form of the pleadings) that Mr Brookes' objectives in formulating the policy were of limited significance in determining the purpose or purposes for which Safeway engaged in the conduct constituting the nine incidents. As we have noted, the question posed by s 46(1) of the Act is whether Safeway had a substantial degree of market power and, if so, whether it took advantage of that power for one of the proscribed purposes. If it was Safeway's conduct in the nine incidents that was critical in determining whether it had taken advantage of a substantial degree of market power, Mr Brookes' intentions in formulating his incompletely implemented policy could hardly be decisive in characterising Safeway's purpose in undertaking that conduct.
44 We should add that we have approached the appeal on the basis that, as the primary Judge found, Mr Brookes formulated a policy designed to achieve a competitive position for Safeway and not to punish or deter the plant bakers or independent stores. Nonetheless, a particular problem stands in the way of accepting Mr Brookes' evidence. As we have noted, the policy in the form asserted at trial by Safeway was never implemented in any of the nine incidents. There were always over-deletions and in most cases another plant baker's price-fighting bread was used. Mr Brookes was personally involved in the first incident at Frankston. While one or even two subsequent departures from the alleged policy might be explicable as a mistake or lack of communication within Safeway, eight subsequent departures would seem to demonstrate a rule, not exceptions. This casts doubt on whether the policy in the form alleged ever existed in the first place.
45 Mr Smith SC, who appeared with Mr Whitford for the respondent, repeatedly stressed on the appeal that his Honour had made "credit based" findings. The extent to which appellate courts are free to reverse findings based on a trial judge's assessment of witnesses has been the subject of recent review in the High Court: see State Rail Authority of New South Wales v Earthline Constructions Pty Ltd [1999] HCA 3; (1999) 160 ALR 588, at 608-623 [68]-[95], per Kirby J; Fox v Percy [2003] HCA 22; (2003) 197 ALR 201. Perhaps this might have been an apt occasion for the operation of the aphorism of Atkin LJ in Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The Palitana) (1924) 20 L1 L Rep 140, at 152, quoted by Kirby J in Earthline, at 617 [88]:
"...an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour."
46 In the result we do not think it necessary to determine whether Mr Brookes' subjective intentions in 1994, as found by his Honour, were consistent with the undisputed evidence as to what in fact happened in the nine incidents.
3.2 PUNITIVE VERSUS COMPETITIVE
47 The primary Judge saw the critical question as whether Mr Brookes' purpose in formulating the policy was "punitive" or, by contrast, was designed to enable Safeway to be "competitive vis-à-vis its competitors". On one reading of the judgment, his Honour adopted this terminology as a convenient form of shorthand and did not intend to regard the two alternatives as necessarily mutually exclusive. Nonetheless, there is a danger that, in framing the issue in this way, his Honour created a false dichotomy.
48 The point can be illustrated by reference to the Commission's case under s 46(1)(c) of the Act. In order to make out that case, the Commission had to show that Safeway had a substantial degree of power in the wholesale bread market and had taken advantage of that power for the purpose of deterring or preventing a person from engaging in competitive conduct in that or any other market. A corporation may take advantage of its market power for that purpose without necessarily intending to "punish" anyone. For example, a corporation with a substantial degree of power in a market might threaten to refuse to purchase a supplier's products, not for any "punitive" purpose (the supplier might not yet have done or refused to do anything), but in order to deter the supplier from discounting prices of its product to competitors of the corporation. Similarly, a corporation may engage in conduct that is designed to improve its competitive position vis-à-vis its competitors, yet still fall foul of the Act. A corporation might misuse its market power for a proscribed purpose precisely as a means of improving its position in a market vis-à-vis its competitors.
49 The primary Judge ultimately found (at 65 [224]) that
"the purpose of the policy was not to punish or deter the plant bakers but rather was to enable Safeway to be competitive in the retailing of bread".
Reading the judgment as a whole, we think that the better view is that, despite the use of inexact language, the primary Judge appreciated that such relevance as Mr Brookes' policy had depended upon whether he intended to deter or prevent the plant bakers from engaging in competitive conduct (s 46(1)(c)) or to eliminate or substantially damage the independent retailers (s 46(1)(a)) rather than whether the conduct simply could be characterised as "punitive" or "competitive". Even so, as his Honour's approach to the question of case deals shows, the use of the punishment/competitiveness terminology tends to obscure the true issues.
3.3 CASE DEALS
50 The issue of "case deals" played a very important part in the trial. We refer shortly to some of the pleading issues that arose on the appeal. The pleading problems were not confined to the case pleaded by the Commission. Safeway's final pleaded statement of their defence was a twenty-nine page document forbiddingly entitled "Third Further Amended Defence of the First Respondent to the Fifth Further Amended Statement of Claim". While the alleged requests for case deals loomed large at the trial, not a word about them appeared in that document. The issue only emerged during the course of the hearing. As a means of stating the issues for trial in a readily comprehensible form the employment of the traditional form of pleading in the present case would not survive a cost-benefit analysis.
51 As the trial unfolded, the Commission's primary case was that it was no part of Mr Brookes' policy to seek "case deals" from the plant bakers who were supplying discounted generic bread to the independent retailers. Rather, the Commission's contention was that Mr Brookes always intended that, if a plant baker provided a discounted generic bread to an independent retailer and that retailer sold the bread to customers at a discount, Safeway would simply delete the plant baker's products from the affected Safeway supermarket. Such an intention, so the Commission argued, was compatible only with Safeway having the purpose of deterring or preventing competitive conduct or eliminating or damaging its independent retail competitors.
52 The Commission's primary case encountered difficulties because Safeway adduced evidence that Mr Brookes had always intended that case deals should be sought from the plant bakers prior to any deletions occurring. The evidence suggested that in most, if not all the incidents, Mr Jones or someone else on behalf of Safeway had asked the plant baker concerned to supply premium brand bread at the same price as that at which the same baker sold secondary or generic bread to the discounting independent retailer.
53 Safeway's evidence about the case deals prompted the Commission to amend its pleadings, although it is by no means clear that any amendment was required to meet what seems merely to have been evidence relevant to the issues in dispute. The amendments allege that Safeway sought the case deals knowing full well that the plant bakers would never agree to them, since to do so would damage or destroy the goodwill or brand value attaching to the brand names of the premium brand bread. In effect, the Commission contended that if Safeway had in fact requested case deals the requests were shams, since the representatives of Safeway knew that the requests would never be met.
54 Clearly the parties regarded the question as to whether case deals had been sought as of great importance. Not surprisingly, so did his Honour. He said (at 67 [230]) that the
"fact that the policy created and put in place by Mr Brookes included a provision that case deals be sought before deletion of bread from the shelves occurred is critical in determining the purpose of the policy and the purpose of Mr Brookes (and thereby the purpose of Safeway) in creating it.... I consider that the provision of the policy whereby a case deal was to be sought before a deletion is inconsistent with the purpose of the policy being to punish plant bakers". (Emphasis added.)
55 The primary Judge also regarded the question of whether case deals had been sought before deletions as crucial in determining whether Safeway had taken advantage of market power for a proscribed purpose in some or all of the nine incidents. This is reflected in his conclusion that in the two cases where (on his findings) no case deals had been sought by Safeway prior to the plant baker's product being deleted from the relevant Safeway store, Safeway had a "punitive" purpose. In the other seven cases, where the primary Judge found that case deals had genuinely been sought (or where he could not determine whether they had been sought) prior to deletion, he concluded that Safeway did not have a proscribed purpose.
56 There is considerable force in the view that the primary Judge placed too much weight on the fact that in some instances Safeway sought case deals prior to deleting the plant baker's products. His Honour repeatedly indicated that the making of a request by Safeway for a case deal prior to deletion was "inconsistent with an intention or purpose to punish [the plant baker] by deleting its products" (138 [573]). It is not apparent why this is necessarily so.
57 Safeway's requests for case deals on the plant bakers' premium brands were invariably refused. Safeway then proceeded to delete the products of the particular plant baker from the affected Safeway store. It is possible that Safeway deleted the plant baker's products simply in order to persuade the plant baker to provide the case deal requested by Safeway. On the other hand, the deletion of the plant baker's products may have been designed, for example, to dissuade the plant baker from continuing to supply discounted bread to the independent retailer. In short, one view of the facts is that, while Safeway may have been perfectly content for a plant baker to accede to a request for a case deal, Safeway nonetheless contemplated that, if the request was refused, it would delete the plant baker's products so as to deter the plant baker from continuing to supply discounted bread to the independent retailer. The latter view receives support from the extent of the deletion that occurred on the first occasion, the Frankston incident which took place in May 1994. In that incident, as we explain later, Safeway deleted virtually the complete range of Buttercup products from two of Safeway's supermarkets. None of the deleted products was being discounted by Quadara. Both the over-deletions and the purchase of price-fighting bread manufactured by another plant baker might be thought to have been calculated to deter Buttercup from continuing the conduct which provoked Safeway's response in the first place, that is supplying a retail competitor with bread at a discounted price. It must be remembered, too, that, for a contravention of s 46(1) to be established, the proscribed purpose need only have been one of a number of purposes, so long as it was a substantial purpose: s 4F(1)(b).
58 In the course of the appeal, the Court raised with counsel whether it was open to approach the case on the basis that Safeway's requests for case deals were not necessarily inconsistent with it having taken advantage of its market power for one of the proscribed purposes specified in s 46(1) of the Act; in other words that it would not matter whether Safeway requested case deals or not. Senior counsel for Safeway resisted this suggestion on the ground that the proposition had never been advanced at the trial. He said that the area of dispute was whether case deals had ever been sought and, if so, whether the requests could be regarded as effectively a sham or a form of punishment in themselves. He pointed out that it had never been put to Mr Brookes or Mr Jones that even if they had sought case deals from the plant bakers, they intended that the deletion of the plant bakers' products would prevent or deter the bakers from engaging in competitive conduct or would damage the independent retailers (by cutting off their supplies of discounted secondary or generic bread).
59 Senior counsel for the Commission asserted that the argument was available on the appeal. However, he was unable to identify any part of the transcript which showed that the argument had been advanced or foreshadowed at the trial. Nor did he contradict the contention of senior counsel for Safeway that the point had not been put to Safeway's principal witnesses.
60 The principles governing the circumstances in which an appellate court will entertain a point not raised in the court below were stated by Latham CJ, Williams and Fullagar JJ in Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, at 438:
"Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards. In Connecticut Fire Insurance Co v Kavanagh [1987] UKPC 2; [1892] AC 473, at 480. Lord Watson, delivering the judgment of the Privy Council, said, `When a question of law is raised for the first time in a court of last resort, upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is not only competent but expedient in the interests of justice, to entertain the plea. The expediency of adopting that course may be doubted, when the plea cannot be disposed of without deciding nice questions of fact, in considering which the court of ultimate review is placed in a much less advantageous position than the courts below'."
See, too, Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1, at 7-8, per Gibbs CJ, Wilson, Brennan and Dawson JJ; Crampton v The Queen [2000] HCA 60; (2000) 206 CLR 161, at 182-184, per Gaudron, Gummow and Callinan JJ; Peacock v Human Rights and Equal Opportunity Commission [2003] FCAFC 50, at [27]-[29], per Kiefel and Allsop JJ.
61 In the light of what was put by Senior Counsel for Safeway and not disputed by Senior Counsel for the Commission, we have concluded, with some hesitation, that we cannot say that we have all the facts bearing on the question of whether, despite Safeway's requests for case deals, it took advantage of its market power for a proscribed purpose. Had the case been run at trial on the basis that any request made by Safeway was compatible with the existence of a proscribed purpose specified in s 46(1) of the Act, it is possible that further evidence might have been adduced. In these circumstances, despite our reservations about the way the case was conducted at trial, we do not think that the Commission should be permitted to revise its case on appeal.
3.4 PLEADING ISSUES
62 As we have noted, there was much debate on the appeal about the scope of the Commission's pleaded case. The most important pleading issue arose out of the primary Judge's conclusion that the Commission could not succeed in its claim that Safeway had contravened s 46(1)(c) of the Act. His Honour took the view (at 234 [1013]) that it was
"an integral part of the Commission's s 46(1)(c) case that the purpose of Safeway's bread policy was to punish the plant bakers and to deter them and independent stores from engaging in competitive conduct."
Since his Honour had found that "the policy and the purpose of the policy was not in the terms alleged by the Commission", he held that the contraventions of s 46 alleged were not made out "insofar as they [were] based on the implementation of the policy alleged by the Commission".
63 Despite this conclusion, the primary Judge held that it was still open to the Commission to pursue its case under s 46(1)(a) of the Act by reference to the nine incidents involving the independent stores. In other words, the Commission could contend, notwithstanding the primary Judge's finding as to the purpose of the policy formulated by Mr Brookes, that Safeway had taken advantage of its substantial degree of market power to substantially damage the independent stores.
64 Neither party accepted the primary Judge's conclusions. Safeway argued that since his Honour had found that its policy was not as alleged by the Commission, the Commission's case under s 46(1)(c) had to fail. Senior Counsel for Safeway maintained that the reasoning that led his Honour to reject the Commission's case under s 46(1)(c) should have led him to reject the case based on a contravention of s 46(1)(a) of the Act. He submitted that an essential element of the Commission's pleaded case was that the conduct said to have constituted Safeway's taking advantage of its market power entailed the implementation of the policy pleaded in par 6D(h). It followed that insofar as his Honour concluded that the policy had neither been adopted nor implemented by Safeway, the conduct alleged in the statement of claim had not been made out. It was not to the point that the conduct might have been found to contravene the Act if the Commission had chosen to plead its case in some other way.
65 The Commission, in effect, accepted the logic of Safeway's submission. Senior counsel for the Commission characterised as "bizarre" his Honour's willingness to consider the Commission's case based on s 46(1)(a), but to reject the case based on a contravention of s 46(1)(c). However, he submitted that the finding as to Safeway's policy was no barrier to a conclusion that Safeway's conduct in relation to the nine incidents contravened both s 46(1)(a) and (c) of the Act.
66 The statement of claim pleads the contraventions of s 46(1)(c) of the Act in three lengthy paragraphs, each concerning the incidents involving one of the three plant bakers. Paragraph 19C, for example, pleads that Safeway took advantage of the substantial degree of market power it enjoyed in the wholesale bread market in Victoria for the purpose of deterring or preventing Sunicrust, or the three independent retailers supplied by it (Westend Foodtown, Goldy's Tuckerbag and Costa's Fruit Market), from engaging in competitive conduct in the wholesale or retail markets previously pleaded. The proscribed purpose is said to have existed "in that" Safeway acted in relation to Sunicrust in contravention of ss 45, 47 and 48 of the Act and "implemented the policy referred to in paragraph 6D(h)" (par 19C(d)). The particulars to par 19C refer to and repeat earlier paragraphs in the statement of claim, which allege the circumstances in which Safeway is said to have deleted Sunicrust's products from the Safeway supermarkets directly affected by the discounting of Sunicrust bread by the three independent retailers. The particulars also identify the "purpose thereof" (presumably a reference to Safeway's purpose in taking advantage of its market power) as including maintaining retail prices for bread products and preventing Safeway's competitors in the retail market from maintaining or increasing their market share.
67 This form of pleading is not easy to follow. However, we think it is to be construed as alleging that, by doing the things and performing the acts previously pleaded for the purposes alleged or particularised in par 19C itself, Safeway contravened s 46(1)(c) of the Act. The reference in par 19C to implementation of the policy pleaded in par 6D(h) of the statement of claim is not to be understood as limiting par 19C to those things or acts done or performed by Safeway that can necessarily be characterised as implementing the policy pleaded in par 6D(h). Rather it is to be understood as alleging that the things done or acts performed were in conformity with the policy. If, however, the things done or acts performed are found not to be in conformity with the policy alleged, the pleading still leaves it open to find that those things or acts were done for the purposes alleged and thereby amounted to a contravention of s 46(1)(c) of the Act.
68 This view of the pleading is supported by the fact that, although par 19C alleges that Safeway's conduct contravened s 46(1)(c) "in that" it acted in contravention of ss 45, 47 and 48, a mere contravention of those sections could not of itself establish a contravention of s 46(1)(c) of the Act. Similarly, the mere implementation of the policy alleged in par 6D(h) could not of itself constitute a contravention of s 46(1)(c). While it is not obvious why the Commission chose to incorporate references to these matters in par 19C (and the equivalent paragraphs elsewhere in the statement of claim), it is unduly restrictive to interpret par 19C as intended to plead, for example, that Safeway's conduct contravened s 46(1)(c) only if it also contravened ss 45, 47 or 48. It is similarly unduly restrictive to interpret par 19C as intended to plead a contravention of s 46(1)(c) only if Safeway's conduct could also be characterised as implementing the previously pleaded policy.
69 Much the same analysis applies to the pleading relating to Safeway's alleged contraventions of s 46(1)(a) of the Act. Indeed, there is less reason for regarding the policy pleaded in par 6D(h) as limiting the material facts on which the Commission relies to establish that Safeway took advantage of its power in the wholesale market for the purpose of substantially damaging the independent retailers. (It is for this reason that the primary Judge's distinction between the case pleaded in relation to s 46(1)(a) and that pleaded in relation to s 46(1)(c) does not deserve to be characterised as "bizarre".) Paragraph 19D of the statement of claim, for example, which alleges that Safeway contravened s 46(1)(a) in its dealings with Sunicrust, makes no express reference to Mr Brookes' policy, nor to par 6D(h) of the pleading. Paragraph 19D does cross-refer to par 19C of the statement of claim and "the particulars subjoined thereto", but it is not clear whether this is intended to incorporate the pleading in par 19C(d) that Safeway implemented the policy referred to in par 6D(h). If par 19C should not be read as limited in the manner for which Safeway contends, par 19D (and other equivalent paragraphs) also should not be read in that manner.
70 It follows that his Honour erred in holding that by reason of his findings concerning the policy as formulated by Mr Brookes, the Commission was precluded from pursuing its claim that Safeway had contravened s 46(1)(c) of the Act.
4 FINDINGS AS TO THE NINE INCIDENTS
71 There are challenges in the appeal to a number of findings made by the primary Judge. However, before dealing with those challenges, it is convenient to set out the findings actually made by his Honour. The nine incidents fall conveniently into three groups, each group involving a different plant baker. Each incident has been treated separately, although it may be that conduct on the part of Safeway in relation to one incident may give rise to inferences as to the purpose of its conduct in relation to other incidents.
4.1 BUTTERCUP
72 Safeway was Buttercup's largest proprietary bread customer although it was not its largest customer. Buttercup had a standard wholesale price list but it also offered a number of volume discounts depending on the size of the business of the purchaser. Safeway's trading terms included a volume discount, a co-operative rebate, a state rebate and a national rebate. Mr Ronald Linton, General Manager of Buttercup in Victoria and Mr Ray Cooper, Buttercup's Victorian Sales Manager, were the Buttercup staff with whom Mr Jones and Mr Brookes negotiated trading terms.
73 There were several instances in 1994 when Buttercup products were deleted from Safeway supermarkets because of problems with service or supply. Such deletions occurred less frequently after the early part of 1994. There were also occasions when Buttercup products were permanently deleted but these were in relation to products that Safeway was not successful in selling, such as crumpets and muffins.
4.1.1 Frankston
Course of Events
74 During 1993 and 1994, Mr Joseph Quadara operated a fruit and vegetable store in Ashleigh Street, Frankston ("the Quadara Store"). The Quadara Store stocked bread supplied by Buttercup. From 1993 the bread stocked by the Quadara Store included a Code C 680g plain wrap or generic bread branded "Quadara". The Quadara brand was owned by Mr Quadara. The Quadara branded bread was advertised in its own name and not as Buttercup bread. Nevertheless, the Quadara bread wrapper had printed on it that it was manufactured by Buttercup and Mr Quadara did not hide from customers the fact that Quadara branded bread was manufactured by Buttercup.
75 Quadara branded bread came in four varieties and was retailed in the Quadara Store at 99c per loaf. Mr Quadara purchased the bread from Buttercup at a nominal price of $1 per loaf, but after the rebate allowance, the cost price became 90c a loaf. All purchases by Mr Quadara from Buttercup were on a returns basis.
76 Quadara was located near a number of supermarkets including a Safeway supermarket and a Woolworths supermarket, which later became a Safeway supermarket. Both supermarkets were located in the Karingal Hub Shopping Centre in Frankston, approximately two kilometres from the Quadara Store. At the relevant time in 1994, Buttercup supplied bread to both of the Woolworths and Safeway supermarkets. At that time, Mr David Lewry was the store manager of the Woolworths supermarket and Mr Mark Kelly was the store manager of the Safeway supermarket.
77 It was Mr Kelly's practice to telephone Mr Jones to inform him of the extent of discounting of bread. Mr Kelly learned that Mr Quadara was stocking a Buttercup bread at a discounted price of 99c per loaf. That discounting by Mr Quadara was reported to Mr Jones.
78 On Thursday 12 May 1994, as part of his normal competition reporting, Mr Lewry telephoned Mr Jones. As Mr Jones was not available, Mr Lewry spoke to a woman at Safeway's State office and reported the fact that cheap bread was being sold at the Quadara Store. On the next day, Friday 13 May 1994, a woman from Safeway's State office telephoned Mr Lewry and told him that there would be no deliveries of Buttercup bread to the Woolworths supermarket from the following Monday, 16 May 1994.
79 On the same day, 13 May 1994, Messrs Brookes and Jones visited the two supermarkets at the Karingal Hub Shopping Centre and spoke with both managers. Mr Brookes discussed with Mr Kelly the extent to which the Quadara Store was having an impact on their business. One of the supermarket managers told him that the bread prices offered by the Quadara Store were having an adverse effect on the business of the relevant supermarket and that his practice was to match the Quadara Store's prices by discounting Home Brand bread. Mr Brookes told that manager that they would have to withdraw the uncompetitive Buttercup bread.
80 After leaving the two supermarkets, Mr Brookes suggested to Mr Jones that Safeway offer two loaves for $1.80 and instructed Mr Jones to advise the supermarkets of that decision. After the visit, Mr Jones sent a memorandum in the following terms to the managers of the two supermarkets, with a copy to Mr Brookes:
"Effective Monday 16/5/94 Buttercup bread is to be withdrawn from both stores except for Atlantic and speciality rye bread. A competive [sic] bread, Captain Cutless, will be delivered on Monday. This bread is to be retailed at 2 for $1.80. This bread is not sale or return. Mark downs will have to be made at store level. Therefore your store must order requirements with Sunicrust representative.Buttercup bread is not to be ranged until advised by grocery merchandising. 680 g Home Brand Code C is to be priced at full retail $1.52 as of Monday, 16/05/94."
81 Around 16 May 1994, a conversation occurred between Mr Jones and Mr Cooper. Mr Jones did not ask for a case deal in the conversation, which occurred after Mr Jones had decided to delete all Buttercup bread from the two Karingal supermarkets. However, Mr Brookes assumed that Mr Jones had already sought a case deal or spoken to Buttercup. On the other hand, he had no knowledge of whether it occurred and he did not recollect asking whether such a request had been made. The list of Buttercup's products deleted from the supermarkets is instructive. The following products were deleted from the Safeway supermarket: Country Split White Bread 450g, Super Sandwich 680g, Toasty 680g, Wonder White Sliced 680g, Wonder White Toast 680g, Country Split Wholemeal, Wholemeal Plus 680g, Ploughman Wholemeal 900g, Wholemeal Pritikin 680g, Vogel Wholemeal and Grain, Vogel Wholemeal SES 900g, Taylors Wholemeal 900g, Country Split Multigrain 450g, Multigrain Plus 680g, Multigrain Toast 680g, Natural Grain 680g, Natural Grain Toast 680g, Ploughman Barley/Oats 900g, Ploughman Wholegrain Wm 900g, Vogel Family Size 900g, Buttercup Premium Fruit 450g, Fruit `N Spice 680g, Ploughman Fruit/Grain 750g, 5" Hamburger buns Pkt 6, Country Split soft rolls, Buttercup 6 Mini Dampers. The same Buttercup products were deleted from the Woolworths supermarket, except that Vogel Wholemeal & Grain, 5" Hamburger buns Pkt 6 and Country Split soft rolls were not deleted. None of the deleted Buttercup products were being discounted by Quadara.
82 Neither Mr Lewry nor Mr Kelly gave an instruction to their staff not to accept deliveries of the Buttercup range, nor did they request or advise Buttercup not to deliver Buttercup bread. Nonetheless, the instruction in Mr Jones' memorandum was implemented. Buttercup products, save for Atlantic bread and speciality rye, were deleted from the two Karingal supermarkets and Buttercup products were not purchased by, or sold from, them between 17 May 1994 and 6 July 1994.
83 From the beginning of 1994 until the week ending 22 May 1994, both of the Karingal supermarkets retailed Home Brand bread at 99c per loaf. From 16 May 1994 to 5 July 1994, 680g Captain Cutless was sold at the Karingal supermarkets. At around the time of the deletion, Sunicrust's invoice cost of Code C 680g Captain Cutless to Safeway was 90c per loaf. At that time, Buttercup's Budget Family Fresh could be purchased at a net price of 86c per 680g loaf no returns, or 90.6c per loaf with returns.
84 Mr Quadara became bankrupt in early July 1994. After that, Mr Cooper telephoned Mr Jones and told him that Mr Quadara owed Buttercup $20,000, and that Buttercup was no longer supplying Quadara with bread. Mr Cooper asked Mr Jones whether, since the bread was not being sold, Buttercup could put its products back into the Karingal supermarkets. Mr Jones told him he could do so. Deliveries of Buttercup bread to the Safeway Karingal supermarkets resumed on 7 July 1994. Both Mr Lewry and Mr Kelly relied upon an instruction from head office to re-range Buttercup products.
Purpose
85 The deletions that occurred in the Frankston incident went beyond what was required by the policy conceived by Mr Brookes. There was no explanation as to the purpose of the deletion, without a case deal being first sought, when the price-fighting brand introduced was not Buttercup's Budget Family Fresh but rather Sunicrust's Captain Cutless. Mr Brookes agreed that the instruction to the two supermarket managers was to withdraw all Buttercup bread other than Atlantic bread and specialty rye. His Honour rejected Mr Jones' explanation for the over-deletion that, when referring to "Buttercup bread", he was referring to 680g bread.
86 His Honour was satisfied that the purpose of the Frankston deletion was to punish Buttercup for selling bread to Quadara at a discounted cheap price and to deter or attempt to deter Buttercup from continuing to do so. His Honour reached that conclusion because of his findings:
* that the decision was taken to make the deletion without a case deal being sought;
* as to the extent of the over-deletion; and
* as to the manner and form in which the instruction for the deletion, and its extent, was given.
4.1.2 Cheltenham
Course of Events
87 Between 1984 and April 1997, Mr Joseph Carroll ("Mr Carroll") owned and operated two stores that traded under the name "Cheapa Food Barn". One of them was located at the Cheltenham Market on the Nepean Highway at the corner of Bay Road, Cheltenham. The Cheltenham Market was opposite Southland Westfield Shoppingtown, in which a Safeway supermarket was located less than 500 metres from the Cheapa Food Barn. Mr Matthew Scott was the relieving assistant manager of Safeway Southland from about February 1994 to August 1994, and from 5 September 1994 to March 1995, he was the assistant manager of Safeway Southland. During those periods, Mr Ian Knox was the manager.
88 Throughout 1994, Mr Carroll's marketing strategy was to have four products, bacon, bread, margarine and wine, advertised at discounted prices on a permanent basis. The four products were advertised on large boards at the front of the store facing the Southland Westfield Shoppingtown complex. In particular, throughout 1994 there was a large painted sign that stated words to the effect "Code C Bread 99 cents". Mr Carroll used bread manufactured by different bakers for the promotion. Until about 3 July 1994, Mr Carroll purchased "Hot Bake" branded bread from Tip Top for both stores. He then commenced purchasing "Black & Gold" bread from Buttercup for both stores, which he sold at 99 cents a loaf.
89 From 13 July 1994 Mr Carroll commenced purchasing both premium brand and generic bread from Buttercup, although by far the greater proportion of bread purchased was generic. It was extremely rare for him to get the plant bakers' premium brands at the price of secondary or generic bread. He sold the Black & Gold Code C 680g bread for a retail price of 99 cents a loaf.
90 Mr Scott knew in 1994 that Cheapa Food Barn was selling a cheap Code C bread, which he thought was Black & Gold, at 99 cents a loaf. He also knew that Cheapa Food Barn was not selling any of its branded proprietary breads at 99 cents.
91 Between 16 July and 25 July 1994 Safeway did not sell Buttercup bread at Safeway Southland. Several Buttercup products were deleted from Safeway Southland during that period. None of those products was a product that was being discounted by the Cheltenham Cheapa Food Barn. However, not all Buttercup products were deleted. Buttercup continued to make deliveries of speciality products including Atlantic and speciality rye breads such as "Riga", "Karls" and "Conways".
92 There was no evidence as to what communication, if any, was made to Safeway's head office or Mr Jones from Safeway Southland relating to Cheapa Food Barn's sale of discounted bread or to Safeway Southland's need to be competitive. Nor was there any evidence as to how the instruction to delete Buttercup bread was communicated to Safeway Southland.
93 The full range of Buttercup bread was restored to Safeway Southland on 26 July 1994. Mr Cooper did not recall any conversations with Mr Jones about the reinstatement. He did recall, however, that Buttercup had been made aware that the manager of Safeway Southland had received many customer complaints about their inability to purchase certain Buttercup lines and that the manager had insisted that the range be reinstated.
94 His Honour considered that he did not have any basis upon which he could make a finding as to what was said in such conversations as may have occurred between Mr Cooper, on the one hand, and Mr Jones or his office, on the other. His Honour considered that the evidence fell short of establishing to the requisite degree of satisfaction that Mr Jones was involved in the deletion or the re-instatement. Such evidence as there was as to the reason for the deletion was, in his Honour's view, of little probative value.
95 Between 15 July 1994 and 26 July 1994, Safeway Southland sold Sunicrust's Captain Cutless branded 680g bread at a price equivalent to the retail price of Black & Gold bread at Cheapa Food Barn. The invoice cost of buying Code C Captain Cutless bread from Sunicrust for the weeks ending 22 and 29 July 1994 was 90 cents per loaf. From 12 September 1994 Sunicrust's net net price of Code C Captain Cutless to Safeway was 82 cents a loaf, on a no returns basis. The net net price before 12 September 1994 was less. At the time of the deletion of Buttercup's products from Safeway Southland, Safeway was able to acquire Buttercup's Code C 680g "Budget Family Fresh" bread for a net net price of 86 cents per loaf no returns or 90.6 cents per loaf with returns.
Purpose
96 There appears to have been no evidence as to whether a case deal was sought from Buttercup before the deletion. The full range of Buttercup bread was restored to Safeway Southland on 26 July 1994. Buttercup was made aware that the store manager was getting many complaints from customers about not being able to purchase certain Buttercup lines and the store manager insisted that the range be put back in. Mr Cooper did not recall any conversation with Mr Jones about returning the bread into the supermarket. Mr Jones had no knowledge of the reintroduction of Buttercup bread.
97 The primary Judge found that the reason for the deletion at Cheltenham was the fact that Cheapa Food Barn was selling bread at 99 cents a loaf. However, Cheapa Food Barn was not discounting any of the Buttercup products that were deleted.
98 While Safeway communicated the deletion to Buttercup, his Honour considered that there was insufficient evidence to enable him to reach a conclusion that Mr Jones directed or was privy to the deletion. In the absence of being able to make a finding as to who directed the deletion, his Honour could make no finding as to the purpose of the deletion. In particular, his Honour concluded that there was insufficient evidence to enable him to be satisfied that Safeway attempted to induce Buttercup to cause or compel Cheapa Food Barn to increase the retail price of its bread or to induce Buttercup to stop supplying bread to Cheapa Food Barn.
99 The Cheltenham incident occurred within two weeks of the termination of the deletion of Buttercup products in relation to Mr Quadara's store. The primary Judge acknowledged that since a positive finding had been made of purpose in relation to that conduct, an inference was capable of being drawn that the conduct engaged in, in relation to the supply of Buttercup products to Mr Carroll's two Cheapa Food Barn stores, was engaged in for the same purpose. Nevertheless, his Honour did not consider that it was appropriate to extrapolate findings in relation to the two Cheapa Food Barn stores from the Frankston incident (see 106 [404]).
4.1.3 Vermont/Forest Hill
Course of Events
100 The other Cheapa Food Barn owned and operated by Mr Carroll in July 1994 was located at the Brentford Square shopping centre, in the vicinity of the boundary between the suburbs of Vermont and Forest Hill. Safeway operated a supermarket in the Brentford Square shopping centre about 200 metres from the Cheapa Food Barn. In the period leading up to 16 July 1994, the store manager of the Safeway Vermont supermarket was Mr Ralph Hanna. Mr Hanna commenced as store manager in September 1993 and finished on 11 July 1994. Ms Kylie Spears took over from Mr Hanna as store manager at Safeway Vermont on 11 July 1994.
101 Cheapa Food Barn purchased 680g Code C Black & Gold in white, toast and wholemeal varieties from Buttercup for the Vermont store. The bread was retailed at 99 cents a loaf.
102 Buttercup products were not purchased by, or sold from, Safeway Vermont between 16 July 1994 and 25 October 1994. On 1 October 1994, several items were re-listed at Safeway Vermont. On or about 26 October 1994, the remaining deleted bread products of Buttercup were reinstated into the Safeway Vermont supermarket. The deletion ended when Cheapa Food Barn ceased discounting Black & Gold brand bread, apparently because it changed its promotional activity and was selling Vardar branded bread at 99c per loaf.
103 None of the bread products deleted from the Safeway Vermont supermarket was sold by Cheapa Food Barn. Black & Gold bread was not at any relevant time acquired or ranged by Safeway at Vermont.
104 Safeway Vermont sold Captain Cutless 680g bread from 23 June 1994 to 4 November 1994. There were deliveries of Captain Cutless to Safeway Vermont from 23 June 1994 to 11 July 1994 and from 15 July 1994. There were no deliveries of Captain Cutless from 12 to 14 July 1994. After deliveries of Captain Cutless recommenced on 15 July 1994 it continued to be sold in the Safeway Vermont store until December 1995, despite the deletion of Buttercup products finishing on 25 October 1994. From 26 October 1994 to the end of 1995, Cheapa Food Barn was selling 99 cents cheap bread, but no major plant bakers' products were deleted from Safeway Vermont.
105 At and around the time of the deletion Sunicrust's cost of 680g Code C Captain Cutless to Safeway was 90 cents per loaf. From 12 September 1994 Sunicrust's net net price of 680g Code C Captain Cutless to Safeway was 82 cents a loaf on a no returns basis. At the time that Captain Cutless was first introduced, Safeway was able to acquire 680g Code C Budget Family Fresh from Buttercup at a net net price of 86 cents per loaf no returns or 90.6 cents per loaf with returns.
106 There was no evidence as to what communication led to the deletion of Buttercup products from Safeway Vermont. Nonetheless, his Honour was prepared to infer that such communications as were made to Mr Jones' office from the Vermont supermarket related to cheap Black & Gold Code C bread.
107 Mr Jones gave evidence that he did not know who organised the Vermont deletion. Although the deletion lasted for three months, Mr Jones said he had no knowledge of it. His Honour found the evidence insufficient to make a finding that either Mr Jones or Ms Austin, his Category Manager's Assistant ("CMA"), had told Mr Cooper that Buttercup bread was to be deleted from Safeway Vermont. Nor did his Honour consider that the evidence was sufficient to enable him to make a finding as to which person made such a statement to Mr Cooper. His Honour did not consider that the evidence would enable him to be satisfied as to who authorised the deletion or who gave the instruction for it.
108 His Honour, however, was prepared to accept that Mr Hanna had had a conversation with Mr Jones shortly before the former's departure from the Vermont store. Mr Hanna telephoned Mr Jones and said words to the effect "I need a bread to sell at 99 cents to match Cheapa Food Barn, which is in Brentford Square". Mr Jones said that he would get back to him with what he could do. About ten days after that conversation and about two or three days prior to 23 June 1994, Mr Hanna telephoned Mr Jones again and said to him words to the effect of "What have you got for me to compete with Cheapa Food Barn?".
109 There was no evidence that, prior to the deletion of Buttercup bread, Safeway asked Mr Cooper of Buttercup for a case deal for proprietary branded Buttercup bread at the same cost price that Cheapa Food Barn bought Black & Gold bread. Mr Cooper could not remember any circumstance where he was asked to supply Buttercup products at a Black & Gold price, although he could not deny it. His Honour considered that the evidence did not enable him to make a finding that a case deal was sought by Safeway before the Buttercup deletion.
Purpose
110 His Honour was not satisfied on the evidence as to who had spoken to Mr Cooper of Buttercup in relation to the deletion that occurred at Vermont. He was therefore not satisfied that the purpose of the deletion of the Buttercup products was to induce Buttercup to get Cheapa Food Barn to increase the price of its bread or to punish Buttercup for enabling Cheapa Food Barn to sell bread cheaply. Further, if it was Ms Austin, Mr Jones' CMA, who spoke to Mr Cooper, his Honour was not satisfied that she had an intention or purpose to induce Buttercup to get Safeway's retail competitors to increase the price of their bread.
111 The primary Judge was prepared to infer that the reason for the deletion of Buttercup bread from the Safeway supermarket at Vermont was because Safeway was not competitive with Cheapa Food Barn in relation to its 99 cents bread. However, his Honour was not prepared to find that the purpose of the deletion was to punish Buttercup or to induce Buttercup to get Cheapa Food Barn to raise the price of its bread or to cease supplying Cheapa Food Barn unless the latter raised the price of its bread.
112 His Honour considered (at 124 [503]) that his findings provided
"an inadequate basis for a finding that there was an attempt by Safeway to induce Buttercup to cause or compel Cheapa Food Barn at Forest Hill to increase the retail price at which Black & Gold was sold, or to cause or compel Buttercup to cease the supply of Black & Gold bread to Cheapa Food Barn and that in the absence of such steps Safeway Vermont would delete all Buttercup products."
4.2 SUNICRUST
113 In 1994 and 1995 the relevant managerial staff of Sunicrust who dealt with Mr Jones and Mr Brookes about trading terms were Mr Simon McDowall, the Victorian Divisional Sales Manager and his subordinate, Mr Charles McLeish, the Metropolitan Sales Manager/Account Manager. Mr McDowall and Mr McLeish had regular meetings with Mr Brookes and Mr Jones on issues such as service and delivery problems, product launches and out of stock issues.
114 In 1994 and 1995 Sunicrust had seven bakeries in Victoria and one in New South Wales. Sunicrust provided bread for different retailers and, although it had one wholesale price list in Victoria, it had different trading terms depending upon the identity of its customers. Sunicrust sold proprietary branded and generic bread. It supplied Safeway with its "Home Brand" bread. Safeway was Sunicrust's largest customer. Sunicrust supplied bread to Safeway on the best terms available. Safeway received a statement discount, a settlement discount, a co-operative spend discount and a state rebate. From time to time Safeway was also given particular discounts for specified periods.
115 In 1994 and 1995 some Safeway supermarkets were experiencing out of stock occurrences of proprietary bread in the late afternoon or early evening. Safeway asked Sunicrust to resolve the problem and, as a result, Sunicrust introduced a twice-daily delivery so that an afternoon delivery was made to certain Safeway stores. In mid-1994 the twice-daily delivery was extended to the majority of Safeway stores.
4.2.1 Traralgon
Course of Events
116 The West End Village Foodtown supermarket ("West End") is located in Grey Street, Traralgon. Sunicrust supplied generic Code C white sandwich, white toast and wholemeal sandwich bread to West End in bags labelled "West End Supermarket" at a wholesale price of $1.00 or $1.02 per loaf. West End purchased all bread on a returns basis. Sunicrust owned the mark "West End", although it did not provide any advertising or financial support for the discounted bread it supplied to West End. It was generally known by customers of West End that Sunicrust manufactured the West End bread. If a customer asked, the customer would be told that the West End bread came from Sunicrust, Moe.
117 Sunicrust also supplied proprietary bread to the Safeway Traralgon supermarket, which was located less than two kilometres away from West End in Seymour Street Traralgon. Safeway's Home Brand bread was also supplied to it by Sunicrust.
118 In late June 1994, West End discounted the price of its bread to $1.19 per loaf. About two or three weeks after beginning to sell the West End bread at $1.19 per loaf, West End discounted the bread further to 99 cents per loaf. At the end of August or early September 1994, West End offered a loaf of bread and a litre of milk for $2. On other occasions the bread was retailed at two loaves for $1 and on one occasion the price was reduced to 89c per loaf. When West End lowered its prices Safeway and Coles, which was located nearby, lowered their retail price and a price war developed.
119 Mr Berry, the manager of Safeway Traralgon, found out that West End was selling discounted generic bread and was concerned that the discounting was being felt across Safeway's sales of bread in general. On the day that Mr Berry found out about the West End bread, he was on his way to a store managers' meeting. He delegated contact with the buying office to his assistant manager, Mrs Karen Healy. He told Mrs Healy that West End was selling bread for 99 cents and that she should telephone the Safeway buying office and see what action they needed to take. Mrs Healy passed on to the buying office that a competitor was selling bread for 99 cents a loaf, that the store was losing sales and that the supplier of bread was Sunicrust.
120 Mrs Healy told Mr Berry that, when she told the buying office the details about West End's discounted bread, she was instructed to obtain a price matching bread from Buttercup called Family Fresh, or something similar, and to remove all Sunicrust bread from the racks and display Family Fresh in its place.
121 Mr Jones was told that a generic bread was being supplied by Sunicrust, that it was being sold for 99 cents and that Safeway was uncompetitive in relation to it. That motivated Mr Jones to telephone Mr McLeish to see if he could obtain Sunicrust bread at a discounted price so that Safeway could sell bread competitively with West End. In the course of his conversation with Mr McLeish, Mr Jones said to Mr McLeish that West End in Traralgon was selling generic bread supplied by Sunicrust at a price below Safeway and that Sunicrust was "out of Safeway at Traralgon".
122 Sunicrust products were not purchased by, or sold from, Safeway Traralgon between 5 August 1994 and 25 October 1994. All proprietary bread products usually supplied by Sunicrust were deleted from Safeway Traralgon during that period. However, Sunicrust still made deliveries of in-store bakery products and Home Brand bread to Safeway Traralgon throughout the deletion period.
123 From 5 August 1994 to 22 October 1994 Safeway sold 680g Budget Family Fresh at prices that successively matched the retail prices charged by West End for West End bread. From 28 September 1994 to 22 October 1994 Safeway sold 900g Sunicrust Captain Cutless bread at $1.29. The average retail price of a 900g Captain Cutless bread at Safeway Traralgon during this period was generally 99 cents.
124 Mr Berry was surprised that more bread than Code C bread was deleted and he spoke to his area manager, Mr White, about it. He did not want any of the Sunicrust bread removed and wanted it all back because he and his staff were getting a barrage of complaints from customers that they could not buy their particular favourite loaf of bread and wanted it back. He wanted to protect Safeway's business.
125 During the period of the deletion, Mr Berry spoke to Mr White on a number of occasions and told him that customers were complaining that they could not buy Sunicrust bread and could he put it back on display. At the time Mr Berry spoke to Mr White, Mr Berry knew that virtually the whole range of Sunicrust bread had been deleted. After a number of these complaints, Mr White told Mr Berry to forget what head office had told him, to stop matching West End prices and to get Sunicrust into the store.
126 Mr White rang Mr Jones on at least two occasions. On each occasion, Mr White said to Mr Jones "Peter Berry wants to put [the bread supplier's] products back on display. He has had customers complaining. What is happening, why can't he put it back on the shelves?" On at least one of the occasions when Mr White spoke to Mr Jones he said words to the effect:
"I'm still negotiating with [the supplier] trying to get them to give us bread at the same cost price as they are giving it to [West End]. We can't afford to be uncompetitive. I need your support to keep the product off the shelves until successful discussions have been completed."
127 The price war lasted for some time until, eventually, no one could commercially keep it up and the discounting ceased. West End increased the retail price at which it was selling West End bread to about $1.19 or $1.25 per loaf and the price war ceased. It is likely that the price rise occurred in late October 1994. The deletion of Sunicrust products ended on 26 October 1994. Mr Jones was advised that Sunicrust was back in the store and that Budget Family Fresh was out of Safeway Traralgon.
128 The net cost of 680g Code C Home Brand to Safeway, on a returns basis, on 4 December 1993 was 89.93 cents per loaf. From 12 September 1994 it was 85 cents per loaf and from 22 October 1994 it was 90 cents per loaf. In June 1994 Safeway Traralgon's normal retail price for proprietary Code C bread was $1.75 per loaf and for Home Brand bread $1.50 per bread.
129 Safeway was able to acquire 680g Code C Budget Family Fresh bread from Buttercup at a net price of 86 cents per loaf, no returns or 90.6 cents per loaf with returns. As from 12 September 1994 Sunicrust's net net price of Captain Cutless to Safeway was on a no returns basis, 82 cents per Code C loaf and $1.05 per Code D loaf. The net net price before 12 September 1994 was less.b
Purpose
130 Mr Jones gave instructions for the deletion of all the Sunicrust bread from the Traralgon supermarket. Nevertheless, his Honour found that, notwithstanding the deletion of all of the Sunicrust products from the Traralgon store, the deletion did not occur for the purpose of punishing Sunicrust. His Honour considered that the request for a case deal before the deletion was inconsistent with an intention to punish Sunicrust by deleting its products.
4.2.2 Lalor and Thomastown
Course of Events
131 In 1994 and 1995, Goldy's Supermarket Pty Ltd owned and operated two supermarkets, one located in McKimmies Road, Lalor and another in Main Road, Thomastown. The two stores were located about three to four kilometres apart and were separated by a railway line. Both stores were operated under the trading name "Goldy's Tuckerbag" ("Goldy's"). At the relevant time in 1995, Mr Laun Goldberg was a director of the company and Mr Arch Abdelkader was the general manager of the Goldy's stores.
132 The Safeway supermarket at Lalor was located in High Street, Lalor, less than two kilometres from both of the Goldy's stores. In April 1995, Mr Leslie Stewart was the manager of the Safeway supermarket at Lalor and Mr Andrew Campbell was the grocery manager.
133 In 1995, Goldy's stocked Code C and Code D proprietary bread made by Tip Top, Sunicrust and Buttercup. They also stocked generic bread, including "Tuckerbag" bread made by Tip Top. Tip Top was the store's biggest supplier. In each week, Goldy's had a different bread, either proprietary or generic, on a special sale. Generic bread was sold on special sale between once a month and once every six months.
134 During 1994 to 1995 the plant bakers regularly provided Goldy's with promotional discounts and special deals ranging from 20 cents per loaf for proprietary bread to 30 cents to 50 cents per loaf for generic bread. Usually Mr Goldberg would reduce his margin by 10 cents to push sales. Mr Goldberg had a strict policy that his stores would always retail generic bread 10 cents lower than the price of Safeway and Coles generic bread.
135 In early April 1995 Mr Abdelkader arranged with Mr Giuseppe Nittoli, a sales representative with Sunicrust, for the Goldy's stores to conduct a promotion of 680g Code C plain wrap bread called "Local Bake". Local Bake bread was purchased by Goldy's on a sale or return basis. The promotion was conducted in the stores during the week before Easter, from Monday 10 April 1995 to Saturday 15 April 1995, when it ended. Local Bake bread was retailed at 99 cents per loaf with white sliced, toast and wholemeal varieties available for sale. Goldy's advertised its promotion in a hand bill that was distributed in the local suburbs. In 1994 and 1995 the retail price for Local Bake bread was $1.39 to $1.59 when not on special.
136 On Wednesday 12 April 1995, Mr Stewart visited Goldy's Thomastown and then telephoned Mr Jones. He told Mr Jones that Goldy's at Thomastown was selling Local Bake Code C bread supplied by Sunicrust for 99 cents a loaf. He made it clear that Goldy's was not selling proprietary branded bread and asked what action Mr Jones wanted him to take. Mr Jones said he would check it out and get back to him. Later that day, Mr Jones telephoned Mr Stewart and said to him: "Tomorrow morning don't put the Sunicrust bread on show. Leave it in the storeroom. Keep doing that until further notice". Mr Stewart agreed to do so.
137 On that day, Mr Gunton of Tip Top had a meeting with Mr Jones during which he told Mr Jones that Goldy's in Lalor and Thomastown were being supplied by Sunicrust at a cheaper cost than the cost at which Sunicrust was supplying Safeway. He said to Mr Jones that if Tip Top had been involved in selling bread at this cost price then Safeway would have called Tip Top and asked for the same price. Mr Jones told Mr Gunton that no store had contacted him about Goldy's Tuckerbag and that the bread being sold may not be Sunicrust bread and could be a product of a hot bread kitchen. He asked Mr Gunton to provide some facts and told him that he would investigate the matter.
138 As a result of his conversation with Mr Jones, Mr Gunton arranged for the purchase of Local Bake sandwich bread from the two Goldy's stores and sent a copy of the receipts by facsimile to Mr Jones with a covering letter saying:
"Please find attached proof of local bake pricing at Goldy's Tuckerbag, Lalor and Thomastown. Can you please advise us of what action will be taken, so we can reconfirm to our sales staff of [sic] the importance of maintaining intelligent pricing in the market place and maintaining good trade margins."
139 The primary Judge recorded that Mr Jones gave evidence that he had asked someone at Sunicrust (he could not remember whether it was Mr McLeish or someone else) whether Safeway was buying bread at the same cost price as Goldy's. When told that the answer was no, Mr Jones said that he told Sunicrust that he wanted to "buy it at the same price so it would be competitive". Sunicrust was not prepared, however, to do this.
140 His Honour considered that if the only evidence on the question of a case deal was that of Mr Jones, he would not have been disposed to accept it. However, since Mr Brookes' evidence corroborated that of Mr Jones, his Honour found that Mr Jones did ask a Sunicrust representative for a case deal, which request was rejected.
141 On 12 April 1995, Mr Nitolli visited the Safeway supermarket at Lalor and had a conversation with Mr Stewart in which Mr Stewart said:
"If the promotion continues in Goldy's Lalor and Thomastown, Sunicrust product will not be accepted for delivery by Safeway Lalor."
Mr Nitolli said he would have to speak to his supervisor as soon as he could.
142 On the next day, Mr Nitolli visited the Safeway supermarket on two occasions and saw that the Sunicrust bread that had been delivered was stacked in display racks but that the racks were in the storage area at the rear of the supermarket. He was told by his supervisor to do nothing and to continue to support Goldy's promotion.
143 Safeway did not on 13 or 15 April 1995 accept any Sunicrust or Helga's branded bread from Sunicrust for resale at the Lalor supermarket. Proprietary bread and other baked products, such as rolls, muffins and crumpets, which had been delivered on the morning of 13 April 1995, remained in the storeroom all day. However, Home Brand White Sandwich, White Toast, Jumbo White Sandwich, Wholemeal and Multigrain Sandwich were delivered to the store on Thursday 13 April in the same truck with the other Sunicrust products and were put on display for sale by Safeway. No other racks were placed in Safeway Lalor on Thursday 13 April to fill the space left vacant by the Sunicrust racks.
144 Friday 14 April 1995 was Good Friday and the Safeway supermarket at Lalor was closed. Monday 17 April 1995 was a public holiday and no bread was supplied by Sunicrust.
145 Safeway Lalor did not use a generic price-fighting bread such as Captain Cutless to compete with Goldy's Local Bake during the deletion period. Rather, Mr Stewart used the Safeway weekly special. Safeway reduced the price of Buttercup Super Sandwich White 680g bread. It is more probable than not that Mr Jones was involved in the decision as to what Safeway Lalor's competitive response would be to the discounting by Goldy's.
146 The Goldy's promotion continued as advertised until Saturday 15 April 1995. Safeway Lalor was closed on Good Friday, 14 April 1995. Sunicrust proprietary bread was deleted on Saturday 15 April, although Sunicrust Home Brand products were supplied. On Easter Monday, 17 April 1995 no bread was supplied by Sunicrust.
147 Mr Jones telephoned Mr Stewart early in the morning or mid-morning on Tuesday 18 April 1995 and told him to put the Sunicrust bread back. Safeway Lalor resumed purchasing Sunicrust proprietary bread on Tuesday 18 April 1995.
148 His Honour considered that the finding that Mr Jones asked for a case deal before the deletion occurred was decisive. The request was "inconsistent with a punitive purpose in what followed". The reason for the deletion was not that Safeway feared that it would be perceived as uncompetitive in Sunicrust bread. Rather, the reason was that Safeway considered itself to be uncompetitive in bread generally.
4.2.3 Geelong
Course of Events
149 In May 1995, T Costa & Co Pty Ltd operated fruit and vegetable stores under the name "Costa's" in the Geelong area at Corio, Geelong West and Highton. As well as selling fruit and vegetables, the Costa's stores sold bread purchased from Sunicrust and Tip Top. In May 1995, Mr Graeme Pilgrim was the retail divisional manager of Costa's.
150 In May 1995 Safeway operated seven supermarkets in the Geelong area, namely at Corio, Waurn Ponds, Market Square, Geelong West, Highton, Newtown and Newcomb. The Highton supermarket was located directly across the road from Costa's Highton store. In May 1995, Mr Geoffrey Clarke was the manager at the Newcomb Safeway supermarket and Mr Lee Cleary was his assistant manager.
151 Around 8 May 1995, Mr Pilgrim told Mr Matt Eaglesham, a Sunicrust sales representative, that Costa's would be conducting a promotion on bread and other items the following week and that he would be advertising "Thwaites" bread, manufactured by Sunicrust, at 99 cents a loaf. Mr Eaglesham agreed to supply Thwaites bread for the promotion at $1 a loaf. Thwaites bread was a Sunicrust secondary brand sold in Geelong as a generic brand, without advertising or financial support. Because of its origin and heritage in the Colac area, Thwaites bread was supplied in Colac as a proprietary product. The bag in which it was packed was labelled "Thwaites Bakery". The words "Manufactured by Sunicrust Bakeries Pty Ltd" were printed in small print on the side of the bag.
152 On Tuesday 16 May 1995, Costa's advertised in the Geelong News a number of products for sale at 99 cents, including "Code C Bread" for 99c per loaf. The advertisement did not identify the brand of the bread, which was in fact Thwaites bread. As well as advertising Code C bread in the newspaper, Costa's placed a large billboard at the front of its stores advertising Code C bread at 99 cents. The brand was not mentioned on the billboard.
153 During the week beginning 15 May 1995, Safeway deleted Tip Top bread and then Sunicrust bread from the seven Safeway supermarkets in Geelong. Mr Jones ordered the deletion of both Tip Top bread and then Sunicrust bread from the seven Geelong stores.
154 The deletion of the Tip Top bread was a mistake and it occurred because Mr Jones believed that Costa's was selling Tip Top bread rather than Sunicrust bread at a cheap price. Mr Jones was told by Mr Brookes: "You've deleted the wrong line out of Geelong. Tip Top wasn't the supplier". However, the evidence did not establish how Mr Jones became aware that Costa's was selling Code C bread for 99 cents a loaf. There was no evidence of any complaint to Mr Jones's office about Costa's by the manager, or any other employee, of any of the seven Safeway supermarkets in the Geelong area.
155 On Wednesday, 17 May 1995, Mr Jones had a conversation with Mr McLeish, in which Mr Jones said "You guys are supplying bread to a fruit market in Geelong that is selling cheap bread in direct competition with us. What is going on down there?" Mr McLeish said he did not know what he was talking about and that he would get back to him about it. Mr McLeish said he would call Safeway.
156 Mr McLeish telephoned Mr Darryl Pritchard, the general manager of Sunicrust at its Geelong Bakery Division, who told him that Costa's was having a promotion on Thwaites bread at 99 cents a loaf. Mr McLeish asked Mr Pritchard to find out for how long the promotion was running. After speaking to Mr Eaglesham, Mr Pritchard told Mr McLeish it was for the rest of the week.
157 Mr McLeish telephoned Mr Jones and told him about the promotion at Costa's. Mr Jones said that Safeway wanted to buy products at the same cost at which Sunicrust was supplying to Costa's. Mr McLeish told Mr Jones that he would check it out and come back to him. At some point after the conversations, Mr McLeish telephoned Mr Jones and told him that Sunicrust would not provide Safeway with the same cost price on Sunicrust branded products. Shortly after Mr McLeish telephoned Mr Pritchard back and told him that he had telephoned Safeway and it was going to discontinue purchasing Sunicrust bread from all its Geelong stores and that Sunicrust would be out that day.
158 Initially Sunicrust products were deleted from each of the seven Safeway stores in the Geelong region. The decision to do so was made by Mr Jones. Mr Pritchard informed Mr McLeish on either Wednesday 17 May or Thursday 18 May 1995 that Sunicrust products had been removed from display at the seven Safeway stores in the Geelong region.
159 Mr McLeish telephoned Mr Jones and said "We are out of your Geelong stores. What's the story? How can one fruit market [affect] seven stores?" Mr McLeish discussed with Mr Jones the locations of all the Safeway stores in the Geelong region and their proximity to the Costa's stores and told him that the only Safeway store that Costa's pricing could impact upon was the supermarket at Highton. Mr Jones was persuaded that it was only one store in the area that could be a competitor. Sunicrust products were reintroduced into the Safeway stores, except for Highton, on Thursday, 18 May 1995.
160 Some 20 products were deleted from Safeway Highton from 19 May 1995. Many of those products were in no way similar to the bread being discounted by Costa's. Sunicrust bread was not allowed in the Safeway supermarket at Highton until Monday, 22 May 1995, after Costa's finished its promotion.
161 During the period of deletion of Sunicrust products from the Safeway supermarket at Highton, Mr Jones decided to put Buttercup's Budget Family Fresh in the store in place of the Sunicrust products. Safeway sold Budget Family Fresh on 19 and 20 May 1995 at the same price as the retail price of 99 cents charged by Costa's for Thwaites 680g bread. The Highton supermarket stocked Captain Cutless 900g bread on Thursday 18 May 1995. At that time, Captain Cutless Code C bread could have been purchased from Sunicrust for less than 99 cents per loaf.
162 The primary Judge was persuaded that there was no proscribed purpose because Mr Jones had asked for a case deal before he gave instructions for the deletion of Sunicrust products from the seven Safeway supermarkets in Geelong and, after complaint from Mr McLeish that only the Highton store could be affected by Costa's pricing, he agreed to the reintroduction of Sunicrust products to all stores except Highton.
4.3 TIP TOP
163 Mr Christopher Gunton, Mr William Guthridge, Mr Timothy Maine and Mr David Kadir were, at relevant times, executive employees of Tip Top. From November 1994 to October 1995 Mr Guthridge was the General Manager of the Victorian Operations of Tip Top and was responsible for all operations of Tip Top in Victoria. From February 1995, Mr Guthridge's subordinate was Mr Gunton who took over from Mr Gary Ward as Tip Top's Victorian State Sales Manager. Mr Gunton had previously been employed by Tip Top (from September 1994) as its Metropolitan Operations Manager. As Metropolitan Sales Manager he was responsible for the management of the sales and operations employees such as vendor-drivers and area managers and for arranging promotional activities with customers. In his role as Victorian State Sales Manager, Mr Gunton was involved in the negotiation of promotional activities for Tip Top's major customers such as Safeway, Coles and Franklins.
164 In 1995, Mr Graham Taylor was a Tip Top area representative. Mr Paul Toohey was Tip Top's Northern Victoria District Manager and Mr Maine was Tip Top's Victorian State Sales Manager.
165 Safeway was Tip Top's largest customer. It purchased only branded bread from Tip Top. Safeway was, in comparison to other retailers, very demanding, particularly in relation to stock weight and deliveries to the stores. Tip Top had to go to "a lot of extremes to ensure that they had the stock" in the Safeway stores and made more frequent deliveries to ensure this. There were some Safeway stores to which Tip Top made four or five deliveries a day. As well as delivering bread to the Safeway supermarkets, Tip Top staff placed the bread on the shelves or racks and monitored when stock was running low. The cost of the extra services that Tip Top provided to Safeway was borne by Tip Top. Mr Gunton said that it did this because Safeway was a very good retailer in the grocery industry. It had good traffic flow through its stores and it was therefore important to Tip Top to have stock availability in Safeway stores.
4.3.1 Albury (May 1995)
Course of Events
166 Mr Hollan Morrell and his wife, Annette, were the directors and shareholders of Backfox Pty Ltd, which conducted a supermarket under the name "Bob's IGA Festival Supermarket", located in David Street, Albury, New South Wales ("Bob's IGA"). From 10 December 1994, Bob's IGA purchased branded bread, such as "Sunblest" and "Burgen", from Tip Top.
167 The Safeway Albury supermarket was also located in David Street, diagonally opposite Bob's IGA. A Safeway supermarket at Lavington was about three kilometres distant and a third Safeway supermarket was located in Wodonga, across the border in Victoria. In May 1995 the manager of the Safeway Albury supermarket was Mr Leslie Bocquet and his assistant was Mr Richard Fifield.
168 In the second half of 1994, Buttercup introduced a new white high fibre bread called "Wonder White". At about the same time, Tip Top introduced a white high fibre bread called "Mighty White". In early 1995 Mighty White was a 750g loaf sold as a Code D bread. It did not sell well and in about March or early April 1995 Safeway ceased ranging it.
169 In March 1995 Tip Top relaunched Mighty White as a 680g loaf, although it remained priced as a Code D bread. As a result of the change, Tip Top was left with a large quantity of surplus 750g bags. Accordingly, it decided to continue making 750g Mighty White bread and to sell the 750g loaf cheaply in job lots in order to dispose of the surplus bags. The bread was offered to a number of Tip Top customers including Mr Morrell and Safeway (although Mr Morrell was offered better terms, described below).
170 In early May 1995 Mr Morrell wanted to conduct a two day Market Day sale on 10 and 11 May 1995, which was shortly before Mother's Day. Mr Morrell discussed with Mr Graham Taylor a proposal for the supply of Tip Top Mighty White bread at a special price so that he could discount it at the Market Day sale. Mr Taylor passed on the enquiry to Mr Toohey. Mr Toohey in turn discussed the matter with Mr Gunton and they agreed that Tip Top would offer Mighty White to Mr Morrell at $1.20 per loaf. Mr Gunton told Mr Toohey not to under cut Safeway's Home Brand. Following instructions from Mr Toohey, Mr Taylor offered Mr Morrell Mighty White at $1.20 per loaf with a suggested sale price of $1.39, which Mr Morrell accepted.
171 Following his conversation with Mr Taylor, Mr Morrell placed an advertisement in the 10 May 1995 issue of the Border Mail, a newspaper circulating in the Albury area. The advertisement displayed pictures of numerous supermarket products with their description and price, including Tip Top Mighty White at $1.29 per loaf. The picture accompanying the advertisement was in fact incorrect, since it pictured Tip Top Hyfibe and Tip Top Toast instead of Mighty White.
172 On 9 May 1995, Mr Toohey or Mr Taylor, who were travelling together in a car, telephoned Mr Morrell from the car phone and asked him at what price the bread was to be sold during his two day promotion. Mr Morrell said he had advertised it at $1.29 and Mr Toohey and Mr Taylor each said that that would cause a problem with Safeway and asked him if he could alter the advertisement and raise the price to $1.39. Mr Morrell said he would try. Mr Toohey then telephoned Mr Gunton and told him that Mighty White had been advertised at $1.29. Mr Gunton said that Safeway, or Mark Jones, would not be happy.
173 On 10 May 1995, Mr Gunton received a copy of the advertisement from Mr Toohey by facsimile. A copy of the advertisement was also received by the Sunicrust office and Mr Andrew Roberts of Sunicrust faxed a copy of it to Mr McLeish on 10 May 1995. A copy of the advertisement was then readdressed to "Mark Jones Safeway" by Mr Simon McDowall. Mr Jones received the facsimile on 10 May 1995. Thus, on 10 May 1995 Mr Jones became aware that Bobs IGA was advertising two bread products at $1.29 a loaf.
174 On 12 May 1995, Mr Jones received a facsimile letter from Mr van Dooren of Tip Top in relation to Bob's IGA. It is apparent from that letter that Tip Top products had been deleted from the three Safeway supermarkets at Albury, Lavington and Wodonga. The facsimile was sent as a result of a meeting held on 11 May 1995 between Mr van Dooren and Mr Jones, in the course of which Mr Jones asked Mr van Dooren whether the promotion by Bobs IGA in Albury was still continuing. Mr van Dooren said he would make enquiries. In the course of the conversation Mr Jones said that the managers of the Albury Safeway supermarkets did not want Tip Top, since they were not happy with Tip Top's service and stock levels. Mr Jones gave instructions for the deletion of Tip Top products from the three Safeway supermarkets.
175 The three Safeway supermarkets in the Albury area accepted usual deliveries of bread from Tip Top on 10 May 1995. However, late in the day Tip Top products were removed from display in the racks at the Albury and Lavington supermarkets. Those two supermarkets did not accept deliveries of Tip Top proprietary branded bread on 11, 12, 13 or 14 May 1995. The Safeway supermarket at Wodonga accepted deliveries of Tip Top proprietary branded bread on 11 May 1995 but not on 12, 13 or 14 May 1995, apart from Spicy Fruit Loaf, which was accepted on 12 May 1995.
176 Mr Jones and Mr Gunton had a telephone conversation after Mr Jones had given instructions for the deletion of the Tip Top products from the Safeway stores in Albury, Lavington and Wodonga. In that conversation, Mr Jones told Mr Gunton that Tip Top products had been deleted because Tip Top had sold (through Bob's IGA) branded products at a lower price than the red spot products in the Safeway supermarkets in the area. Mr Gunton said that the advertisement was incorrect and that the product in fact being discounted was Mighty White. Nothing was said in this or any previous conversation about Safeway purchasing either Tip Top Hyfibe or Mighty White bread at prices that enabled Safeway to be competitive with Bob's IGA's advertised price.
177 During the week ending 14 May 1995, Home Brand bread was sold in the Safeway supermarket at Albury for $1.47 a loaf and Sunicrust bread was sold for $1.59 a loaf. During the same week Buttercup and Tip Top branded bread was sold for $2.00 a loaf. Bob's IGA's two day promotion ended at the close of business on Thursday 11 May 1995. On Monday 15 May 1995 Tip Top bread was accepted into the three supermarkets again.
Purpose
178 His Honour found that Safeway's response to Bob's IGA's promotion went beyond responding to competition. The range of Tip Top products deleted from the Albury supermarkets was wider than was necessary to meet the competition and was wider than the policy conceived by Mr Brookes required. The deletion was implemented for longer than was required for a competitive response, since Tip Top bread was not accepted into the Safeway supermarkets until four days after the Bob's IGA promotion ceased. No price-fighting brand was introduced. Buttercup Wonder White bread was discounted but there was no evidence that Captain Cutless was unavailable. His Honour also rejected Mr Jones' evidence that before deleting Tip Top products from the three supermarkets he had asked Mr Gunton of Tip Top whether Safeway was receiving the same price as its competitor and requested the same deal. Accordingly, in this instance, Safeway did not seek a case deal from Tip Top prior to the deletions.
179 The primary Judge found that Mr Jones' reason, and that of Safeway, for implementing the deletion was because Tip Top had sold bread to Bob's IGA at a price that enabled Bob's IGA to sell the bread at a price lower than the price at which Safeway was then selling its red spot bread products. His Honour was satisfied that the purpose of the deletion was to deter Tip Top from, or influence it against, selling bread to Bob's IGA at a price that enabled Bob's IGA to sell bread at retail prices less than the prices for which Safeway Albury was selling bread. The purpose of the deletion was not to enable Safeway to be competitive but rather to demonstrate to Tip Top Safeway's disapproval for Tip Top having allowed that situation to occur.
180 His Honour said that while the purpose of Mr Brookes' bread policy may have been to enable Safeway to be competitive, the bread policy had not been implemented in critical respects (163 [715]):
"No case deal was sought before the deletion, more products were deleted than the policy required, it was not an occasion for the implementation of a deletion, a price-fighting brand was not introduced and the deletion lasted longer than the policy required. In short, Safeway's policy was not implemented. It was not a case of a change in the policy, rather it was a case where Mr Jones did not seek to implement the policy."
4.3.2 Albury (November 1995)
Course of Events
181 In October and November 1995 Tip Top decided to sell plain wrapped bread, including "Eureka" brand bread, at cheap prices in order to gain market share. Eureka bread was sold in clear plastic bags. The only marking on the bags was a small white sticker label with computer printing stating the "Use By" date and that it was manufactured by Eureka Bakery of York Street, Eaglehawk, together with the net weight, the ingredients, the price and the bar code. The sale of plain wrap bread, such as Eureka, had the capacity to affect adversely the sales of Tip Top proprietary branded Code C bread, such as Sunblest.
182 In early November 1995, Mr Taylor told Mr Morrell that Tip Top would be prepared to supply him with Eureka White Sandwich, White Toast, Wholemeal Sandwich and Multigrain bread at $1.00 per loaf on a no returns basis. Mr Morrell told Mr Taylor that he would sell the bread at $1.39. Mr Taylor told him that if he sold it below $1.39 a loaf, he would not be able to supply bread to Mr Morrell.
183 On the morning of Monday 13 November 1995, Tip Top commenced supplying Bob's IGA with Eureka bread. The cost to Bob's IGA was $1 per 680g loaf. Tip Top delivered Eureka bread to Bob's IGA on 15 and 16 November 1995. Bobs IGA also continued to stock Tip Top branded products on 13, 14 and 15 November 1995, including Multigrain, Multigrain Toast, Multigrain 9 Grains, five varieties of Burgen products and lines of crumpets, muffins and pikelets.
184 Mr Morrell had initially decided to sell the Eureka bread at $1.29 a loaf and had programmed the computer controlling the scanning process at the check out to charge that price. Shortly before the bread was delivered Mr Morrell recalled the concern expressed by Mr Taylor. Accordingly, he instructed his staff to put a sign inside the store advertising "Plain wrap bread" at $1.39. However, the computer settings were not changed and the price scanned at $1.29. Customers in fact paid that price.
185 As was the usual practice with bread supplied on a no return basis, Mr Morrell told his staff to reduce the price towards the end of the day to clear the stock. By the end of the working day on 13 November 1995, Bobs IGA was selling Eureka bread at $1.19 per loaf.
186 During the week commencing Monday 13 November 1995, Safeway sold its Tip Top Code C range, including Sunblest, on promotion at $1.57 a loaf across Victoria and in Albury.
187 On Tuesday 14 November 1995, Mr Taylor visited Bob's IGA and noticed a sign indicating that bread was being sold at $1.29 a loaf. The bread scanned at $1.29 a loaf. In the course of his visit, Mr Taylor had a conversation with Mr Morrell and expressed concern about the price being $1.29. Mr Taylor asked Mr Morrell to put the price up to $1.39. Mr Morrell said that he would change it so that it scanned at a $1.39 the following morning, which he did.
188 On 15 November 1995, a conversation took place between Mr Jones and Mr Maine. Mr Jones asked Mr Maine for the same deal as Tip Top had given to Bob's IGA. When Mr Maine told him Tip Top could not do the deal because it was unprofitable, Mr Jones arranged for deletion of Tip Top products from the Albury supermarket.
189 Deletion of Tip Top products took place early in the afternoon of 15 November 1995. The racks were left empty and no price fighting bread was brought into replace the deleted bread. The Tip Top products that were deleted went beyond those that were similar to the Eureka brand bread.
190 After his conversation with Mr Jones, Mr Maine asked Mr Toohey to find out the price at which Bob's IGA was selling bread. Mr Toohey told Mr Maine the price was $1.29 or $1.39. Mr Maine decided to cease supplying Bob's IGA with the plain wrap Eureka bread and instead to offer Sunblest bread at a discounted price of $1.24 a loaf every second week until Christmas to enable Mr Morrell to sell the price at $1.39 a loaf. Mr Toohey passed that proposal on to Mr Morrell.
191 On Thursday 16 November 1995, Tip Top delivered Tip Top bread to Bob's IGA but did not deliver any plain wrap Eureka bread. After making the decision to cease selling Eureka bread to Bob's IGA, Mr Maine telephoned Mr Jones on Thursday 16 November 1995 and told him that the Albury situation had been fixed.
192 The Safeway supermarket at Albury accepted a delivery of Tip Top products at 10 am on Thursday 16 November 1995. Mr Jones gave instructions for the reinstatement of Tip Top products.
Purpose
193 His Honour found that Mr Jones was concerned about the price at which Bob's IGA was selling Eureka bread. He wanted to get the same wholesale cost price for the Tip Top bread sold at Safeway Albury as Tip Top had charged Bob's IGA for the Eureka bread. He telephoned Mr Maine to get a competitive price discount from Tip Top rather than to eliminate the cheap discounting of bread. Accordingly, Mr Jones did not delete Tip Top bread from Safeway Albury to punish Tip Top or to eliminate the cheap discounting of bread.
4.3.3 Ferntree Gully
Course of Events
194 In 1994 and 1995 The Cool Store Pty Ltd operated a fruit and vegetable store at 59 Dorset Road, Ferntree Gully under the name "The Cool Store". Mr Kenneth Dobson was the managing director of that company. The store, in addition to selling fruit and vegetables, also sold milk and a small variety of frozen foods. The Safeway Ferntree Gully supermarket was located on the Burwood Highway, about two kilometres from the Cool Store. In November 1995 Mr Kenneth Parker was the manager.
195 In July 1994 The Cool Store began purchasing its bread supplies from Tip Top on a sale or return basis. In November 1995 Mr Dobson had discussions with Mr David Gladstone, a Tip Top area manager, about the possibility of purchasing a plain wrap bread from Tip Top. Mr Gladstone agreed and on Monday 13 November 1995 The Cool Store commenced selling Eureka plain wrap bread as well as proprietary branded bread. The bread bag in which the Eureka bread was sold was a plain, clear plastic bag with a computer generated sticker label as described above. The bag contained no indication that Tip Top manufactured the bread.
196 Tip Top delivered 192 loaves of Eureka bread to The Cool Store on 13 November 1995. The deliveries were increased to over 200 loaves of Eureka bread a day later in the week. The Cool Store paid Tip Top $1 per loaf for the Eureka bread on sale or return and sold it at an everyday price of $1.15. It advertised the bread on a sign outside the store and on a sign in the entrance to the store. The signs did not mention that it was Tip Top bread.
197 In November 1995 Safeway Ferntree Gully was selling Home Brand bread at $1.59 per 680g loaf. At that time it was also purchasing Captain Cutless from Sunicrust. Captain Cutless had been sold at Safeway Ferntree Gully from the week ending 12 June 1994 until the end of 1995, except for a short period between 7 August 1994 and the week ending 14 August 1994.
198 There was a telephone call to Mr Jones's office informing someone at the office, presumably Mr Jones's CMA, that The Cool Store was selling bread a plain wrap Code C supplied by Tip Top at $1.19. On 15 November 1995, at least one conversation took place between Mr Jones and Mr Maine concerning cheap bread being sold by the Cool Store. Mr Jones sought a case deal from Mr Maine in the course of a conversation with him on that day. The substance of what was said by Mr Jones was:
"We have been contacted by Ferntree and are uncompetitive on Tip Top bread. The Cool Store are selling at $1.19. How could they sell bread so far below our costs? Safeway always expects to have the best price available. I want to buy bread at the same cost price as you're selling it to The Cool Store. If Tip Top don't supply us at a competitive cost, we'll have no alternative but to not range this Code C bread at our Ferntree Gully store."
199 Mr Maine telephoned Mr Jones on the same day and told him that he had checked it out and that The Cool Store was only running a promotion, which was in its second week and would be finished at the end of the week. After he spoke to Mr Maine, Mr Jones telephoned Mr Parker and told him to take the Tip Top bread range off show and not just the uncompetitive bread. Mr Parker told Mr Jones that he was not going to take the bread out because it upset the customers.
200 Mr White, the area manager, telephoned Mr Jones shortly after his conversation with Mr Parker and asked him why he had given instructions to delete Tip Top bread from the Safeway Ferntree Gully supermarket. Mr Jones told Mr White that Safeway was uncompetitive in respect of the bread, that he had asked for the same cost price as that at which Tip Top had been supplying The Cool Store, that Tip Top had told him that they would not sell their product to Safeway at the same cost price and that the promotion finished next Sunday.
201 Mr Maine telephoned Mr Gladstone on 16 November 1995 and asked what was happening at The Cool Store in terms of prices. Mr Gladstone told him that they were selling bread at a price that he thought was about $1.19 but that he would go and check. Later that day Mr Maine and Mr Gladstone met in Mr Maine's office. At one stage Mr Gladstone said that The Cool Store was selling bread at $1.19 or thereabouts. Mr Maine said that Safeway was talking about deleting Tip Top at Ferntree Gully and that the problem was obviously the price. He asked Mr Gladstone to talk to The Cool Store about its price. Mr Kadir came in during the course of the discussion and he said that the price needed to be $1.39. Mr Maine asked Mr Gladstone to talk to Mr Dobson about getting his price up to $1.39. Mr Gladstone said he would go and talk to Mr Dobson but that he did not feel comfortable about it and that Mr Dobson would not be happy.
202 Mr Maine and Mr Jones had another discussion on 20 November 1995 concerning Ferntree Gully. Mr Maine then spoke to Mr Gladstone on 20 November 1995 and told him that Tip Top was going to be deleted out of Safeway if they did not fix the problem with The Cool Store. Mr Maine left it to Mr Gladstone to arrange for The Cool Store to receive no further supplies of Eureka bread but to be supplied with Sunblest branded bread, which it should not retail for less than $1.39.
203 Mr Gladstone visited Mr Dobson and told him that it was no longer acceptable for him to sell the bread at $1.29, as Safeway had been on to Tip Top, and that The Cool Store would no longer be supplied with Eureka bread.
204 After making those arrangements with Mr Gladstone, Mr Maine telephoned Mr Jones on Tuesday 21 November 1995 and told him that the situation in Ferntree Gully would be fixed from Wednesday 22 November. Mr Jones said to Mr Maine that Safeway would accept delivery on the following day but would not put the product on display until the store manager had physically checked the price.
205 On Tuesday 21 November 1995, the Safeway supermarket at Ferntree Gully accepted delivery of Tip Top bread. Tip Top did not supply Eureka plain wrap 680g bread to the Cool Store from that day until 28 November 1995.
Purpose
206 Although Mr Jones sought to delete the whole of the Tip Top range in Ferntree Gully, the primary Judge found that his direction to Mr Parker to that effect was not to punish Tip Top for selling Eureka bread to The Cool Store at a discounted price. In taking that step, Mr Jones was seeking to put Safeway in a position where it could buy Tip Top bread at a price comparable to the price for which Tip Top was selling Eureka bread to The Cool Store. His Honour considered that Mr Jones' request for a case deal, in the circumstances which occurred, to be inconsistent with him having a purpose of punishing or intending to punish Tip Top for putting The Cool Store in a position to sell bread at discounted prices.
5 THE COMMISSION'S CHALLENGES TO THE FINDINGS THAT SAFEWAY HAD SOUGHT CASE DEALS
207 In relation to five incidents (Traralgon, Lalor, Geelong, Albury (November 1995) and Ferntree Gully), the primary Judge found positively that Safeway had sought a case deal prior to deleting the plant bakers' products. His Honour considered that that finding, of itself, established that Safeway's purpose in each of the incidents was not to punish a plant baker or to deter it from supplying cheap generic or secondary branded bread to the independent retailer, but was to be competitive. As we have explained, that approach reflects the way in which the trial was conducted. On appeal, the Commission challenges the finding that in these five instances, Safeway sought a case deal from the plant baker before deleting the latter's products.
208 In relation to two incidents (Cheltenham and Vermont), the primary Judge could not determine whether or not Safeway had sought a case deal before deleting the products of the plant baker (Buttercup). Nonetheless, his Honour was not satisfied that, if Safeway had taken advantage of its market power in those cases, it had done so for a proscribed purpose. The Commission also challenges this finding.
5.1 THE PRIMARY JUDGE'S METHODOLOGY
209 A significant complaint by the Commission on appeal is that the primary Judge adopted an incorrect approach in forming his conclusions about Safeway's policy and in making findings about the nine incidents. The Commission contends that his Honour reached a conclusion as to the purpose of the policy without proper regard to the facts of the nine incidents from which inferences could have been drawn as to the purpose of the policy. The Commission's complaint is that it was only after his Honour formed his conclusions about Safeway's policy that he turned to a detailed examination of Safeway's conduct in relation to the nine incidents of which the Commission complained. The Commission says that, when his Honour turned to that examination, he was unduly influenced by the findings that he had already made as to Mr Brookes' policy and the purpose of that policy.
210 In a section of his Honour's reasons under the heading "Purpose of the Policy" the following appears (at 50 [174]):
"In this section of the reasons I consider the purpose of the policy without a detailed consideration of the nine incidents involving independent stores which the Commission alleged constituted contraventions of the Act. Although the Commission submitted that the implementation of the policy in relation to the nine incidents demonstrated what the nature and purpose of the policy was, it is necessary to consider the creation, formulation and alteration of the policy in order to form a view as to how the policy stood and was perceived prior to the first incident at Frankston in May 1994 upon which the Commission relied. When I come to consider each of the nine incidents involving an independent store I revisit the issue whether the purpose of the particular deletion was to punish the plant bakers as alleged by the Commission." (The Commission's emphasis)
The Commission argues that his Honour's analysis of the nine incidents proceeded from a wrong starting point, namely his findings as to Mr Brookes' policy made independently of the nine incidents.
211 We have already expressed our view that the parties and the primary Judge gave excessive attention to Mr Brookes' policy. But in considering the content and purpose of that policy, his Honour took into account the fact that in none of the nine incidents was the policy implemented in accordance with Mr Brookes' formulation of the policy. Moreover, despite his Honour having analysed at length the content and purpose of Mr Brookes' policy, we think that he ultimately did give independent consideration to the circumstances of each of the nine deletions. His Honour recognised that, subject to the effect of the pleadings, the critical issue was not the purpose of Mr Brookes' policy (although it might have had some evidentiary value), but whether Safeway's conduct in deleting the plant bakers' products from particular Safeway stores constituted taking advantage of its market power for a proscribed purpose.
212 In making his factual findings as to the nine incidents (as distinct from ruling on the scope of the pleadings), his Honour did not suggest that the findings as to Mr Brookes' policy were determinative of whether Safeway's conduct in relation to the nine incidents was for a proscribed purpose. As we have noted his Honour recognised that in none of the nine incidents was the policy implemented in accordance with the terms formulated by Mr Brookes. The passage from the judgment which we have quoted contemplates that it would be necessary to "revisit" the purpose of each particular deletion. Later in the judgment, his Honour specifically recognises (at 66 [226]) that
"[e]ach of the instances in which the policy was invoked and implemented otherwise than in accordance with its terms must be analysed to determine whether, standing alone, it constituted a contravention of the Act".
213 That his Honour acted in conformity with this direction to himself is shown by his detailed examination of each of the nine incidents. It is true that he considered the crucial factual question to be whether Safeway had sought case deals before deleting the products of plant bakers. But, as we have explained, his Honour took that course because of the basis upon which the trial was fought, not because he regarded the terms of Mr Brookes' policy as foreclosing all questions other than whether case deals had been sought in each instance. His Honour bore in mind that Mr Brookes' policy had not been implemented in important respects. Accordingly, he examined each of the incidents in the light of what was actually said and done by Safeway's officers, particularly Mr Jones. It may be that in relation to particular incidents his Honour's findings of fact involve error, but any such error is not attributable to an incorrect methodology of the kind identified by the Commission.
5.2 THE COMMISSION'S CONTENTION THAT THE REQUESTS FOR CASE DEALS WERE SHAMS OR PUNITIVE
214 We have referred earlier to the fact that, in response to evidence adduced by Safeway concerning the requests made to plant bakers for case deals, the Commission amended its pleadings. The essence of the amended case was that, in so far as Safeway requested case deals from plant bakers in relation to particular locations, it did so knowing that the plant baker would not agree to the request. This was said to be so because, as Safeway well knew, the sale by it of premium brand bread at prices competitive with the retail prices of secondary or generic bread sold by the independent retailers, would damage or destroy the goodwill attached to the plant bakers' premium brand bread. In substance, the Commission argued before the primary Judge that Safeway had engaged in a charade or sham, since Mr Brookes and Mr Jones knew that no plant baker would ever agree to a case deal for premium brand bread.
215 His Honour observed that not only was the evidence against such a proposition, but it was difficult to understand why Safeway would have made a request for case deals if it knew that the request would be rejected. Nothing would be achieved by such a request. The Commission did not suggest to his Honour that the requests were contrived in order to forestall any future allegation that Safeway had contravened the Act.
216 The primary Judge found that there was no evidence that the plant bakers were prepared to allow substantial discounts on a statewide basis on the price of premium brand bread to meet competition from secondary or generic brand bread, other than in the context of the regular three weekly discount cycle that was implemented by the major supermarket chains. However, the evidence established that the plant bakers were prepared to offer substantial discounts on proprietary branded bread on a store by store basis. During 1994 and 1995, for example, the plant bakers were prepared to offer substantial discounts on the regular price of their premium brand bread to meet specific competitive situations or for special occasions. His Honour considered that this evidence was inconsistent with the contention that Safeway never intended that any requests made by it for case deals would be accepted by the plant bakers.
217 On the appeal, the Commission repeats its contention that if Safeway sought case deals from the plant bakers, the requests were no more than shams since Mr Brookes and Mr Jones knew the plant bakers would never accede to any such request. The Commission emphasises that the case deals that Safeway claimed to have sought would have required the plant baker to sell its premium brand bread to Safeway at the same price as it was selling the secondary brand or generic brand bread to the independent retailer. Accordingly, the product that Safeway requested from a plant baker was not the same as, and was not equivalent to, the product supplied by the plant baker to the independent retailer. The Commission accepts that premium brand bread sold by a plant baker was identical to the secondary or generic bread sold by the same plant baker. It argues, however, that premium brand bread is a different and more valuable product, in economic terms, from secondary or generic brand bread. The Commission relies on the differing marketing and advertising strategies adopted in relation to premium brands, on the one hand, and secondary or generic brands, on the other, to support its contention.
218 The Commission further submits that, even if genuine case deals were sought, Safeway still carried out the deletions for a proscribed purpose because the requests for case deals were themselves intended to be punitive. The Commission points out that if Safeway sought a case deal of the type described, the plant baker was effectively faced with three choices. It could have
* continued to supply the independent retailer and suffered the pain of being deleted from the Safeway supermarket;
* continued to supply the independent retailer, given Safeway a case deal on the premium brand product and suffered the pain of seeing the value of the brand endangered; or
* stopped supplying the independent retailer with cheap bread.
The first two alternatives would "inflict pain" on the plant baker. The third would require the plant baker to accede to Safeway's demands and thereby cease to engage in competitive conduct.
219 In our view, the findings made by the primary Judge demonstrate that he correctly rejected the Commission's contentions. His Honour found that Mr Brookes knew that there was a difference between asking for a case deal on premium brand bread to enable it to be used for price-fighting purposes on a State wide basis and requesting a case deal on a store by store basis. His Honour also found that plant bakers were willing to consider granting case deals on their premium proprietary breads to enable them to be sold for price-fighting purposes against secondary or generic brands. The plant bakers did not have an inflexible rule or policy that they would not grant case deals on their proprietary bread to enable it to be used for such price-fighting purposes. Mr Brookes believed that it was feasible to seek case deals on proprietary branded bread on a store by store basis. Mr Jones had a similar belief.
220 These findings, which were open on the evidence, support the primary Judge's conclusion that such requests for case deals as were made were not shams. They were made with an expectation that, depending on the terms, they might be accepted by the plant bakers. In short, the evidence does not support a finding that Mr Brookes and Mr Jones knew that no plant baker would accede to a request for case deals for proprietary branded bread.
221 Once it is accepted that Mr Brookes and Mr Jones had a genuine belief that the plant bakers might have provided case deals on a store by store basis, there is no basis for concluding that the making of the requests by Safeway was in itself "punitive". To the extent that Safeway requested case deals, the requests were designed to secure Safeway the advantage of purchasing proprietary branded bread at discounted prices. It cannot be said that the making of the request, of itself, was for the purpose of deterring the plant bakers from supplying bread to independent retailers at a cheap price or of preventing discounting of bread by the retailers.
5.3 THE COMMISSION'S CHALLENGES TO THE FINDINGS THAT CASE DEALS WERE SOUGHT
5.3.1 Traralgon
222 Mr Jones gave evidence that, after he had been told that the Traralgon store was uncompetitive on Sunicrust bread, he telephoned Mr McLeish. Mr Jones said that he told Mr McLeish that he (Mr Jones) had been advised that Safeway was uncompetitive on bread at Traralgon and that he wanted Safeway to buy at the same cost price as its competitors. Mr Jones could not recall Mr McLeish saying anything in response.
223 The Commission contends that Mr Jones' conversation with Mr McLeish took place after the deletion had been ordered. The Commission also contends that Mr Jones' evidence was, in essence, a reconstruction. While Mr McLeish of Sunicrust gave no evidence in chief that a case deal was sought before the deletion in the Traralgon incident, he accepted in cross-examination that it could have happened.
224 The primary Judge did not find that Mr Jones' evidence was a reconstruction. Mr Berry's evidence did not require a finding that, when the Traralgon supermarket advised Safeway's buying office about cheap competitor's bread, the buying office immediately directed the deletion. In the circumstances, no basis has been established for setting aside his Honour's finding that Safeway requested a case deal prior to the deletion at Traralgon.
5.3.2 Lalor
225 Mr Jones gave evidence that he spoke to someone at Sunicrust asking for a case deal but said that it was not Mr McLeish. He could not identify the person to whom he spoke. The primary Judge considered that Mr Jones's evidence by itself, was insufficient to satisfy him that Mr Jones asked anyone at Sunicrust for a case deal before instructing Mr Stewart to withdraw Sunicrust bread from display. His Honour considered that in this particular instance Mr Jones' evidence was unreliable and savoured of reconstruction, rather than recollection. If it stood alone, his Honour would not have been disposed to accept it.
226 However, the primary Judge took the view that Mr Jones's evidence was supported by Mr Brookes' evidence. Mr Brookes' evidence was that Mr Jones had told him, prior to the deletion, that Sunicrust had "refused to provide a deal to us to sell at a price to enable us to compete with [Goldy's]". That evidence was hearsay insofar as it tended to prove the contents of a conversation between Mr Jones and anyone from Sunicrust, but the Commission did not object to the evidence being admitted.
227 Notwithstanding its failure to object to the evidence at the trial, the Commission now contends that the evidence was not admissible to prove the fact of a request for and refusal of a case deal. The Commission says that if that contention is accepted, there was no admissible evidence that Safeway sought a case deal before the deletion. The Commission argues that where a hearsay statement is admitted without objection and would, if objected to, have been admissible as proof of something other than the facts asserted in it, then it may only be relied upon as proof of that other matter and not of the facts asserted in it. If the evidence is admissible as proof of some issue in the case, its evidentiary significance should be confined to that issue. The Commission contends that it is only if a hearsay statement is not admissible for any purpose that it may be used, if received without objection, as proof of the facts asserted in it.
228 It follows, so the Commission argues, that Mr Jones's statement to Mr Brookes was admissible, not as to the truth of what Mr Jones told him but only as to the basis upon which he, Mr Brookes, acted in making the decision to withdraw the Sunicrust bread from the Safeway supermarket in Lalor. Clearly, Mr Brookes' evidence of his conversation with Mr Jones was admissible to explain Mr Brookes' decision. The question, then, is whether Mr Brookes' evidence is admissible as evidence of the truth of what Mr Jones told him.
229 In response, Safeway invokes the provisions of the Evidence Act 1995 (Cth) ("Evidence Act"). Section 59(1) of the Evidence Act provides that evidence of a previous representation made by a person is not admissible to prove the existence of a fact that the person intended to assert by the representation. A previous representation is a representation made otherwise than in the course of giving evidence in the proceeding in which evidence of the representation is sought to be adduced (s 3). Section 60 of the Evidence Act, however, provides that the hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of the fact intended to be asserted by the representation. Thus, Safeway says, once the statement by Mr Brookes was admitted, it was admitted as evidence of the truth of the statements made.
230 In our view, Safeway's submission should be accepted. The Commission seeks to escape the effect of s 60 by contending that Mr Brookes' evidence was not "first-hand hearsay" because it amounted to no more than Mr Jones having said that he (Mr Jones) had been told by a third party that Safeway had sought a case deal. However, a fair reading of the evidence in the light of Mr Jones' responsibilities within Safeway is that Mr Jones told Mr Brookes that he (Mr Jones) had personally requested a case deal.
231 In any event, the fact that Mr Jones told Mr Brookes that a case deal had been requested, in circumstances where there would be no reason for Mr Jones to make a false statement on that matter to Mr Brookes, has probative value as to whether Mr Jones' evidence should be accepted. That is to say, it was open to the primary Judge to treat the evidence that Mr Jones made the statement to Mr Brookes as corroboration of Mr Jones' own evidence as to the making and refusal of a request.
232 No basis has been established for setting aside the finding made by the primary Judge that Safeway requested a case deal from Tip Top before the deletion.
5.3.3 Geelong
233 Mr Jones ordered the deletion of Tip Top bread from the Geelong supermarkets in the erroneous belief that Tip Top was the supplier of the cheap bread being sold by Costa's. The Commission complains that the primary Judge gave little weight to the fact that Mr Jones ordered the deletion before requesting a case deal from Tip Top. The Commission says that his Honour should have concluded from the fact that Tip Top bread was deleted without a request for a case deal having previously been made, that Sunicrust bread was also deleted without first requesting a case deal.
234 Contrary to the Commission's submissions, his Honour made no finding that Tip Top had been deleted without any request having been made for a case deal. Because the deletion of Tip Top products at Geelong had not been pleaded as a contravention, there was no warrant for any investigation as to the circumstances in which the deletion occurred and, in particular, whether any such deletion had occurred before the request for a case deal had been made. Accordingly, no basis has been established for setting aside his Honour's finding.
5.3.4 Albury (November 1995)
235 Mr Maine said in chief that Mr Jones telephoned him and said:
"You've got cheap bread in Albury and Ferntree Gully. Get it out of there. You've been deleted in Albury, in the two stores in Albury and I will delete you in Ferntree Gully." (see 194 [834])
The Commission characterises that as evidence by Mr Maine that no case deal had been sought prior to the deletion. Mr Jones gave a different account of the conversation and claimed that he had sought a case deal for Albury.
236 His Honour concluded that the conversation was not in the precise terms deposed to by Mr Jones because of an incorrect recollection on the part of Mr Jones concerning a reference to "9 Grains" bread. However, Mr Maine, in cross-examination, accepted that Mr Jones spoke to him and sought a case deal in connection with Tip Top's sale to Bob's IGA of "Eureka" bread. Mr Maine also recalled ringing Mr Jones back and saying that he (Mr Maine) could not offer a case deal in relation to Albury because the deal would be unprofitable. Mr Maine also accepted that Mr Jones complained about the failure to supply a case deal. Mr Maine accepted, although he had no recollection, that Mr Jones could well have said, after Mr Maine had told Mr Jones that no case deal would be granted, that he, Mr Jones, would get back to Mr Maine and let Mr Maine know what Safeway's attitude was.
237 The primary Judge found that there was a conversation between Mr Jones and Mr Maine in relation to the sale of Eureka bread at Bob's IGA Albury on or about 15 November 1995. In that conversation, which Mr Jones mistakenly described as a conversation about a Tip Top "9 Grains" promotion, Mr Jones asked for a case deal on Tip Top proprietary bread and the case deal was refused. His Honour's finding makes clear that the conversation between Mr Jones and Mr Maine occurred before any deletion.
238 His Honour accepted that Mr Jones asked for a case deal for Albury in relation to the supply by Tip Top of Eureka bread to Bob's IGA. There was evidence to support the finding. No basis has been established for setting aside his Honour's finding in relation to the incident at Albury in November.
5.3.5 Ferntree Gully
239 Mr Maine agreed, in the course of cross-examination, that Mr Jones telephoned him and said that Safeway wanted to buy bread at the same cost price as Tip Top was selling it to The Cool Store. Mr Jones' evidence was that he asked for a case deal, that Mr Maine rang him back and told him that it was a promotion that would end on the Sunday and that he, Mr Jones said, that he would not worry about it and that he would let it be.
240 The Commission relies on the fact that, notwithstanding that Mr Jones told Mr Maine that there would not be a deletion, Mr Jones directed the manager of the Safeway supermarket at Ferntree Gully to delete Tip Top products until the Sunday. The Commission says that, on that basis, Mr Jones' own evidence indicates that he ordered a deletion without asking for a case deal. The Commission says that it is irrelevant that Mr Jones asked for a case deal before telling Mr Maine not to worry about it because, in making that statement, Mr Jones was telling Mr Maine that there would be no deletion at all.
241 The primary Judge found that Mr Jones was looking for a comparable case deal so that the Ferntree Gully supermarket could buy Tip Top branded bread at the same price at which the competitor, The Cool Store, was purchasing Eureka bread. His Honour found that before Mr Jones told Mr Parker that the uncompetitive Tip Top bread should be taken off show, Mr Jones had sought a case deal from Mr Maine. No basis has been established for setting aside his Honour's finding.
5.4 THE COMMISSION'S CHALLENGE TO THE FINDINGS CONCERNING CHELTENHAM AND VERMONT
242 Mr Cooper said, in relation to the Cheltenham and Vermont incidents, that either Mr Jones or Ms Austin, Mr Jones' CMA, telephoned him and told him that Buttercup products were to be deleted from the two Safeway supermarkets at Cheltenham and Vermont. Mr Cooper did not suggest that he had been asked for a case deal on Buttercup proprietary branded bread and indeed it appears not to have been put to him that was asked. The primary Judge could not identify who ordered the deletion. If it was Ms Austin, it was clear that no case deal had been sought, because Ms Austin had no authority to ask plant bakers for case deals. Ms Austin herself had no recollection of either incident. Mr Jones said he was not involved in either the Cheltenham or the Vermont deletions and Mr Brookes had no recollection of either incident.
243 Mr Cooper said that no case deal had been sought in relation to the Cheltenham and Vermont incidents. Despite this evidence and despite Safeway not leading evidence that a case deal had been requested prior to either deletion, his Honour was not prepared to make a finding that no case deal had been requested before the deletions at Cheltenham and Vermont. The reason for that conclusion is not entirely clear. It may be that his Honour considered that, because the policy conceived by Mr Brookes included the element of requesting case deals before deletion, he could not conclude that a case deal had not been requested by Safeway from Tip Top before the deletions at Cheltenham and Vermont.
244 His Honour did not articulate any such reason for concluding that Safeway's purpose in deleting the products of Buttercup from the Cheltenham and Vermont supermarkets, was to enable Safeway to be competitive with the respective Cheapa Food Barn stores. His Honour simply concluded that the evidence did not enable him to reach a finding as to the circumstances in which the deletions at Cheltenham and Vermont occurred. His Honour considered that he was unable to make a finding as to the purpose for which those deletions were implemented.
245 The primary Judge seems to have been influenced by his inability to make a finding as to who, on behalf of Safeway, had directed the deletion of Buttercup products from the Cheltenham and Vermont supermarkets. But that could not be decisive in determining the purpose for which the deletions occurred. It will be recalled that s 46(7) of the Act provides that a corporation may be taken to have taken advantage of its power for a purpose referred to in s 46(1) if, after all the evidence has been considered, the existence of that purpose is ascertainable by inference from the conduct of the corporation or of any other person or from other relevant circumstances. Even in the absence of a finding as to who directed the deletions in question, it was still open to his Honour to consider the conduct of Safeway, the conduct of its officers and other relevant circumstances. While the case was conducted on the basis that a request for a case deal precluded a finding that Safeway had a proscribed purpose within s 46(1), the absence of an affirmative finding that a case deal was sought left open the question of what inferences should be drawn from Safeway's conduct and the circumstances.
246 The fact of deletion of Buttercup products from the two supermarkets in question, being deletions that went beyond what was necessary in order to maintain an appearance of competitiveness with Cheapa Food Barns, is capable of giving rise to an inference that the purpose of the deletions was to deter Buttercup from continuing to supply the Cheapa Food Barn stores with cheap bread. Moreover, it is significant that the deletions at Cheltenham and Vermont took place in July 1994, very shortly after the deletion of Buttercup products at the Frankston supermarkets came to an end by reason of Mr Quadara becoming bankrupt. His Honour found (and we later uphold this finding) that the deletion of Buttercup products at the Frankston supermarkets was for the purpose of deterring Buttercup from selling bread to the Quadara Store at discounted prices. That circumstance lends weight to the inference that Safeway's conduct in relation to Buttercup's dealings with Cheapa Food Barns was for the same purpose. The fact that the primary Judge could not identify who within Safeway ordered the deletion is of little consequence to Safeway's position, since it can readily be inferred that it must have been someone with the authority to do so.
247 In the absence of a finding that a case deal was requested from Buttercup prior to the deletions at Cheltenham and Vermont, the inference is clearly open that the purpose of the deletion was to deter Buttercup from continuing to supply discounted bread to the independent retailers. In all the circumstances, that inference should have been drawn. Thus, his Honour erred in not making a finding that the purpose of the deletions was to deter Buttercup from selling cheap bread to the Cheapa Food Barn stores.
6 SAFEWAY'S CHALLENGES TO THE FINDINGS THAT NO CASE DEALS WERE SOUGHT
248 As we have seen in Section 4, the primary Judge found in relation to two incidents (Frankston and Albury (May)) that Safeway had not requested a case deal from the plant bakers concerned (Buttercup and Tip Top). In those cases his Honour found that the purpose of deletions of the plant bakers' products from the Safeway stores was to deter Buttercup and Tip Top respectively from supplying bread at discounted prices to the independent retailers (Mr Quadara, in the case of Frankston, and Bob's IGA, in the case of Albury). Safeway challenges these findings.
6.1 Frankston
249 Safeway submits that his Honour erred in finding that Mr Jones did not seek a case deal in the conversation he had with Mr Cooper. In particular Safeway contends that the primary Judge should not have accepted Mr Cooper's account of his conversation with Mr Jones in preference to the latter's account. Safeway also submits that his Honour erred in finding that the conversation occurred some time around 16 May 1994, after Mr Jones had decided to Buttercup products from the Safeway supermarkets.
250 Although the primary Judge accepted Mr Cooper's evidence as to the content of his conversation with Mr Jones, his Honour declined to accept Mr Cooper's evidence in a number of other respects. Specifically, his Honour was not prepared to accept Mr Cooper's account of what occurred in relation to the Cheltenham and Vermont deletions because of Mr Cooper's vague recollection of those events. Ultimately, however, his Honour accepted Mr Cooper's version of the conversation about Frankston, in preference to Mr Jones' version, partly because of what he characterised as a "firm denial" by Mr Cooper that Mr Jones had asked for a case deal.
251 A second reason given by his Honour for preferring Mr Cooper's evidence was that he was satisfied that the conversation occurred after Mr Brookes and Mr Jones had decided to delete Buttercup products. His Honour was satisfied as to the timing of the conversation on the following basis:
* Mr Jones decided to delete Buttercup bread from the Frankston supermarket at the time he and Mr Brookes visited the supermarkets;
* Mr Jones gave evidence that the conversation with Mr Cooper took place after he visited the Frankston and Karingal supermarkets;
* Mr Cooper gave evidence that the conversation occurred on Monday 16 May 1994; and
* Mr Jones drafted and sent his memorandum deleting the Buttercup products on Friday 13 May 1994.
252 The Commission alleged in the Statement of Claim that the conversation between Mr Jones and Mr Cooper took place within a day or so prior to 16 May 1994. Mr Cooper's affidavit evidence was that the conversation took place "within a day or so prior to [16 May 1994]". In oral evidence, he said that he believed the conversation was "around 16 May 1994". The deletion in fact commenced on 17 May 1994.
253 Mr Jones' memorandum to the Karingal supermarket is undated. Mr Jones said that that he sent it after visiting the supermarket and after speaking to Mr Cooper. Safeway submits that Mr Cooper's evidence as to the date of the conversation was consistent with the evidence of Mr Jones, since Mr Jones said that the conversation took place on 13 May 1994, which was a day or two, and only one business day, prior to 16 May 1994.
254 Safeway contends that his Honour should have found that the conversation took place after the visit to the supermarket but before the issue of the memorandum. That is to say, his Honour should have found that the conversation took place before the decision to delete was made and that all relevant events occurred on 13 May 1994. According to Safeway, the sequence of events on that day was:
* Mr Brookes and Mr Jones visited the Frankston supermarkets;
* Mr Jones then made a telephone call to Mr Cooper; and
* Mr Jones then sent the memorandum.
255 Safeway's submissions are not without some force. However, this is an example of the primary Judge having to make findings based on the conflicting evidence of two witnesses, both of whom were cross-examined at length. Safeway emphasises in its submissions that Mr Cooper's evidence was rejected on a number of important respects. That is true. It is equally true that the primary Judge rejected much of Mr Jones' evidence. On this aspect of the case, the primary Judge carefully examined the competing accounts of the two witnesses, neither of whom was wholly reliable, and considered the surrounding circumstances before making his findings.
256 Safeway's starting point is to attack the primary Judge's characterisation of Mr Cooper's evidence as including a "firm denial" that Mr Jones had asked for a case deal. It is fair to say that Mr Cooper did firmly deny that suggestion. The relevant passage is as follows:
"MR BATHURST: I want to ask you some questions now, if I may, about the deletion which occurred at Frankston. Do you remember giving some evidence about that?---Yes, I do.
You said in your evidence about that that Mr Jones rang to tell you. That's at page 615, line 36. Then you said that he, Mr Jones, said, `There's a problem in the area. Your Buttercup brands are out of these two particular stores'. Then you were asked, `Did he tell you what the problem was?' `I don't recall whether he did or not'. Then his Honour asked you to give your recollection of the substance of the conversation and you said, `Okay. Well, I believe it was a fairly short conversation. `It's Mark Jones here. There's some cheap bread in the Frankston area. On the basis of that, you're out of the Woolies and the Safeway store'. You told his Honour that you responded, `You know I can't do anything about it'. He said, `Well, that's the rules,' and that was the end of the conversation.' Then you went on to say you knew what the source of the problem was. What I want to suggest to you was in fact said in relation to that meeting was this ---
HIS HONOUR: Conversation.
MR BATHURST: Conversation - was this, that Mr Jones rang you and he said this: `We have a competitor in Frankston and we're uncompetitive in the Frankston store with your 680 gram products. Are we buying at the same price as our competitor?' Do you remember him saying that?---No.
Do you deny it?---I don't remember it.
And he went on to say, `They're using Black and Gold. It's a contractual price'. Do you remember him saying that?---No.
HIS HONOUR: I'm sorry, who said that?
MR BATHURST: I'm sorry, that you said that - `They're using Black and Gold. It's a contractual price?'---I'm sorry, is that Mark?
No, you?---No, I didn't say that at all.
You deny that, do you?---Absolutely.
Then he said, `I want to buy Buttercup as they're buying', and you responded, `I can't do it'?---No.
Do you deny that was said?---Yes.
You see, what I want to suggest to you is Mr Jones asked for the same price as the competitor was buying?---I'm saying no.
And he responded, `We're going to have to withdraw your product because we're uncompetitive'?---I don't remember that either." (Emphasis added.)
It is true that subsequently the following exchanged occurred:
"MR BATHURST: You see, again I want to suggest to you that you have got only the vaguest recollection of the matters about which you have given evidence in this case. By the matters, I include firstly the strategy conversations and secondly the three deletions and thirdly the June conversation. Do you agree with that?---Yes, I do."
But that question was asked immediately after Mr Bathurst had cross-examined Mr Cooper about conversations concerning the Vermont incident. It was a matter for his Honour, having seen Mr Cooper, to determine the significance of his answer in relation to the Frankston incident. In the judgment, his Honour acknowledged that Mr Cooper had agreed that his recollection of the deletions was vague, but he took into account that Mr Jones' evidence as to what was said in the course of the conversation was neither "credible" nor "reliable" (at 102 [378]). It was open to his Honour to take that view.
257 Safeway also attacks the finding that the conversation between Mr Cooper and Mr Jones took place after Mr Jones drafted and sent his memorandum on 13 May 1994. It should be noted that even if that finding is wrong, it does not necessarily undercut his Honour's finding as to the content of the conversation between Mr Cooper and Mr Jones. Be that as it may, we accept that the evidence as to the sequence of events was somewhat equivocal. On balance, however, if only marginally, Mr Cooper's evidence supported the conclusion that the conversation between Mr Cooper and Mr Jones post-dated the latter sending the memorandum requiring deletion of the Buttercup products. In any event, we do not think that the evidence is such as to justify setting aside his Honour's finding as to the sequence of events.
258 Safeway also contends that this was an instance in which the primary Judge should have applied the principle in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, to the effect that a trier of fact should take into account the nature and consequences of the facts to be proved in determining whether an issue has been established to his or her reasonable satisfaction, in making findings as to whether a case deal was sought by Safeway. If one thing is clear in this case, it is that the primary Judge steadily bore the Briginshaw principle in mind. He made repeated references to it and there can be no basis for suggesting that he overlooked it in considering the Frankston incident.
259 We reject Safeway's challenge to the primary Judge's findings in relation to the Frankston incident.
6.2 Albury (May 1995)
260 Safeway challenges the primary Judge's findings that Mr Jones deleted Tip Top bread from the Albury supermarkets before his conversation with Mr Gunton and that he did not ask Mr Gunton for a case deal.
261 Safeway submits that his Honour's conclusion that no case deal was sought rested on a finding that Mr Jones received a copy of the advertisement placed in the Border Mail by the proprietors of Bob's IGA by facsimile communication on 10 May 1995. Safeway contends that it was not open to the primary Judge to infer that the document was received by Mr Jones on that date. Safeway says that his Honour should not have inferred that the document was sent by facsimile transmission when the Commission called no evidence to prove that it was sent by that means notwithstanding that Mr McDowall, the author of the document, gave evidence in the proceedings. Secondly, Safeway says that, even if an inference can be drawn that the document was sent by facsimile, there was no basis for the further inference that Mr Jones received it before he spoke to Mr Gunton.
262 Mr Jones said that he received the document on 15 May 1995, through the mail. His Honour found that Mr Jones was mistaken in giving this evidence. His Honour's reasoning is based on the fact that the document bears an alteration of the name of the addressee to "Mark Jones Safeway", together with Safeway's facsimile number. His Honour considered that it was improbable that Mr McDowall would have put a note on the facsimile personally addressed to Mr Jones saying that he would be "in Wodonga today if you need to talk with me" if he had sent it by ordinary mail. In those circumstances, Mr McDowall would not have been able to determine when Mr Jones would receive the note.
263 The primary Judge's finding that Mr Jones received the facsimile on 10 May 1995 played a part in his Honour's conclusion that Mr Gunton's account of the conversation should be preferred to that of Mr Jones. On Mr Jones' version, he told Mr Gunton that he had received information that a competitor of Safeway Albury was selling Tip Top Toast and Hyfibe at $1.29 per loaf. According to Mr Jones, he only learned in the course of the conversation that the Bob's IGA sale was being advertised. The primary Judge did not accept that this was an accurate recollection having regard to the terms of the facsimile received from Mr McDowall.
264 This, however, was not the only reason for rejecting Mr Jones' account. According to Mr Jones, he asked Mr Gunton whether Tip Top was funding a deal on Hyfibe and Tip Top Toast and Mr Gunton replied that because the lines had been advertised, Tip Top had agreed to fund the deal at Bob's IGA. But the fact was that Tip Top was not funding such a deal. For that reason and also because it was not probable that Mr Gunton would say that Tip Top had agreed to fund a deal on products being sold at normal prices, the primary Judge preferred Mr Gunton's version.
265 The primary Judge also took into account that other aspects of Mr Jones' evidence relating to the deletion of Tip Top's products were unreliable. In particular, Mr Jones' evidence that in May 1995 he had no knowledge of any withdrawal of Tip Top products from the Safeway stores was contradicted by another facsimile that he had initialled. The unreliability of that evidence cast doubt on Mr Jones' evidence as to the content of his conversation with Mr Gunton.
266 In our view, it was open on the evidence for the primary Judge to find that Mr Jones received the facsimile on 10 May 1995. The notation on the redirected facsimile only made sense (as his Honour found) if it had been transmitted to Safeway on 10 May 1995. Moreover, Mr Jones' written statement implies that he had received the facsimile on that date. The fact that Mr McDowall did not give evidence as to how and when the facsimile was sent does not mean that the finding made by his Honour was not open. The absence of evidence from Mr McDowall on the point was only one factor to take into account.
267 Safeway submits that even if the facsimile was received in Safeway's offices on 10 May 1995, that does not necessarily mean that Mr Jones saw the facsimile before his conversation with Mr Gunton. It was pointed out that, although the Safeway store had accepted the usual deliveries on 10 May 1995, Tip Top products were removed from the shelves "later in the day". However, Mr Jones' evidence was that he had not seen the facsimile until 15 May 1995: he did not claim to have received it on 10 May 1995 but only after the deletions had commenced. Having regard to this circumstance, and the fact that Mr Jones' handwriting appears on the facsimile, it was open to the primary Judge to infer that Mr Jones read the document before his conversation with Mr Gunton took place.
268 Safeway then submits that the primary Judge should not have accepted Mr Gunton's version of the conversation because of concessions he made in cross-examination. Mr Gunton acknowledged that, although he could not recall, he could not deny that Mr Jones may have asked if Safeway was receiving the same cost price as its competitor and requested the same deal. His Honour expressly referred to that passage in Mr Gunton's evidence, but concluded nonetheless that Mr Jones had not asked for a case deal. While it is unusual for a trial judge to reject the evidence of a witness as to the terms of a conversation that another witness cannot recall but does not deny, it is not necessarily an error to do so. The primary Judge was entitled to form a view that Mr Jones' evidence as to the conversation was unreliable and to accept that the objective circumstances made it more likely that Mr Gunton's inability to recall a request for a case deal reflected the true position, that is, that no such request was made.
269 Safeway repeats a submission made to the primary Judge, that Mr Gunton had admitted in cross-examination that he had told Mr Jones that Tip Top was funding Hyfibe and Tip Top Toast. His Honour rejected that submission on the ground that Mr Gunton's evidence did not bear that interpretation. In the relevant passage, Mr Gunton gave evidence that he did not recall saying that Tip Top had agreed to fund Sunblest Hyfibe, but that he had been prompted to "recall conversations in relation to the toast product and the Hyfibe product". He was not, however, pressed on what was said in these conversations. In these circumstances, the primary Judge did not err in interpreting Mr Gunton's evidence as he did.
270 Safeway also challenges the finding that Mr Jones directed the deletion of all Tip Top products from the three Safeway stores. There is no dispute that the products were deleted, nor that Mr Jones had responsibility for directing the deletion of products in uncompetitive situations. There was evidence that Mr Jones knew of the deletions no later than 12 May 1995, because he received a facsimile on that day making it clear that deletions had occurred. The deletions were not reversed until 15 May 1995. Mr Jones gave no explanation for his lack of response to the facsimile of 12 May 1995. In our view, there was ample evidence to support the finding that Mr Jones directed the deletions.
271 Since the challenge to his Honour's findings of primary fact fail, the challenge to his finding as to the purpose of the deletion also fails.
7. MISUSE OF MARKET POWER: TRADE PRACTICES ACT, S 46
7.1 HOW THE ISSUE ARISES
272 As we have seen, on the primary Judge's reasoning, the Commission's case that Safeway had contravened s 46(1)(c) of the Act failed independently of any question of market power. His Honour considered that it was integral to the Commission's pleaded case under s 46(1)(c) that the purpose of the policy formulated by Mr Brookes was to punish the plant bakers and to deter them and independent stores from engaging in competitive conduct. Since his Honour found that the policy and purpose of the policy were not in the terms pleaded by the Commission, the foundation for the Commission's case under s 46(1)(c) of the Act was removed. Nevertheless, his Honour took the view that it was necessary to consider the Commission's case under s 46(1)(a), namely that Safeway had taken advantage of its substantial degree of market power for the purpose of substantially damaging the independent stores, which competed with Safeway in the retail bread market.
273 The primary Judge found in the Commission's favour on two issues. First, his Honour concluded that the relevant market was the market in Victoria for the supply on a wholesale basis of bread products to food retailers (the "Wholesale Market"). Secondly, his Honour found that Safeway had a substantial degree of power in that market.
274 The third issue was whether Safeway had taken advantage of its market power for the purpose identified in s 46(1)(c) of the Act. It will be recalled that his Honour found that in two of the nine instances (Frankston and Albury (May 1995)) Safeway had acted with the purpose of deterring the plant bakers concerned from engaging in competitive conduct. On the basis of this finding, his Honour appeared to have regarded it as open to him to conclude that Safeway had engaged in the conduct alleged by the Commission. His Honour described that conduct as follows:
"Safeway imposing a term of trade on the three plant bakers to the effect that if they sold cheap bread to independent stores who retailed it at a price less than the price charged by Safeway for its bread at a store in the vicinity of the independent store, Safeway would delete the respective plant baker's products from the Safeway store whose bread sales were affected by the sale of the cheap bread and the deletion would stay in place until the independent store ceased selling the bread supplied by the plant baker at a cheap price."
275 Nonetheless, his Honour held that even if the Commission had made out this allegation, it had failed to establish that Safeway had taken advantage of its market power. While Safeway had "used" its market power, in the sense that it had engaged in conduct available to it, there was no necessary connection between Safeway's market power and the conduct in which it had engaged. Accordingly, the Commission's case against Safeway under s 46(1)(a) had to be dismissed.
276 We have held that his Honour erred in concluding that the Commission's pleading, taken together with the finding as to the purpose of Mr Brookes' policy, precluded it from succeeding in its claim that Safeway had contravened s 46(1)(c) of the Act. We have also held that in addition to the incidents at Frankston and Albury (May 1995), there were two incidents (Cheltenham and Vermont) where Safeway's purpose in deleting the plant baker's products from its supermarkets was to deter the bakers concerned from engaging in competitive conduct by supplying cheap generic bread to the independent retailers. The market issues must therefore be considered for the purposes of the Commission's claims under both s 46(1)(a) and s 46(1)(c) of the Act.
277 His Honour's conclusions on all the market issues have been challenged by the parties. The questions are therefore whether his Honour correctly
(i) identified the relevant market;
(ii) concluded that Safeway had a substantial degree of power in that market; and
(iii) concluded that Safeway had not taken advantage of its market power for a proscribed purpose.
7.2 INTER-RELATIONSHIP BETWEEN THE ISSUES
278 There is a close relationship between the questions of market definition, degree of power in the market and whether the respondent has taken advantage of its market power. In Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Co Ltd [1989] HCA 6; (1989) 167 CLR 177, Mason CJ and Wilson J observed (at 187-188) that the
"analysis of a s 46 claim necessarily begins with a description of the market in which the defendant is thought to have a substantial degree of power. In identifying the relevant market, it must be borne in mind that the object is to discover the degree of the defendant's market power. Defining the market and evaluating the degree of power in that market are part of the same process, and it is for the sake of simplicity of analysis that the two are separated...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."
See, too, at 195, per Deane J; at 200, per Dawson J.
279 In Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; (2003) 195 ALR 609, Gleeson CJ and Callinan J noted (at 634) that the
"questions whether BBM had a substantial degree of power in a market between April 1994 and October 1996, and whether its behaviour, and in particular its pricing behaviour, during that period involved taking advantage of, that is, using, that power, are closely related. But, as the decision in Melway shows, they are two questions, not one. The appellant in that case conceded that it had a substantial degree of power, but it was held that its conduct did not involve taking advantage of that power."
280 It is therefore appropriate to consider each of the issues separately, although it is important to bear in mind the interrelationship between them.
7.3.1 The Primary Judgment
281 The primary Judge recorded the Commission's submission that the relevant market was the Wholesale Market (see above at [273]). The Commission's case was that Safeway had engaged in conduct in each of the nine incidents in its capacity as an acquirer of bread in the Wholesale Market. It was in that capacity that Safeway had refused to acquire proprietary branded bread from the plant bakers so long as the plant bakers continued to supply cheap generic or secondary branded bread to the independent retailers. Accordingly, so the Commission argued, the relevant market was the Wholesale Market.
282 Safeway, in contrast, submitted that the relevant market was the total bread market at wholesale and retail levels. It adopted this position because of what it said was the interaction and impact of activities at the retail level with the wholesale market. Safeway also submitted that hot bread shops should be included in the market because of their ability to constrain the conduct of other sellers at the retail level.
283 His Honour pointed out that the first step in considering a contravention of s 46 of the Act is to identify the relevant market in which the alleged contravener is said to have a substantial degree of market power. In his view, the definition of the market was dependent upon the context in which the issue of market definition arose.
284 His Honour made these findings relevant to the identification of the market (at 241 [1037]):
". There was a demand for the supply of bread products on a wholesale basis in Victoria.
* There were no products (other than other bread products) that were substitutable, or in close competition, with bread products in Victoria.
* Tip Top, Sunicrust and Buttercup, in supplying bread products in Victoria on a wholesale basis had not been constrained to any significant degree by the prices at which other non-bread products were supplied by other wholesalers in Victoria.
* Tip Top, Sunicrust and Buttercup had been in close competition with each other in supplying bread products in Victoria on a wholesale basis.
...
* The demand for the supply of bread products on a wholesale basis in Victoria was derived from the demand for bread products by customers of food retailers in Victoria.
* Consumers of bread products in Victoria were unlikely to switch from bread products to other products to any significant extent."
285 After referring to the observations of Mason CJ and Wilson J in Queensland Wire, his Honour continued (at 1039 [242]):
"The conduct of Safeway in issue is that relating to the terms of its dealings with the three plant bakers in relation to its acquisition of bread. Accordingly, the relevant functional level is the wholesale level. It is at that level that the relevant alleged abuse of power or proscribed purpose arose. I do not therefore consider it appropriate to define the market more widely to include the retail functional level notwithstanding that the extent of competition at that level may have had a constraining effect on the ability of any wholesaler to charge a monopoly price or on the ability of any purchaser at the wholesale level to influence the terms of trade at the retail level."
286 Next the primary Judge addressed the question of whether hot bread shops, independent bakers and in-store bakeries should be included in the market for the acquisition of bread by wholesale. Safeway has argued that if hot bread stores competed at the retail level with stores selling plant baked bread, then the hot bread shops would constrain prices that could be charged by plant bakers at the wholesale level. This was said to be so because constraints on a retailer would influence the prices that sellers in the wholesale market could extract. But, according to his Honour, the issue in the present case was Safeway's power to influence the terms of trade on which the plant bakers sold bread at the wholesale level. That issue was not concerned with Safeway's power to raise prices at the retail level. His Honour said this (at 243 [1045]):
"Put shortly, competition in the retail market did not provide any significant restraint on the ability of Safeway to exercise a substantial degree of market power as an acquirer of bread in the wholesale market and to obtain terms of trade at that level, nor did it provide any significant restraint on the plant bakers from whom Safeway acquired bread in relation to the terms of trade they imposed on purchasers from them. I therefore do not accept that the relevant market for the purpose of considering Safeway's market power in the present context is the total bread market comprising transactions at both the wholesale and retail levels."
287 The primary Judge was satisfied that hot bread shops and in-store bakeries should be included in the market for the retail sale of bread. However, he excluded bread manufactured by hot bread shops from the Wholesale Market since their output had little impact on the manner in which and the extent to which Safeway made purchasing or sale decisions or exercised its power within the Wholesale Market. Hot bread shops were not an alternative source of distribution for the plant bakers as they were vertically integrated and so undertook little by way of wholesaling activities.
288 His Honour held, however, that the independent bakers had to be taken into account in determining the nature and extent of the Wholesale Market for the acquisition of bread products. The evidence as to the source of bread products sold by retail in 1994 and 1995 was as follows:
Plant bakers 50.6%
Independent bakers 9.2%
Hot bread shops 31.6%
In store bakers 8.5%
There was an elastic demand for the various brands of bread and independent plant bakers so that product differentiation did not mean that each plant baker was a market unto itself.
289 On the other hand, the existence of the independent plant bakers did not constrain Safeway's ability to exercise its market power in the Wholesale Market in relation to the major plant bakers. The independent plant bakers could not provide an alternative source of supply, without increased cost, to independent stores throughout Victoria. They simply could not cover the Wholesale Market statewide as did the major plant bakers. Accordingly, his Honour was not satisfied that the independent plant bakers were a viable source of supply for independent retailers seeking to acquire cheap bread to sell at a discount.
290 In-store bakeries were not a constraint in the Wholesale Market. Those which baked their own bread on the premises had no need to acquire bread from plant bakers. The in-store bakeries with no production facility ("cold spots") did not operate as a constraint as they were mostly contained in the supermarkets operated by Safeway and the other major chains, Coles and Franklins.
7.3.2 Analysis
291 Safeway does not dispute that the primary Judge had correctly stated the general principles governing the definition of markets. His Honour appreciated that a market is an area of close competition between firms, a field of rivalry. He quoted the well-known passage to that effect in Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169, at 190, per the Tribunal, a passage approved by the High Court, most recently in Boral Besser, at 634 [133], per Gleeson CJ and Callinan J (with whom Gaudron, Gummow and Hayne JJ agreed on the market definition issue). He noted that the defining feature of a market is substitutability, a point reinforced by s 4E of the Act. His Honour also appreciated that the question of substitutability of products is a matter of degree: see Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 213, at 269 [112].
292 Safeway's principal criticism of the primary Judge is that he wrongly treated the conduct alleged against Safeway as determinative of the extent of the boundaries of the market. Moreover, according to Mr Smith, his Honour wrongly treated the relevant market for the purposes of the s 46 analysis as confined to the wholesale functional level. There is no dispute that the geographical extent of the market was Victoria and immediately adjacent localities such as Albury.
293 It is well recognised that the market is an instrumental concept, designed to assist in the analysis of the processes of competition and the sources of market power: Dowling v Dalgety Australia Ltd (1992) 34 FCR 109, at 132, per Lockhart J. In a frequently quoted article, Professor Brunt said this (M Brunt, "`Market Definition' Issues in Australian and New Zealand Trade Practices Litigation" (1990) 18 Aust Bus L Rev 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."
294 Professor Brunt was a member of the Trade Practices Tribunal which addressed the market definition issue in the context of an application to review the refusal of an authorisation relating to codes governing accreditation of advertising agencies: Re Media Council of Australia [1996] ATPR 41-497. The Tribunal observed (at 42,262) that:
"[t]he choice of market definition, i.e. the specification of relevant markets in the particular case, must depend upon the issues for determination. For the Tribunal's purposes it is the identification of a market or markets that best enables it to evaluate the likely effects of authorized conduct, whether the subject of past authorisation or possible future authorisation."
295 In this case, all that we understand his Honour to be saying is that the conduct alleged against Safeway concerned its attempt, as an acquirer of plant baked bread in the Wholesale Market, to impose a term of trade upon the three major plant bakers. The Commission claimed that Safeway had used its substantial degree of power in that market for bread baked by the plant bakers for a proscribed purpose. Safeway did so (according to the Commission) by imposing a term of trade on its dealings with the plant bakers to the effect that, if an independent retailer competing with Safeway in a local market sold generic or secondary bread supplied by one of the bakers at a discounted price, Safeway would refuse to acquire that baker's products for the Safeway supermarket competing with the independent retailer so long as the discounted bread remained on sale.
296 As the primary Judge pointed out, the critical question is whether there were competitive constraints upon Safeway's power to impose the term of trade upon plant bakers selling bread by wholesale. The issue is not whether Safeway could raise prices at retail level to supra-competitive levels. His Honour specifically found that competition in the retail market for bread, although preventing Safeway from raising its retail prices, did not constrain Safeway's ability to impose terms of trade as an acquirer of bread in the Wholesale Market. In other words, the retail market for bread did not constitute an area of close competition so far as Safeway's conduct as a buyer of plant baked bread in the Wholesale Market was concerned: see Australian Competition and Consumer Commission v Boral Ltd [2001] FCA 30; (2000) 106 FCR 328, at 377, per Beaumont J, a finding upheld by the High Court: Boral Besser, at 635, per Gleeson CJ and Callinan J; at 638, per Gaudron, Gummow and Hayne JJ. The fact that Safeway's conduct, on the Commission's case, was designed to prevent local discounting by independent retailers did not alter the fact that the conduct of which the Commission complained was as a purchaser in the Wholesale Market.
297 Given his Honour's finding, in effect, that there was no close competition between the retail and wholesale markets, we see no error of principle in identification of the relevant market as that for the sale and acquisition of bread by wholesale in Victoria. Independent bakers formed part of that market, although that is not the same thing as saying that they operated as a constraint on Safeway's power to exact terms of trade from the plant bakers. Nor do we see any error of principle in his Honour's approach to the hot bread shops and in-store bakeries. It is not to the point that what went on at a retail level might constrain some conduct of those in the Wholesale Market. Suppliers in a wholesale market usually cannot set prices regardless of what prices retailers are able to obtain in the retail market. But that is not to deny that there are separate wholesale and retail markets for the purpose of the present case.
7.4 SUBSTANTIAL DEGREE OF MARKET POWER
298 The question of whether a corporation has a substantial degree of power in a market and whether its behaviour involves taking advantage of that power are closely related, but separate questions: Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1, at 16 [25] per Gleeson CJ, Gummow, Hayne and Callinan JJ; Boral Besser, at 634 [132], per Gleeson CJ and Callinan J.
299 In Queensland Wire, Mason CJ and Wilson J defined (at 188) market power as the ability of a firm to raise prices above the supply cost without rivals taking away customers in due time. Dawson J, however, adopted (at 200) a rather broader approach:
"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. Thus Kaysen and Turner define market power as follows:`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.' (Kaysen and Turner, Antitrust Policy (1959), p 75)."
[Some citations omitted.]
This passage was cited with approval by the joint judgment in Melway Publishing, at 21, per Gleeson CJ, Gummow, Hayne and Callinan JJ. See, too, Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43, at 62, where Lockhart and Gummow JJ observed that market power is concerned with power which enables a corporation to behave independently of competition and of the competitive forces in a relevant market.
300 In the case of a buyer, such as Safeway in the Wholesale Market, market power might be evidenced by a firm's ability to extract favourable prices from suppliers. (While it might be thought that such an exercise of market power works to the ultimate benefit of consumers in the form of lower prices, it is by no means the case: R D Blair and J L Harrison, "Antitrust Policy and Monopsony" (1990-1991) 76 Cornell L Rev 297, at 303-306.) But as the primary Judge pointed out, there are ways in which a purchaser in a market can act unconstrained by competition, otherwise than by influencing the output of or prices charged by suppliers. A purchaser's market power may be demonstrated by its ability to secure more favourable terms of trade than those available to other purchasers in the same market. His Honour cited the evidence of Professor Williams who defined monopsony power as (at 238 [1025])
"a buyer's ability to extract terms more favourable to itself than it could extract in a competitive market".
See, too, R D Blair and J L Harrison, above, at 320-321.
301 The essence of market power is, as Gleeson CJ and Callinan J said in Boral Besser, at 632 [121], the absence of constraint. In the case of a purchaser of goods in a market, such as Safeway, s 46(3) of the Act directs attention to the extent to which the purchaser's conduct is constrained by its competitors and potential competitors, or by its suppliers and customers. Of course, market power need not be total. Section 46(1) of the Act applies where a corporation has a substantial degree of power in a market. It is therefore not necessary for a purchaser to be a monopsonist (a single buyer of a product or service) in order to have a substantial degree of market power: Melway Publishing, at 21, per Gleeson CJ, Gummow, Hayne and Callinan JJ. Matters of degree are involved. In assessing the extent of a firm's market power, it is not only the matters referred to in s 46(3) that are relevant. Other relevant matters include the number of competitors, their strength and size, the height of barriers to entry and the stability or volatility of demand: Boral Besser, at 643 [168], per Gaudron, Gummow and Hayne JJ.
302 Section 46(1) took its present form in 1986. The Trade Practices Revision Act 1986 (Cth), s 46(1) substituted the test of "a substantial degree of power in a market" for the previous test of a corporation "being in a position substantially to control a market". According to the Explanatory Memorandum accompanying the Trade Practices Revision Bill 1986 the amendment was "designed to lower the threshold test for determining whether the section is applicable to the conduct of a corporation" (par 35). The Attorney-General, in the second reading speech, expressed much the same view:
"As well as monopolists, section 46 will now apply to major participants in an oligopolistic market and in some cases, to a leading firm in a less concentrated market."
The argument in the present case proceeded on the basis that the amended version of s 46(1) is intended to lower the threshold test. In any event, it is clear that s 46(1) of the Act is not concerned only with a pure monopsony or a near monopsony.
303 In assessing whether the primary Judge correctly concluded that Safeway had a substantial degree of power in the Wholesale Market, a number of factors must be kept in mind. These include the following:
* A large market share may well be evidence of market power, but does not necessarily mean that the relevant firm has a substantial degree of market power. Much depends on the barriers to entry in the market: it is only when it is not rational or possible for new entrants to participate in the market that a firm can have market power: Queensland Wire, at 189, per Mason CJ and Wilson J; at 201, per Dawson J; Boral Besser, at 635 [137], per Gleeson CJ and Callinan J.
* Financial strength is not of itself market power, although it may explain the existence of that power: Boral Besser, at 635 [138].
* It is consistent with s 46(3) of the Act to approach the question of market power by examining the actual conduct of the alleged contravener in the market over the whole of the relevant period: Boral Besser, at 636 [140].
304 In coming to the conclusion that Safeway did have a substantial degree of market power in the relevant market his Honour relied upon a number of factors.
305 First, the independent bakers were not a sufficient alternative source of supply for the independent stores. Independent bakers were not able to cover the Wholesale Market statewide as were the plant bakers. They could not supply the same volume of bread at the price sought by independent retailers throughout the state. There was also some evidence that their bread was not of the same quality as that of the plant bakers. Consequently, the existence of the independent plant bakers did not constrain Safeway's ability to impose a term of trade requiring plant bakers not to supply cheap or discounted bread to independent stores.
306 Secondly, his Honour considered that a new entrant to the market that might constrain the power of Safeway was a retailer of comparable size. Such a retailer could provide a viable alternative outlet for a plant baker's products if the latter did not want to accept Safeway's terms of trade. His Honour rejected Safeway's argument that the relevant barrier to entry was simply the cost of setting up a retail store in competition with a Safeway store. Safeway's argument failed to take into account the ability of Safeway to negotiate terms of trade, prices, discounts and rebates as a result of the overall purchases it was prepared to make on a statewide basis. If a plant baker was not prepared to accept any terms of trade required by Safeway, it could only replace Safeway's purchase by going to a number of individual retail outlets. Any new entrant that could impinge upon or erode Safeway's market power would have to be able to set up a network of stores of a significant size throughout Victoria. There was evidence that to enjoy comparable economies of scale to Safeway, a new entrant would have to achieve a market share of eight to nine per cent of the total grocery market, equivalent to an annual turnover of approximately $500 million. On appeal, the Court was not referred to any evidence which suggested that there was a realistic potential of such a new entrant into the market in 1994 and 1995.
307 Thirdly, there was Safeway's market share. Safeway was the largest individual purchaser of plant-baked bread in Victoria. It acquired 20 to 25 per cent of the output of the plant bakers. His Honour found that the Wholesale Market included bread supplied by the independent bakers and in-store bakeries (although inclusion of the latter is perhaps difficult to understand since in-store bakeries did not supply bread to other retailers). On this basis, his Honour found that Safeway's share of the Wholesale Market was reduced to "something under 20 per cent, around 16 per cent". (If one excludes in-store bakeries the Safeway share of purchases in the Wholesale Market would be closer to 20 per cent.) The approximate proportions of the output of the three plant bakers acquired by Safeway were 19 to 20 per cent of Tip Top's production; 33 per cent of Sunicrust's Victorian production and 50 per cent of its Melbourne metropolitan production; and 17 per cent of Buttercup's production.
308 Fourthly, his Honour referred to Safeway's ability to influence the terms on which bread products were supplied to it. Safeway's ability flowed in part from the fact that there was a high degree of elasticity as between brands of bread, although the market for bread as a whole was inelastic. His Honour accepted that Safeway was not able to obtain lower prices from suppliers than other purchasers in the Wholesale Market, but he found that Safeway was able to purchase bread at the best prices available. Moreover, Safeway was able to obtain co-operative promotional allowances from plant bakers and to insist on the baker providing certain services such as a second delivery of bread each day and stacking the bread on racks.
309 Fifthly, his Honour found that at all relevant times each of the plant bakers had significant excess capacity. Accordingly, a significant reduction in purchases by a buyer of Safeway's size could not be replaced by sales to "another similar organisation".
310 It must be said at the outset that not all these factors point to Safeway having a substantial degree of power in the Wholesale Market. His Honour found that Safeway was not able to obtain persistently better buying terms than the independent retailers, and that it could not affect the price at which the plant bakers supplied bread to the other two major retailers, Coles and Franklins. It is difficult to see why the fact that Safeway regularly obtained the best price available in the market, in common with other retailers, is indicative of market power. Similarly, the evidence does not suggest that Safeway was able to negotiate promotional allowances substantially greater than those provided to other retailers. Nor was there anything unusual about the stacking of bread or twice daily deliveries at Safeway's supermarkets. However, we think that the other factors relied on by his Honour support his conclusion that Safeway had a substantial degree of power in the Wholesale Market.
311 We accept that Safeway's market share does not, of itself, establish that it had market power. Nonetheless, the fact that it acquired nearly one quarter of the output of the plant bakers is relevant to the question of market power. As Professor Williams explained in evidence, if a supplier to a purchaser has alternative purchasers who are willing to acquire the suppliers' entire output (Professor Williams' emphasis) at a similar price, the first purchaser has no market power. But the larger the market share of any particular purchaser, the less likely it is that an alternative purchaser will take the former's place should it decide to reduce its purchases from a particular supplier. If Safeway reduced its purchases of bread from one of the plant bakers, albeit on a local rather than a statewide basis, the plant baker concerned had to find an alternative purchaser for its output.
312 It is here that the excess capacity of suppliers in the Wholesale Market is of significance. His Honour found that in 1994 and 1995, there was substantial over-capacity in the bread baking industry. It appears, for example, that in 1994 Buttercup was under-utilising its production facilities by approximately 20 to 40 per cent. The primary Judge made no findings as to the cause of the excess capacity (such as the introduction of new plant or erroneous estimates as to the likely demand for bread products). Nor did he make a finding as to the period during which the excess capacity was likely to continue. Nonetheless, it is clear that the plant bakers had excess capacity throughout the relevant period.
313 Excess capacity cannot be considered in isolation, without regard to the sheer size of Safeway's market share in the market and its importance in relation to each of the plant bakers. While in theory excess capacity of sellers in a market is something which benefits all buyers, realistically the larger the market share of that buyer, the more it can bring to bear pressure on sellers disadvantaged by that excess capacity. In Boral Besser, the excess capacity of suppliers in the relevant market was relevant to the finding, upheld by the High Court, that Boral did not have a substantial degree of power in that market: see at 620 [61], per Gleeson CJ and Callinan J. McHugh J, in the context of discussing a predatory pricing claim, said this (at 665 [269]):
"Conduct that is predatory in economic terms and anti-competitive may not be captured by s 46 simply because the predator does not have substantial market power when it sets out on its course to deter or injure competitors. That may be because until it achieves its object it has no substantial degree of market power. Or it may be that it is a firm in a cyclical industry which has had, but does not have a substantial degree of market power at the time of the predatory conduct. In cyclical industries such as construction and building materials, firms may have no substantial degree of market power at the bottom of the economic cycle when competition is fierce and margins slender. As demand increases, however, some firms may acquire a substantial degree of market power...." (Citation omitted.)
Since the waxing and waning of excess capacity is usually a feature of cyclical markets, it is inherent in what McHugh J says that excess capacity can be a relevant factor in determining whether or not a firm has a substantial degree of market power.
314 It is important to appreciate that although Safeway was unable to reduce the price at which it purchased bread from the plant bakers, it could reduce the quantity of bread sold by them. By deleting a plant baker's products from a particular supermarket, Safeway was able to reduce the quantity of products sold by that plant baker. Just as refusal to supply a customer can indicate both the existence and use of market power (as in Queensland Wire), so can a refusal to acquire products from a supplier. Moreover, bread is a staple which is sold and consumed (both in the economic and literal sense) day by day. Each plant baker's loaf which was not baked and delivered to Safeway and sold to a consumer represented a return which was lost to the plant baker forever. This feature, accentuated by the over- deletions and loss of price-fighting bread sales, would increase the pressure on plant bakers to comply with Safeway's wishes: see the observations on the significance of perishable commodities in the exercise of monopsonistic power by R D Blair and J L Harrison, above, at 313-314.
315 In the present case, his Honour found that there was no constraint on Safeway as a purchaser of bread in the Wholesale Market by reason of the existence of other acquirers of bread. This was because all the plant bakers had significant excess capacity and thus, if deleted by Safeway, could not find a substitute purchaser for the deleted product. Further, the consequences of excess capacity were exacerbated by the low level of brand loyalty between premium brands of the plant bakers. These findings indicate that Safeway had at least some degree of power in the Wholesale Market, even if it was not able to obtain persistently better buying terms than independent supermarkets.
316 In assessing the barriers to entry into the Wholesale Market, the primary Judge was influenced, rightly in our view, by the statewide nature of Safeway's operations. Safeway argued that it would never consider engaging in a statewide deletion. Mr Brookes gave evidence that he did not give consideration to a statewide deletion since that would "have a big impact on our profitability". But that seems beside the point. Whatever Safeway's motivation, on nine occasions over a period of eighteen months, in locations throughout Victoria and adjacent localities, Safeway deleted most if not all of the products of plant bakers who were supplying cheap bread to independent stores in competition with particular Safeway retail outlets.
317 Statewide deletions were not a realistic possibility, but they did not need to be. Plant bakers would have known that if they were to supply cheap bread anywhere in Victoria to an independent competing with a Safeway store, all or nearly all their products would be deleted from that Safeway store. Safeway would have known that the plant bakers knew this. Because the plant bakers had excess capacity, they knew they would lose certain sales they otherwise would have made.
318 These considerations also tend to negate Safeway's argument that his Honour was in error in finding in connection with barriers to entry that the relevant new entrant to the market was a participant of similar size to Safeway's network. It was only a new entrant of that kind that would be able to match the power of Safeway to strike wherever there was a competitive threat by independent retailers to one of its 130 stores. Although his Honour referred to Safeway's market power deriving from its ability to negotiate statewide terms, we do not think it correct to suggest, as Safeway did, that his Honour's conclusion concerning barriers to entry into the Wholesale Market rested on an assumption that deletions of a plant baker's product would occur in all of Safeway's 130 or so supermarkets. The point is that Safeway's practice (whatever Mr Brookes' subjective intention) was to delete a plant baker's products from any of its supermarkets, if the plant baker supplied discounted bread to an independent retailer in direct competition with the particular supermarket. It is difficult to see how Safeway's power in the Wholesale Market could be significantly constrained by the entry of individual retailers into specific locations. We should add that the threat of a new entrant has to be assessed in a time frame comparable to that of the impugned conduct, which was short term, reactive behaviour targeted at specific market activity then occurring. This conduct was unlikely to be restrained by the theoretical arrival of a new entrant of comparable size in the future.
319 The primary Judge did not closely analyse Safeway's conduct over the relevant period in determining whether it had a substantial degree of power in the Wholesale Market. Any such analysis has to take account of the basis on which the trial was conducted, namely that a request by Safeway for a case deal from the plant baker was inconsistent with the existence of a proscribed purpose. We have already expressed our reservations about that approach. Even so, in four instances (Frankston, Cheltenham, Vermont and Albury (May 1995)), spread over eighteen months, Safeway engaged in over-deletions in an attempt to force the plant baker concerned to stop selling discounted bread to an independent retailer. In one of these cases involving Tip Top (Albury (May 1995)), the attempt succeeded. In another two instances (Albury (November 1995) and Ferntree Gully), whatever the subjective intentions of Mr Brookes and Mr Jones, Safeway's over-deletions in fact resulted in the plant baker (Tip Top) ceasing to sell discounted generic bread to the independent retailers concerned.
320 Safeway's actions suggest that its officers responsible for the "over-deletions" thought that Safeway had market power sufficient to impose a term of trade that could not be imposed in a competitive market. On Mr Brookes' own evidence, the practice of over-deletions went beyond what was required to preserve Safeway's competitive position in relation to a local retailer discounting generic bread. Unless Safeway thought it had substantial market power, it could hardly have hoped to persuade the plant bakers to engage in anti-competitive conduct by ceasing to supply cheap generic bread to the independent retailers.
321 What is more important is that in three instances Safeway's practice of deleting the products of a plant baker which supplied discounted generic bread to an independent retailer in competition with a Safeway supermarket, persuaded the plant baker to cease supplying bread at a discount. In each case the plant baker concerned was Tip Top. Although his Honour did not make findings as to Tip Top's share of the market, plainly it was one of the three large plant bakers supplying the Wholesale Market. This is not a case where Safeway's actions were ineffective (cf Boral Besser, at 637 [145], per Gleeson CJ and Callinan J). Tip Top's anti-competitive response to Safeway's over-deletions is a strong indicator that Safeway had a substantial degree of power in the Wholesale Market, notwithstanding that neither Sunicrust nor Buttercup succumbed to the pressure.
322 We have not overlooked his Honour's finding (at 252 [1088]) that Safeway did not have "the ability to raise the costs of the supply of bread to its retail competitors". But in the three incidents involving Tip Top deletions, that is exactly what happened. In each case, the independent retailer was unable to continue discounting in competition with Safeway because Tip Top raised the price of its supplies as a result of Safeway's actions. Moreover, the other plant bakers, Buttercup and Sunicrust, must have known of Safeway's practice in circumstances where independent retailers sold discounted bread in competition with a Safeway supermarket. While there was no evidence that they succumbed, they each would have been subject to a powerful disincentive in relation to supplying discounted bread to independent retailers.
323 We should add one further point. The argument before us seemed to assume that since neither Buttercup nor Sunicrust had ceased supplying discounted bread to independent retailers they were quite unaffected by Safeway's conduct. Accordingly, it was only Tip Top's response that suggested that Safeway had any market power. However, in at least the three instances involving Buttercup (Frankston, Cheltenham and Vermont), Safeway imposed a term of trade requiring the plant baker either to desist from supplying discounted bread to the independent retailer or to have its products deleted from the competing Safeway supermarket. Buttercup therefore faced a choice. That Buttercup (unlike Tip Top) chose to continue supplying the independent retailers does not alter the fact that it could no longer sell to Safeway's competing supermarkets so long as Safeway maintained the deletion. In a competitive market Buttercup would have been able to sell to both the independent retailer and Safeway, since (as we explain later) there would have been no point in Safeway deleting Buttercup's products. Thus Buttercup was constrained by Safeway's conduct in a manner that would not have occurred in a competitive market. This, too, is suggestive of Safeway having power in the Wholesale Market.
324 In our view, his Honour was correct in finding that Safeway had a substantial degree of market power in the Wholesale Market.
7.5 TAKING ADVANTAGE OF MARKET POWER
325 Queensland Wire establishes that a firm having a substantial degree of market power contravenes s 46(1) of the Act if it uses that power for a proscribed purpose. As Mason CJ and Wilson J said (at 191):
"The question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition, and the addition of a hostile intent inquiry would be superfluous and confusing."
See too, at 194, per Deane J; at 202, per Dawson J; at 213, per Toohey J. To like effect, in Melway Publishing, the majority said (at 23 [51]) that a
"firm is taking advantage of market power where it does something that is materially facilitated by the existence of the power, even though it may not have been absolutely impossible without the power. To that extent, one may accept the submission made on behalf of the ACCC, intervening in the present case, that s 46 would be contravened if the market power which a corporation had made it easier for the corporation to act for the proscribed purpose than otherwise would be the case."
326 As already noted, it was accepted that his Honour fairly summarised the conduct alleged by the Commission as follows (at 257 [1110]):
"Safeway imposing a term of trade on the three plant bakers to the effect that if they sold cheap bread to independent stores who retailed it at a price less than the price charged by Safeway for its bread at a store in the vicinity of the independent store, Safeway would delete the respective plant baker's products from the Safeway store whose bread sales were affected by the sale of the cheap bread and the deletion would stay in place until the independent store ceased selling the bread supplied by the plant baker at a cheap price."
Having regard to the role that the case deals played in the conduct of the trial (see [50] above), Safeway can be said to have imposed that term of trade in four of the nine instances (Frankston, Cheltenham, Vermont and Albury (May 1995)).
327 The primary Judge held that Safeway could not ever be said to have taken advantage of its market power in the Wholesale Market in the sense in which the expression "take advantage of" had been construed in Queensland Wire and Melway Publishing. His Honour summarised his reasons in these terms (at 258 [1113]):
"Although Safeway has `used' its market power in the sense that it has engaged in conduct that is available to it there is no necessary connection between its market power and the conduct in which it has engaged with the plant bakers."
328 If the meaning of this passage is that something more than the use of market power must be shown to establish a contravention of s 46(1) of the Act, then his Honour fell into error. However, his Honour may have been intending simply to say that Safeway's conduct had not been materially facilitated by the existence of a substantial degree of market power. This interpretation of the judgment perhaps receives support from a later passage in which his Honour considered (at 259 [1118]) how Safeway would have behaved in a hypothetical competitive market:
"The reality of a competitive wholesale market in which Safeway did not have substantial market power would be that Safeway would still have alternative sources of supply available if a plant baker refused to stop selling bread to an independent store and Safeway stopped buying that plant baker's bread. The other plant bakers, who were not supplying the particular independent store with cheap bread, would no doubt be willing to supply the particular Safeway store with bread, or with increased quantities if they already supplied it with bread. In particular, Safeway would have access to the supply of the Sunicrust and Buttercup price-fighting brands. Safeway would still have the same number of retail outlets and there is no reason to assume that it would not receive the same tenders as it did from Sunicrust and Buttercup. If it sought to impose the same term of trade and policy upon the plant bakers and the plant bakers resisted, it would still delete the plant bakers products' and bring in a price-fighting brand. In such circumstances, it would not act any differently, as it would not, unlike BHP in Queensland Wire, be faced with a competitive situation in which it would be expected, according to accepted principles of commercial practice and reality, to act differently from the way it acted in circumstances where it possessed a substantial degree of market power in the wholesale market.In a competitive situation Safeway might still try to impose its terms of trade and policy upon the plant bakers. If it failed, as it did in a number of the incidents under consideration, would it forget about the deletion and abandon the idea of bringing in the bread of other plant bakers or the Sunicrust or Buttercup price-fighting brands? I consider the answer to be in the negative. It would act in exactly the same way as it did in the situation where it possessed market power. It would not (unlike BHP in Queensland Wire) be faced with any commercial imperative different from that which it faced while possessing a substantial degree of market power in the wholesale market."
329 In our view, this analysis ignores the question of why Safeway engaged in the impugned conduct. This is not the same question as to whether one or more of the statutorily proscribed purposes existed. Before reaching that point it is necessary to look at not only what the firm did, but why the firm did it. That is why a business rationale for the conduct, independent of the question of market power, is relevant: Melway Publishing, at 13-14 [17]-[19], 18-19 [31], 20 [38], 26 [62], per Gleeson CJ, Gummow, Hayne and Callinan JJ; Boral Besser, at 643-644 [170]-[171], per Gaudron, Gummow and Hayne JJ; D Robertson, "The Primacy of `Purpose' in Competition Law - Part 1" (2001) 9 CCLJ 101, at 115, 121. Another example is Queensland Wire itself. The bare fact of BHP refusing supply to Queensland Wire would have taken on a different complexion if, for example, the reason for that refusal was genuine concern for the latter's creditworthiness. And again, as in Boral Besser, the bare fact of pricing below cost may be attributable to a firm having no market power but simply wanting to stay in business. Alternatively, it may be the firm has market power and expects it can drive competitors out of the market and then recoup its costs by obtaining supra-competitive prices: see at 643 [171], per Gaudron, Gummow and Hayne JJ. The rationale for the conduct is critical.
330 So in the present case, in a competitive wholesale market without excess capacity, Safeway would obtain no leverage by deleting a particular plant baker's bread. Safeway did not delete simply for the sake of doing so or because of any problems with quality of product, reliability of supply or other legitimate business considerations. It is clear that in the four instances with which we are concerned, Safeway's deletion of the plant baker's products was directed to the plant baker's conduct in supplying discounted bread to Safeway's retail competitor. A firm without market power would not have pursued a policy of deletion because to do so would have produced harm for itself without any countervailing benefit. A firm without market power would commercially be compelled to stock the full range of products in order to satisfy consumer demand. The only consequence of the deletion would be the adverse reaction of customers, of which there was ample evidence. To take only one example, Mr Brookes spoke of being informed by his area manager Mr White:
"Bernie, I would like you to look at the decision that Mark [Jones] has made to delete Sunicrust bread at Traralgon. We are getting a lot of customer complaints."
331 Furthermore, Safeway's conduct involved not just deletion from the relevant supermarket of bread comparable to that supplied by the plant baker to the independent retailer, but the deletion of most if not all the plant baker's products and the introduction of a price-fighting bread manufactured by a different plant baker. Safeway's conduct in the four instances is only rationally explicable as the use of the leverage it had in the market to inflict pain on the plant baker concerned and thereby dissuade it from continuing to supply discounted bread to Safeway's local competitor.
332 In only one of the four instances in which Safeway deleted the plant baker's products from its supermarket but sought no case deals (Albury (May 1995)) did the plant baker concerned (Tip Top) cease supplying discounted bread to the independent retailer competing with the Safeway supermarket. In the remaining three instances (Frankston, Cheltenham and Vermont) the plant baker (Buttercup) continued to supply discounted bread to the independent retailers. Nonetheless, in our view in all four instances Safeway took advantage of its power in the Wholesale Market in the sense described by the High Court in Queensland Wire and Melway Publishing.
333 Section 46(1) of the Act is not confined to a case where a corporation succeeds in achieving an anti-competitive object. Its terms are satisfied when a corporation that has a substantial degree of power in a market takes advantage of that power for one of the proscribed purposes. In determining whether a corporation has taken advantage of its market power it is enough that the corporation's conduct has been "materially facilitated" by the existence of its power. In each of the four instances with which we are concerned Safeway deleted all or most of the plant baker's products from one of its supermarkets. Its reason for doing so was to induce the plant baker to cease supplying discounted bread to an independent retailer in competition with a Safeway supermarket. As we have explained, there would have been no purpose in Safeway acting in this manner in a competitive market. On the contrary, had Safeway done so it would have inflicted economic harm on itself for no gain. Safeway's conduct in the four instances was therefore materially facilitated by the existence of its market power even though that same conduct would not have been "absolutely impossible" without that power.
334 For those reasons, we are satisfied that his Honour was in error in finding that Safeway did not take advantage of its power in the Wholesale Market.
335 It will be recalled that the trial was conducted on the basis that a request by Safeway for a case deal from a plant baker was necessarily inconsistent with Safeway having taken advantage of its power in the Wholesale Market for a purpose proscribed by s 46(1) of the Act. Since the primary Judge found that in five instances (Traralgon, Lalor, Geelong, Albury (November 1995) and Ferntree Gully), Safeway had sought case deals and since we have upheld those findings, the Commission's appeal in respect of those five instances must fail.
336 In the case of Frankston, the primary Judge was satisfied that the purpose of the deletion of Buttercup's products from the Karingal supermarkets was to punish Buttercup for selling bread to Quadara at a discounted price and to deter or attempt to deter Buttercup from continuing to do so. In the case of Albury (May 1995) the primary Judge found that Mr Jones' reason, and that of Safeway, for implementing the deletion of Tip Top's products from the Albury supermarket was because Tip Top had sold bread to Bob's IGA at a price that enabled it to undercut Safeway's Albury supermarket. His Honour was satisfied that the purpose of the deletion was to deter Tip Top from selling bread to Bob's IGA at a price that enabled it to sell bread at retail prices lower than those offered by Safeway. The challenges by Safeway to those findings on the appeal have failed.
337 We have also held that his Honour should have found that Safeway's purpose in deleting Buttercup's products from the Cheltenham and Vermont supermarket was to deter Buttercup from continuing to sell bread to independent retailers (Cheapa Food Barns) at a discounted price.
338 These findings lead to the conclusion that Safeway, in these four instances (Frankston, Cheltenham, Vermont and Albury (May 1995)), took advantage of its power in the Wholesale Market for the purpose of deterring or preventing both the plant bakers and the independent retailers from engaging in competitive conduct, in contravention of s 46(1)(c) of the Act. Safeway was faced with competitive conduct by the independent retailers, in the form of discounting of bread products. The raison d'etre of Safeway's over-deletions and purchase of other price-fighting bread was to put pressure on the plant bakers in order to stop them providing discounted bread to independents (in itself a form of competitive conduct) and, in turn, to prevent or deter the independents from engaging in competitive conduct at the retail level. Section 46(1)(c) explicitly contemplates that the purpose of the proscribed conduct might be to deter or prevent conduct in a market quite different from that in which the firm holds a substantial degree of power.
339 In reaching this conclusion, we have taken into account the observation in the joint judgment in Melway Publishing, at 18 [31], that purpose, in connection with s 46(1) of the Act
"involves intention to achieve a result."
Their Honours cited in support of that proposition the comment of Toohey J in Queensland Wire, at 214, that the reference to "for the purpose of" in s 46(1):
"carries with it the notion of an intention to achieve the result spoken of in each of the paragraphs."
340 In the present case, the findings to which we have referred reflect the actual intentions of those who participated in the transactions on behalf of Safeway. In any event, s 46(7) of the Act permits the Court to conclude that a corporation has taken advantage of its market power for a proscribed purpose
"notwithstanding that, after all the evidence has been considered, the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person or from other relevant circumstances."
341 This provision allows the Court to focus on the conduct of the firm in question and the inferences that should be drawn from that conduct. It is to be noted that although "purpose" is an element in other provisions of Part IV of the Act, Parliament considered the mandate in s 46(7) sufficiently important to include the provision in that section, rather than make it a generally applicable provision. Moreover, the inference of a proscribed purpose (while giving due weight to the rule in Briginshaw v Briginshaw) is one which need only be drawn on the balance of probabilities; it is not a question of excluding all hypotheses reasonably consistent with innocence. And the inference need only be that the purpose was one of a number of purposes, provided it was a substantial purpose: s 4F(1)(b).
342 In making a finding as to purpose in the context of s 46 and the circumstances of this case, the Court is not concerned with a search for the individual who was Safeway's "directing mind and will": cf Lennard's Carrying Company Ltd v Asiatic Petroleum Company Ltd [1978] UKHL 2; [1915] AC 705, at 713, per Viscount Haldane LC. As explained by the Privy Council in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, the attribution of a particular state of mind (purpose) to Safeway must start with the construction of the relevant substantive rule (in this case, that contained in s 46(1) of the Act). Those drafting the Act must have had in mind the problematic issue of the imputation of states of mind to corporate bodies exemplified by authorities such as Lennard's. Section 46(7) of the Act in a sense anticipates the clarification of the law which occurred in Meridian.
343 These considerations reinforce our view that too much emphasis was placed at the trial and in argument on the appeal in ascertaining Mr Brookes' intention or "policy" and working forward from that, as opposed to analysing Safeway's conduct and drawing inferences from that conduct. What Safeway did in the four instances to which we have referred, by deleting the plant baker's bread and using the price-fighting bread of another manufacturer, was a matter of undisputed fact. In addition, it is necessary to take into account the finding that, in these four instances, Safeway did not request case deals from the plant bakers. Rather than impute Mr Brookes' subjective intention in formulating the "policy" to Safeway's later conduct, it is a safer approach, consistent with s 46(7) of the Act, to ascertain Safeway's purpose by analysing the facts to see what they say about the likely purpose for which they were done.
344 What Safeway did was not the sort of thing that happens by accident in a large commercial organisation. As we have discussed, the fact that the deletions had adverse consequences for Safeway strongly suggests that there must have been a rational purpose underlying its conduct. That purpose could only have been to persuade the plant bakers to cease supplying discounted bread to the independent retailers and, in turn, to end discounting by those retailers. Safeway's success in inducing Tip Top to cease its discounting confirms that Safeway's purpose was to prevent or deter competitive conduct.
345 Since this case involves the exercise of monopsonistic power by Safeway, it is perhaps worth noting that similar market behaviour has received attention in the United States, albeit in a somewhat different statutory context: In Klor's Inc v Broadway Hale Stores Inc, 359 US 207 (1959), for example, Broadway Hale, which operated a chain of department stores, used what was alleged to be "`monopolistic' buying power" to convince several manufacturers and distributors of appliances not to deal with Klor's, a single outlet retailer in competition with one of Broadway Hale's stores. The Court held that the allegations were capable of constituting a group boycott which contravened the Sherman Act. In United States v Griffith, 334 US 100 (1947), four affiliated corporations operated picture theatres in 85 towns, of which 53 were "closed towns" - that is, towns in which there were no competing theatres. The corporations used their buying power in the closed towns to obtain exclusive privileges from film distributors across their network. This was held also to violate the Sherman Act.
346 For these reasons, we conclude that in the four instances to which we have referred, Safeway had a substantial purpose of deterring or preventing the plant bakers and the independent bakers from engaging in competitive conduct. It therefore contravened s 46(1) of the Act.
8.1 THE COMMISSION'S CASE
347 The Commission alleged that Safeway engaged in, or attempted to engage in, the practice of exclusive dealing in two respects as follows:
* First, the Commission said that, in contravention of s 47(4) of the Act, Safeway acquired or offered to acquire bread products from each of the plant bakers on the condition that such plant baker would not supply bread products to independent retailers except where those independent retailers did not sell the same products at prices cheaper than Safeway's retail prices in the retail markets in which those independent retailers were located.
* Secondly, the Commission said that, in contravention of s 47(5) of the Act, Safeway refused to acquire bread products from each of the plant bakers for the reason that such plant baker had supplied, or had not agreed not to supply, bread to independent retailers during the period that those independent retailers undercut Safeway on the bread, or sold the bread at prices cheaper than Safeway's retail prices, in retail markets in which those independent retailers were located.
The primary Judge rejected those claims and the Commission challenges that rejection as a ground of appeal from the order dismissing the proceeding.
8.2 THE FINDINGS OF THE PRIMARY JUDGE
348 The primary Judge characterised the critical issue that arose under s 47(4) as whether the condition imposed by Safeway was that the plant baker in each instance should only supply bread to the relevant independent retailer "to a limited extent". His Honour considered that that expression did not sit easily with a condition that a supplier would supply whatever quantity of goods were required by a purchaser, but only if the purchaser did not sell the goods below a particular price.
349 His Honour concluded (at 223 [970]) that the expression "will not except to a limited extent" was not easily adapted to, and did not cover, a situation where the condition imposed by an acquirer of goods required the supplier of those goods not to supply goods to a third party which sold or proposed to sell goods at prices cheaper than those charged by the acquirer for its goods. His Honour considered that the terminology used in s 47 recognises a distinction between a condition that seeks to impose a limitation on the quantity of goods that can be supplied, involving a refusal to supply, and a condition that seeks to impose a term on which goods are to be resupplied by the purchaser. His Honour observed that the latter condition sits more easily within the framework of the resale price maintenance provisions found in ss 48 and 96 of the Act. He concluded, therefore, that Safeway did not contravene s 47(4) in relation to any of the nine incidents.
350 In relation to its claims based on s 47(5) the Commission said that in each relevant case Safeway had refused to stock a plant baker's bread because the particular plant baker had supplied cheap bread to an independent retailer. The refusal was constituted by the deletion of the plant baker's products from the relevant Safeway supermarket. His Honour (at 225 [980]) drew a distinction between:
* a refusal to acquire goods from a person because the person has supplied goods to particular persons; and
* a refusal to acquire goods from a person because the person has supplied goods to particular persons for particular prices.
His Honour considered that, while the first situation was covered by s 47(5), the second was not.
351 His Honour observed that the structure and content of s 47 is such that each of the practices proscribed in ss 47(2) to 47(9) is a practice in which the issue is the supply or acquisition of goods simpliciter, rather than the supply or acquisition of goods on particular terms or conditions, whether as to price or otherwise. His Honour considered that s 47(4) and s 47(5) are predicated on the existence of a proscribed condition or proscribed reason for the refusal to acquire goods. The provisions are concerned with the fact of the supply of goods simpliciter, or the lack of agreement not to supply goods simpliciter, rather than the fact of the supply of goods on particular terms or conditions or the lack of agreement not to supply goods of particular terms or conditions.
352 Accordingly, his Honour reasoned, the condition referred to in s 47(4) and the reason referred to in s 47(5) are concerned with the supply of particular goods to particular persons, not with the supply of goods at a particular price. Section 47(5) recognises, in s 47(5)(b), that exclusive dealing may occur where a person refuses to acquire goods "at a particular price from a person", yet it does not provide that the proscribed reason include the reason that the body corporate has supplied goods at a particular price to a person. That distinction, in his Honour's view, supported a conclusion that s 47(5) does not cover a situation where the reason for the refusal to acquire goods is that the supplier has supplied goods to a third party for a particular price. His Honour concluded that the conduct of Safeway in relation to the nine incidents did not contravene s 47(5) of the Act.
353 Section 47(10) of the Act provides that the proscription contained in s 47(1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in s 47(4) or s 47(5) unless, relevantly, the engaging by the corporation in that conduct has the purpose of substantially lessening competition. The Commission alleged that the purpose of Safeway in acquiring or offering to acquire bread products from the plant bakers on conditions or in refusing to acquire bread products from the plant bakers for particular reasons included the purpose of substantially lessening competition. In the light of his Honour's conclusion concerning the effect of ss 47(4) and 47(5), it was unnecessary for him to make a finding about the purpose for which any condition was imposed or any acquisition was refused.
8.3 THE APPEAL
354 In its argument on appeal, the Commission relies on the expression "or classes of persons" in ss 47(4)(c) and 47(5)(c). The Commission says that a case of exclusive dealing would be made out where an acquirer of goods says to its supplier:
"We will acquire goods from you on the condition that you do not supply goods to discounters."or
"We will not acquire your goods if you supply discounters."
The Commission says, alternatively, that the provisions would be attracted where the acquirer tells its supplier that it would not acquire its goods because the supplier had supplied goods to a "discounter". That is to say, the Commission contends that persons who can properly be characterised as "discounters" constitute a separate class of persons within the meaning of those provisions.
355 Alternatively, the Commission contends the circumstances of the nine incidents involve a contravention of ss 47(4) and 47(5) of the Act. This is said to be so because it was a condition of acquisition that the plant bakers not supply goods, or a reason for not acquiring goods that the plant bakers would not agree not to supply goods, to a particular class of persons, being the class whose members offer certain categories of bread for resale at prices below those that Safeway wished to charge.
356 It is clear that, in so far as Safeway acquired goods from the plant bakers on a condition, or refused to acquire bread products from the plant bakers for a reason, the condition and the reason were related to the price at which the independent retailers were selling bread. Safeway's concern was with the price at which bread products were being supplied by the plant bakers to independent retailers. If the products were being supplied at a non-discounted price, Safeway would have had no concern. Neither the condition nor the reason had anything to do with the identity of the independent retailers. The condition or reason, as the case may be, was based on the particular conduct of the independent retailers, not upon their identity or their membership of a particular class.
357 The essence of s 47(1), in conjunction with ss 47(4) and 47(5), is the proscription of conduct directed at a particular person or class of persons. Those provisions do not proscribe conduct that is not directed at a particular person or class of persons. Thus, it is not sufficient to attract s 47(5) to establish that a corporation engages in conduct involving refusal to acquire goods from a person so long as that person supplies goods to a third person who is either undercutting the first person or selling goods at a price lower than the price at which the first person sells the goods. Further, s 47(4) is not concerned with a condition that is limited to a period during which there is undercutting or discounting by particular persons. It is concerned with acquiring goods on condition that the supplier will not supply similar goods to specific persons or specific classes of persons, by reason of their identity.
358 The Commission also maintains its contention that the words "to a limited extent" are apt to refer to categories or classes or particular characteristics of goods that may or may not be supplied. Thus, it is said, Safeway's conduct constituted a contravention of s 47(4) because the condition on which it acquired bread could be characterised as a condition that the plant bakers would not supply bread, except to a limited extent, to the independent retailers. For example, the Commission contends that s 47(4) was contravened because Safeway had offered to acquire bread products from Buttercup on condition that Buttercup would not supply bread products to Mr Quadara except to a limited extent, that limited extent being that Mr Quadara did not sell the bread at a price cheaper than the price at which the relevant Safeway store sold bread.
359 The primary Judge correctly rejected the contention based on the expression "except to a limited extent". The expression is concerned with a condition relating to the quantity of goods to be supplied. It does not refer to a circumstance where a supplier imposes a condition as to the price at which an acquirer will resell goods but imposes no limit on the quantity of goods that it is prepared to supply if that condition is accepted.
360 While there may be overlap between ss 47 and 48, it is clear that ss 47(4) and 47(5) are directed to conduct excluding a particular person, by reason of the identity of that person or by reason of that person's being a member of a particular class, rather than preventing discounting or undercutting.
361 In the present circumstances, the Commission's case against Safeway is that their conduct was directed to preventing the independent retailers from discounting. So long as the independent retailers were selling bread products at a price that was regarded as satisfactory by Safeway, Safeway would not have an interest in preventing the plant bakers from supplying bread products to those independent retailers.
8.4 CONCLUSION AS TO EXCLUSIVE DEALING
362 Neither s 47(4) nor s 47(5) is satisfied by the conduct of Safeway in any of the nine incidents that is under challenge. Accordingly, it is not necessary to consider the operation of s 47(10). It follows that, in so far as the appeal is based upon failure by the primary Judge to find contravention by Safeway of s 47 of the Act, the appeal should be dismissed.
9.1 THE ISSUE
363 The Commission's claim in relation to Safeway's conduct relating to the Preston Market was different from the other nine incidents because no independent retailer was involved. The Commission alleged that Safeway and Tip Top had made an agreement or arrangement, or arrived at an understanding, as to the prices Tip Top would charge for its proprietary branded bread at a stall it had operated for many years at the Preston Market under the name "Tip Top Bread Shop". The Tip Top stall at Preston Market was located only a short distance from the Safeway Preston store and was regarded as Safeway Preston's main competitor for the sale of bread. The arrangement or understanding was also said to include a term restricting the range of products offered for sale at the stall, in particular requiring Tip Top to sell only plain wrap rather than branded proprietary bread.
364 The Commission's case at trial was that Tip Top and Safeway had made an arrangement (for the most part we use this expression to include an understanding) in relation to the fixing of prices for Code C and Code D products by Tip Top at its Preston Market stall. It was alleged that the arrangement contained a provision to the effect that Tip Top would supply Code C bread at $1.40, $1.50 or $1.60 per loaf and Code D bread at $1.90 per loaf. This provision was said to have the purpose or likely effect of fixing, controlling or maintaining the prices for products supplied, or to be supplied, at the retail level by Tip Top to customers or potential customers of the Preston Market stall. Accordingly, so it was said, Safeway had made an arrangement containing a provision that had the purpose or effect of substantially lessening competition, in contravention of s 45(2)(a)(ii) of the Act. Safeway had also given effect to a provision of an arrangement that had the purpose or effect of substantially lessening competition, in contravention of s 45(2)(b)(ii) of the Act.
365 In support of its case, the Commission invoked s 45A(1) of the Act, which provides that a provision of a contract, arrangement or understanding is deemed, for the purposes of s 45(1) to have the purpose or effect of lessening competition
"if the provision has the purpose or...effect, as the case may be, of fixing, controlling or maintaining...the price for...goods...supplied...by the parties to the contract, arrangement or understanding... or by any of them...in competition with each other".
The Commission contended that since the arrangement included a provision that had the purpose or effect of fixing the price for Code C and Code D bread, s 45A relieved it of the necessity of proving that those provisions had the purpose or effect of substantially lessening competition.
366 At the trial, the Commission also contended that Safeway had made an arrangement containing an exclusionary provision and had given effect to that exclusionary provision, in contravention of ss 45(2)(a)(i) and 45(2)(b)(i) of the Act. The Commission further alleged that Safeway had offered to acquire bread from Tip Top on condition that Tip Top did not supply fresh proprietary bread to consumers at its Preston Market stall and that this constituted exclusive dealing in contravention of ss 47(4)(a) and 47(5)(a) of the Act.
367 The principal case pleaded and particularised by the Commission was that Mr Brookes was a party to the making of the arrangement on behalf of Safeway. The Commission alleged that at a meeting on 19 April 1995, Mr Brookes had asked Mr Guthridge to stop offering bread on special at the Preston Market in competition with Safeway's Preston store. The Commission further alleged that Mr Jones told Mr Gunton that Tip Top would not be allowed back into the Safeway Preston store until Tip Top stopped selling proprietary bread at its Preston Market stall and raised the prices of its plain wrap bread to match Safeway's prices. While both Mr Guthridge and Mr Gunton gave evidence on behalf of the Commission, the primary Judge found that their evidence did not support these allegations.
368 Presumably because of the way the evidence developed at the trial, the proceedings against Mr Brookes were dismissed by consent on 17 March 1999. However, the case against Safeway and Mr Jones in relation to the Preston Market incident continued.
369 The primary Judge rejected the Commission's principal case that an arrangement had been made between Mr Brookes, on behalf of Safeway and Mr Guthridge, on behalf of Tip Top. His Honour also rejected an alternative case advanced by the Commission, that an arrangement or understanding had been made or reached between Mr Feldgen, Safeway's Preston store manager, and Mr Lovett, Tip Top's area manager for Preston, and that this arrangement had been authorised or ratified by Mr Jones on behalf of Safeway and Mr Gunton and Mr Guthridge on behalf of Tip Top.
370 On the appeal, the Commission does not challenge the findings of primary fact adverse to its case. It contends, however, that on the findings actually made by the primary Judge, his Honour should have concluded that an arrangement or understanding had been made between Safeway and Tip Top determining the prices to be charged by Tip Top for the sale of Code C and Code D bread at the Preston Market stall. The principal argument advanced on the appeal is incorporated in ground 27A of the second further supplementary amended notice of appeal as follows:
"The learned trial judge erred in failing to conclude from his findings of primary fact that [Mr] Feldgen and [Mr] Lovett, as authorized agents of [Safeway] and Tip Top respectively and on behalf of those corporations, made or arrived at a contract, arrangement or understanding -
(a) whereby Tip Top would not sell bread at its Preston Market stall for prices less than those charged by [Safeway] at its Preston store for Home Brand bread; and/or
(b) whereby Tip Top would not sell branded bread at that stall."
371 The Commission advances an alternative argument on the appeal, that it is not necessary to find that any two individuals within Tip Top and Safeway had reached a meeting of minds, if the evidence otherwise discloses that Safeway "as a whole" was making an arrangement with Tip Top "as a whole". Since the primary Judge found that Mr Feldgen and Mr Lovett had each been instructed to check on the implementation of an agreement, there must have been an arrangement or understanding and it matters not that his Honour could not determine when and between whom the arrangement had been made or the understanding reached.
372 The Commission formally submits on the appeal that the understanding or arrangement whereby Tip Top agreed not to sell branded bread was an "exclusionary provision" and that Safeway had therefore contravened s 45(2)(a)(i) and s 45(2)(b)(i). However, Mr Brett QC, who argued this aspect of the case for the Commission, accepts that the decision of the Full Court in Rural Press v ACCC precludes it from making that submission in this Court. Mr Brett also accepts that if the Commission cannot succeed under s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Act, it cannot succeed under s 47 of the Act.
373 It follows that the only live issue on the appeal in relation to the Preston Market incident is whether the Commission has made out ground 27A(a) of the amended notice of appeal.
9.2 THE FINDINGS
374 The primary Judge made detailed findings of fact concerning the Preston Market incident. In doing so, he had to resolve a number of conflicts on the evidence. It is important to appreciate that he found Mr Feldgen and Mr Lovett to be honest witnesses, although he considered that their recollection of some significant events was imperfect. In particular, he found Mr Feldgen to be a careful witness, and preferred his evidence on some important issues over that of Mr Jones.
375 Between March 1994 and 20 March 1995, Mr Errol Ryan was the manager at Safeway Preston. Around February 1995, Mr Ryan became aware that the Preston Market stall was selling fresh bread. Prior to that time he believed Tip Top had been selling only day old bread at the stall. Mr Ryan telephoned Mr Jones and informed him that the Preston Market stall was selling over 20 varieties of branded bread. At the time, the price for Tip Top Sunblest Code C was $1.20 or $1.30 a loaf and for Code D was $1.40 a loaf. These prices were substantially below Safeway Preston's prices for the same Sunblest bread.
376 The evidence does not disclose the terms of what Mr Jones said but the result was that Captain Cutless bread was introduced into Safeway Preston. Mr Jones told Mr Ryan to sell it for 99 cents a loaf. Up to the time of Mr Ryan's departure from the Preston supermarket, at the end of the week commencing 13 March 1995, no Tip Top bread had been withdrawn from sale at Safeway Preston. However, the delivery that Tip Top made to Safeway Preston on 24 March 1995 was not accepted. Tip Top bread was ultimately reintroduced into Safeway Preston on 1 May 1995.
377 Mr Feldgen replaced Mr Ryan as the manager of Safeway Preston. As part of his "initial" instructions, Mr Feldgen was told that he was not to discuss prices with anyone at the Preston Market stall. Mr Feldgen could not remember whether it was Mr Jones or someone else at Safeway who communicated that instruction to him.
378 Mr Gunton discussed Tip Top's activities at the Preston Market stall with Mr Jones before the deletion of Tip Top's bread at Safeway Preston. In these conversations, Mr Jones communicated his concern about the prices that Tip Top was charging for bread at the stall. Mr Gunton first became aware of the deletion after it occurred, when he was told by Mr Lovett. By reason of the prior conversations, Mr Gunton knew the reason for the deletion. The primary Judge also found that, after the deletion, Mr Jones told Mr Gunton that he would discuss the matter with Mr Brookes.
379 On 19 April 1995, a meeting took place between Mr Brookes and Mr Guthridge at Safeway's offices in Mulgrave. Mr Guthridge asked Mr Brookes why Tip Top was out of the Preston store. Mr Brookes replied that Safeway Preston had been unable to sell its bread at a satisfactory margin and that Tip Top had been given an opportunity to give a case deal, but had declined. When Mr Guthridge asked what Tip Top had to do to get back into the Safeway Preston store, Mr Brookes responded by saying that Tip Top had to provide Safeway with a case deal to enable it to be competitive. Mr Guthridge then said that Tip Top was looking at alternative uses for the Preston Market stall and would use it to retail speciality products.
380 The primary Judge accepted Mr Brookes' denial that Mr Guthridge told him during the conversation of 19 April 1995 that he (Mr Guthridge) had prepared a price list of the products to be sold at the Preston Market stall. Nonetheless, his Honour appears to have accepted that a price list prepared by Mr Guthridge was later delivered to Mr Brookes, although his Honour made no finding as to when this occurred.
381 On an unidentified date, Mr Feldgen received a telephone call from Mr Jones' office, although he could not recall whether it was from Mr Jones or someone else. In that telephone call, he was advised that he would receive a visit from someone at Tip Top. At about the same time, he was given information as to the conditions on which Tip Top was to be allowed to return its products to the Safeway Preston store, although he could not recall how or when he received this information (at 175 [761]). Mr Feldgen was told that Tip Top bread would be restocked at the Safeway Preston store if the Preston Market stall stopped ranging national or branded bread and replaced it with plain label bread priced the same as Home Brand bread or Safeway generic Code C and Code D bread.
382 His Honour made these findings (at 177 [764-765]):
"I am not satisfied that Mr Jones told Mr Feldgen of the conditions on which Tip Top bread would be reintroduced into Safeway Preston. Although I am satisfied that someone from Safeway informed Mr Feldgen that an arrangement had been entered into with Tip Top in relation to the reintroduction of Tip Top bread into Safeway Preston, the evidence does not enable me to make a finding as to who that person was who made the arrangement on behalf of Safeway, what was the level of authority of that person or as to who were the persons who made the arrangement. I therefore do not accept the Commission's submission that Mr Feldgen had given evidence of an admission by someone with relevant authority to make an admission that an agreement had been made....
Mr Feldgen believed it was Mr Jones but conceded that that belief was based upon an assumption he made because it was a ranging decision that fell under the responsibility of Mr Jones. Although there is a logical attraction in concluding that it must have been Mr Jones, having regard to his position and role and the procedure in place for store managers to refer bread pricing issues to Mr Jones, the required standard of proof does not enable me to be satisfied to the required degree of satisfaction that it was Mr Jones who told Mr Feldgen to meet Mr Lovett. I cannot exclude the possibility that Mr Feldgen received the instruction from someone else within the Safeway organisation." (Emphasis added.)
383 Notwithstanding these findings, the primary Judge specifically rejected Safeway's submission that "Mr Feldgen was acting on a frolic of his own without instructions in meeting Mr Lovett". On the contrary, his Honour accepted Mr Feldgen's evidence that he received an instruction to meet Mr Lovett from someone within the Safeway organisation (at 177 [766]).
384 Mr Lovett met with Mr Feldgen as the result of an instruction Mr Gunton gave him on either Monday 24 April 1995 or Wednesday 26 April 1995 (25 April was a public holiday), to go to Safeway Preston to meet with the store manager (at 177 [767]). Mr Lovett's understanding was that Tip Top bread had been deleted from Preston Safeway because Safeway was not happy with Tip Top selling fresh bread at the Preston Market stall at prices cheaper than Safeway's specials. Mr Gunton told Mr Lovett that Tip Top could go back into Safeway Preston if it sold plain labelled bread, two or three cents dearer than Safeway's house brand. Mr Gunton also said that Mr Lovett should go to the Preston Market stall with the store manager who would look at the products being sold and the prices and would give Mr Lovett "the OK" for Tip Top to go back into Safeway Preston. Mr Lovett's understanding was that if the store manager was happy with the prices at the stall then Tip Top would be allowed back into Safeway Preston.
385 On Thursday 27 April 1995, Mr Lovett and Mr Feldgen visited the Preston market stall together and discussed the bread on sale and its prices. Mr Feldgen pointed to some Tip Top Sunblest branded bread and asked Mr Lovett why it was there. Mr Lovett, who had been told not to send proprietary bread to the stall, said it was a mistake and would not happen again. Mr Feldgen then referred to the price list displayed at the stall and asked Mr Lovett what the prices were for plain label bread. Mr Lovett told him that plain label Code C bread was $1.50 a loaf and Code D was $1.80. Mr Feldgen said he would like to see the Code D price "a bit higher" and agreed to Mr Lovett's suggestion of $1.90. Mr Feldgen told Mr Lovett to come back and see him on the following day.
386 On the same day, Mr Feldgen contacted Mr Jones and reported what had occurred at his meeting with Mr Lovett (at 178 [770]-[771]). Mr Jones then telephoned Mr Gunton and discussed the proprietary bread that was available at the stall, as well as the prices at which bread was sold there. Mr Gunton subsequently informed Mr Lovett that he (Mr Gunton) had had a call from Safeway regarding "what happened at Preston this morning".
387 On the following day, Friday 28 April 1995, Mr Feldgen and Mr Lovett visited the Preston market stall for a second time. The stall was displaying Code C plain wrap bread at $1.50 per loaf and Code D plain wrap at $1.90. Mr Feldgen gave his approval to these prices, saying "that's fine". Mr Lovett asked whether Tip Top could go back into Safeway Preston and Mr Feldgen said that he would inform other suppliers to cut back on stock and that Tip Top could start delivering on Monday 1 May 1995. The resumption of Tip Top deliveries in fact began on that date (at 179 [772]).
388 The primary Judge accepted Mr Feldgen's evidence (in preference to Mr Jones' denial) that Mr Jones gave approval before the go-ahead was given to restock Tip Top bread at Preston Safeway. As his Honour noted, Safeway's bread policy required that decision to be made by the bread category manager, who at the time was Mr Jones (at 179 [773]).
9.3 THE PRIMARY JUDGE'S REASONING
389 The primary Judge rejected the Commission's principal contention that an arrangement or understanding relating to the price of bread at the Preston Market stall was made or arrived at between Mr Brookes and Mr Gunton or between Mr Jones and Mr Guthridge. His Honour also rejected an alternative case that an arrangement or understanding had been made or arrived at between Mr Feldgen and Mr Lovett, with the authority of Mr Jones and Messrs Gunton and Guthridge, respectively. In this section, we summarise his Honour's reasons for rejecting this alternative case.
390 The primary Judge pointed out that the Commission pleaded that both Mr Feldgen and Mr Jones intended on behalf of Safeway to make the arrangement or arrive at the understanding pleaded. He held (at 184 [795]) that:
"Mr Feldgen did not intend to make any contract or arrangement, or reach any understanding. He had no authority to do so and to the extent that he was a participant in the relevant chain of events, he was acting on instructions and doing what he was told. He was carrying into effect a sequence of events initiated by others. Although he was employed as a store manager, his authority did not extend to reaching an agreement with competitors as to the prices they would charge for their products. The bread policy implemented by Mr Brookes had removed any authority from store managers to enter into particular transactions when faced with competitive issues."
391 His Honour accepted that for an arrangement to be made or an understanding to be reached, it is not necessary for there to be documents or explicit conversations setting out the terms. An understanding, for example, may be inferred from the circumstances. But his Honour considered (at 185 [799]) that:
"it is still necessary to find a meeting of the minds of the relevant participants authorised to enter into the contract, arrangement or understanding".
392 The primary Judge, doubtless influenced by the Commission's pleading, said that it was necessary for the Commission to establish that each of the Safeway participants possessed the intention to make an arrangement or reach an understanding. He was not satisfied that any of the Safeway participants, including Mr Feldgen, had the requisite intention. Nor was his Honour satisfied that the agreement, arrangement or understanding alleged had been made out, whether made or reached, in whole or in part, by Mr Brookes, Mr Jones or Mr Feldgen. He found that the evidence was insufficient to establish a meeting of the minds of the various participants (at 186 [803]).
393 So far as Mr Feldgen was concerned, his Honour found (at 186 [804]) that even if he had the relevant intention, he did not have the
"authority to enter into the contract or arrangement or reach the understanding on behalf of Safeway, nor did he have the authority to implement such a contract, arrangement or understanding. Although the issue that arose related to competition from a competitor of Safeway, it was no part of the function of a store manager to decide how Safeway would respond to that competition. Such matters had to be referred to, and resolved by, the category manager. Even if a store manager had authority to determine when bread could be reintroduced into the store, a store manager had no authority to discuss prices at which bread would be sold by a competitor or to agree on such prices on behalf of Safeway."
394 According to the primary Judge, in accordance with the principles stated by the House of Lords in Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153, Mr Feldgen could not be said to be part of "the directing mind and will of Safeway", since his duties as the manager of one supermarket did not involve him in directing the company. If the correct test was that formulated by Lord Hoffmann in Meridian, the Commission still could not succeed. On the approach taken in that case (at 511), it is a question of construction of the relevant statute to determine whether a particular rule requires that knowledge that an act has been done, or the state of mind with which it was done, should be attributed to the company. But (at 189 [811]-[812]):
"...Mr Feldgen had no authority to undertake any negotiations with any Tip Top representative as to the terms upon which Tip Top bread was to be reintroduced to the Safeway Preston store. It was not part of his employment to do so. Although he was given authority to meet with Mr Lovett, the evidence does not establish that he was given authority to reach an agreement with the Tip Top representative in relation to what bread would be sold, and for what prices bread would be sold, at the Preston Market stall. Indeed, Mr Feldgen acknowledged that he had been told not to discuss prices with anyone at the Tip Top Preston Market stall.In this respect the position of Mr Feldgen is to be distinguished from the investment managers to Meridian. The investment managers had authority to carry out the transaction which gave rise to the obligation [on the company] to give notice [to the regulator]. Mr Feldgen had no authority to reach any agreement, arrangement or understanding with Tip Top as to the supply or pricing of bread whether at the Safeway Preston store or at the Preston Market stall. The action of discussing prices and negotiating the terms on which bread would be reintroduced into Safeway Preston was not within the scope of Mr Feldgen's employment. It was not part of his ordinary or regular duties. If he did reach such an agreement, arrangement or understanding he did so, as he acknowledged, contrary to his instructions."
395 The primary Judge then addressed Mr Feldgen's position on the basis that he was told to meet with a Tip Top representative and to ensure that Tip Top agreed to stop selling branded bread and sold only plain wrap bread at the same price as Home Brand bread or the Safeway generic Code C and Code D bread (at 190 [814]-[816]):
"On this alternative basis it is necessary to determine whether Mr Feldgen was given authority by Safeway to implement the agreement, arrangement or understanding that had been entered into. The evidence is sparse in this respect. Although I have rejected the submission that Mr Feldgen was acting on a frolic of his own, I have also reached the conclusion that I am not satisfied that Mr Jones told Mr Feldgen of the conditions on which Tip Top bread would be reintroduced into Safeway Preston. In this context it is important to remember that Mr Feldgen was not prepared to say that Mr Jones instructed him to discuss prices with anyone outside Safeway but acknowledged that either Mr Jones or someone at Safeway Preston had told him not to discuss prices with anyone at the Tip Top Preston Market stall.As noted earlier, I am satisfied that someone within Safeway told Mr Feldgen to meet with Mr Lovett but the evidence does not enable me to be satisfied that that person was Mr Jones. It is not therefore possible to determine the level of authority or responsibility possessed by the person who told Mr Feldgen of the conditions on which Tip Top bread was to be reintroduced to Safeway Preston or the level of authority or responsibility possessed by the person who told Mr Feldgen to meet with the Tip Top representative.
Whether one applies the approach in Meridian or Tesco, it is not possible to say who it was who communicated the information about the conditions on which Tip Top bread could be reintroduced and who it was who told Mr Feldgen to meet with Mr Lovett."
396 Finally, his Honour rejected a contention by the Commission that Mr Feldgen's conduct was to be attributed to Safeway even though he may have contravened express instructions that he was not to discuss prices with anyone at the Preston Market stall. Quite apart from the express instruction, store managers did not have the authority to negotiate and implement the terms on which bread deleted from a Safeway store was to be reintroduced. That was a matter for the category manager.
9.4.1 The Commission's Contentions
397 The Commission submits that, on the findings made by the primary Judge, his Honour should have held that an arrangement was made or an understanding arrived at by Mr Feldgen and Mr Lovett, on behalf of Safeway and Tip Top respectively, at their meetings held on 27 and 28 April 1995. Mr Brett accepts that, on his Honour's findings, no arrangement or understanding had been concluded prior to the meetings between Mr Feldgen and Mr Lovett. He contends, however, that even taking account of the Briginshaw standard, the evidence strongly supports a finding, on the balance of probabilities, that Mr Jones gave the instruction to Mr Feldgen to attend the first meeting. The inference that should have been drawn was that Mr Feldgen, whom his Honour found was not on a frolic of his own, had been instructed by Mr Jones to do precisely as he did on 27 and 28 April 1995, that is, make an arrangement with Mr Lovett as to the prices Tip Top would charge at the Preston Market stall.
398 The Commission also relies on the fact that Mr Feldgen reported the events of 27 April 1995 to Mr Jones and that Mr Jones subsequently approved the restocking of Tip Top bread at Safeway Preston. It submits that these findings amply support an inference that Mr Jones authorised Mr Feldgen to approve the prices at which Tip Top sold bread at the Preston Market and, in consequence of that approval, gave instructions for Tip Top bread to be reinstated at Safeway Preston.
399 Mr Brett devoted little time to the Commission's alternative submission on the appeal, namely that it is not necessary to find two individuals within Safeway and Tip Top whose minds specifically met at a particular point if the evidence suggested that the two corporations came to an arrangement on prices at the Preston Market stall. He contends, however, that even if the primary Judge was correct in finding that the evidence did not enable him to determine who within Safeway had made the arrangement, nonetheless someone had and his Honour should have so found.
9.4.2 Safeway's Contentions
400 Safeway first submits that neither of the arguments advanced by the Commission on the appeal is open on the pleadings. Mr Smith contends that the Commission conducted its case at the trial on the basis that Mr Brookes or Mr Jones made an arrangement or reached an understanding directly with Mr Guthridge or Mr Gunton, and it is now too late to change direction by alleging that Mr Jones authorised Mr Feldgen to make an arrangement or reach an understanding with Mr Lovett. A fortiori, it is not open to the Commission, having identified the parties to the alleged arrangement or understanding, to suggest that such an arrangement or understanding was made or reached between unidentified persons within each organisation.
401 Secondly, Safeway submits that there are no grounds for rejecting the primary Judge's findings that Safeway and Tip Top did not make an arrangement or reach an understanding in relation to prices charged for bread at the Preston Market stall and that, in any event, Mr Feldgen lacked authority from Mr Jones, or, indeed, anyone at Safeway, to determine the prices at which a competitor of Safeway could sell bread. Nor is there any basis for setting aside the primary Judge's findings that he was not satisfied that Mr Jones told Mr Feldgen of the conditions on which Safeway bread would be reintroduced into Safeway Preston.
402 Thirdly, Safeway challenges a number of the primary Judge's findings of fact. In particular, Safeway challenges the findings that:
(i) someone from Safeway informed Mr Feldgen of the conditions on which Tip Top bread would be reintroduced into Safeway Preston;
(ii) someone from Safeway told Mr Feldgen to meet with Mr Lovett on 27 April 1995;
(iii) Mr Feldgen reported to Mr Jones the results of his first visit to the Preston Market stall;
(iv) Mr Gunton and Mr Jones had a conversation between Mr Feldgen's first and second visits to the Preston Market stall in the course of which they discussed prices at which bread was sold by Tip Top at the stall;
(v) Mr Jones gave his approval to Mr Feldgen for the reintroduction of Tip Top bread at Safeway Preston; and
(vi) Mr Feldgen's evidence should not have been preferred to that of Mr Jones.
9.5.1 The Pleaded Case on Price Collusion
403 The Commission pleaded that in or about April 1995, Tip Top and Safeway made a contract or arrangement or reached an understanding with each other in relation to the retail supply of Code C and Code D bread product by Tip Top at the Preston Market stall (par 7). The contract, arrangement or understanding was said to include a provision to the effect that Tip Top would supply bread products at its Preston Market stall at $1.40 or, alternatively, $1.50 or $1.60, per loaf for Code C bread and $1.90 per loaf for Code D bread (par 7(b)). The pleading did not allege that the contract, arrangement or understanding included a provision requiring Safeway to reinstate Tip Top as a supplier to the Safeway Preston store.
404 The particulars to par 7 stated that the agreement, arrangement or understanding was partly oral and partly implied. Insofar as it was oral, it was constituted by a number of particularised conversations and insofar as it was implied it was to be implied from certain conduct. The particulars included the following:
(iii) On the morning of Friday 24 March 1995, Safeway at its Preston supermarket refused to accept its usual delivery of Tip Top products ("deletion"). Safeway refused to accept delivery of Tip Top products at its Preston supermarket until on or about 1 May 1995....
(ixa) On or shortly prior to 27 April 1995, Jones (either personally or through his assistant) instructed Feldgen by telephone to visit Tip Top's Preston Market stall with Lovett and check that proprietary branded bread was not on sale and that plain wrap bread was not on sale at prices lower than Safeway's price for Home Brand bread.
(x) On the morning of 27 April 1995, Lovett went to visit the Manager of Preston Safeway, Raynor Feldgen, and together they visited the premises of Tip Top's Preston Market stall. During the visit to the Tip Top store, Feldgen noticed that there was branded bread in the store, and told Lovett to remove the bread and take down the price board indicating prices for this branded bread. Feldgen then asked Lovett about the prices at which Tip Top was selling its plain wrap bread, and it was agreed, as determined by Feldgen that the prices were to be $1.50 for Code C, and $1.90 for Code D.
(xa) Immediately following this visit to Tip Top's Preston Market stall with Lovett, Feldgen reported to Jones (either personally or through his assistant) by telephone what had occurred and informed Jones (either personally or through his assistant) that he would be revisiting the stall with Lovett the following day.
...
(xii) On the morning of Friday 28 April 1995, Lovett again met with Raynor Feldgen and they went together to the Tip Top Preston Market stall. Feldgen inspected the premises to his satisfaction, and then told Lovett that he could start delivering bread to Safeway on Monday 1 May 1995.
(xiia) Immediately following his visit to Tip Top's Preston Market stall with Lovett on 28 April 1995, Feldgen reported to Jones (either personally or through his assistant) by telephone what had occurred on that visit.
...
(xvi) Tip Top subsequently commenced retailing bread at the Preston Market stall at the prices which had been agreed with Safeway and at no less than the Safeway price."
405 The Commission alleged that at the time the contract, arrangement or understanding was made or reached, each of Mr Jones, Mr Feldgen and Mr Brookes intended on behalf of Safeway to make the contract or arrangement or to reach the understanding. In the case of Mr Feldgen, the particulars stated that the intent was to be inferred from the fact that he participated in the meetings and gave the directions set out in sub pars (x) and (xii) of the particulars to par 7. Moreover, it was said that Mr Feldgen at all material times
"(i) was employed by Safeway as a Manager of its Preston supermarket;(ii) acted on behalf of Safeway in relation to the said matters:-
A. as its servant or agent within the scope of his actual or apparent authority;
B. further or in the alternative, at the direction or with the consent of the Third and Fourth Respondents where the giving of such direction or consent was within their apparent authority."
The Commission pleaded that the intentions of Mr Jones, Mr Brookes and Mr Feldgen were to be aggregated and imputed to Safeway and that, accordingly, Safeway intended to make the contract or arrangement or to reach the understanding pleaded in par 7.
406 The Commission further alleged that the provision of the contract arrangement or understanding had the purpose or was likely to have the effect of fixing, controlling or maintaining the prices for products supplied, or to be supplied, at the retail level by Tip Top to customers or potential customers of the Preston Market stall. The provision was deemed by s 45A of the Act to have the purpose, effect or likely effect of substantially lessening competition (par 11). It was also alleged that the contract, arrangement or understanding was carried out or given effect, in that Tip Top only sold bread at its Preston Market stall after April 1995 at $1.40 or, alternatively, $1.50 or $1.60 per loaf for Code C bread and $1.90 per loaf for Code D bread (par 12(c)).
9.5.2 Do the Pleadings Embrace the Case as Presented?
407 The arrangement pleaded by the Commission is one that required Tip Top to charge specified prices for bread sold at the Preston Market stall. It was not specifically alleged that the arrangement required Safeway to do anything, although the Commission's case before the primary Judge was that it was part of the arrangement that Safeway would reinstate Tip Top products into Safeway Preston if the pricing issue at the Preston Market stall was resolved. In any event, no issue has been raised as to whether an arrangement for the purposes of s 45 of the Act requires reciprocity of obligation: cf Trade Practice Commission v Service Station Association Ltd [1993] FCA 405; (1993) 44 FCR 206, at 230-231, per Lockhart J, with whom Spender and Lee JJ agreed; Rural Press v ACCC, at 258, per curiam.
408 It is far from clear that it was necessary for the Commission to plead, as it did, that Mr Jones, Mr Brookes and Mr Feldgen intended to make the "contract or arrangement or [reach the] understanding" referred to in par 7. It is not necessary, in a contract case, to plead that the parties to the alleged contract intended to make a contract: see J I H Jacob and I S Goldrein, Bullen & Leake & Jacob's Precedents of Pleading (13th ed 1990) at 269-270. Since the objective theory of contract has been generally accepted in this country (Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422, at 429, per Mason ACJ, Murphy and Deane JJ) a subjective intention is not a necessary element in the formation of a contract: Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, at 336, per McHugh JA. On the other hand, an intention to create a legally enforceable contract is a necessary element (Air Great Lakes, at 336). However, as the High Court has recently said (Ermogenous v Greek Orthodox Community of South Australia Inc [2002] HCA 8; (2002) 209 CLR 95, at 105 [25], per Gaudron, McHugh, Hayne and Callinan JJ):
"[a]lthough the word `intention' is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties."
409 An arrangement or understanding for the purposes of s 45(2) of the Act is apt to describe something less than a binding contract or agreement: Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286, at 290-291, per Smithers J; Re British Basic Slag Ltd's Agreement [1963] 2 All ER 807, at 814, per Willmer LJ. The elements of an arrangement or understanding have been summarised as follows (Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344, at 359-360 per Sackville J):
"in order for there to be an arrangement or understanding for the purposes of s 45(2), there must be a meeting of the minds of those said to be parties to the arrangement or understanding. There must be a consensus as to what is to be done and not merely a hope as to what might be done or happen: Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383 at 385 (Lockhart J); Ira Berk at 291 per Smithers J. Ordinarily, an arrangement or understanding involves communication between the parties arousing expectations in each that the other will act in a particular way: Email at 395".
410 The authorities dealing with s 45(2) of the Act or its precursors sometimes refer to intention. Thus in Ira Berk, at 291, for example, Smithers J said that
"the existence of an arrangement of the kind contemplated in s 45 is conditional upon a meeting of the minds of the parties to the arrangement in which one of them is understood, by the other or others, and intends to be so understood, as undertaking, in the role of a reasonable and conscientious man, to regard himself as being in some degree under a duty, moral or legal, to conduct himself in some particular way...". (Emphasis added.)
Language of this kind, however, is directed to what must be shown in order for an alleged arrangement or understanding to be made out. It does not imply that in a case such as the present the Commission is bound to plead distinctly that the parties to the alleged arrangement or understanding intended to make the arrangement or reach the understanding. It would seem, therefore, that it was unnecessary for the Commission to plead that Mr Jones and Mr Feldgen intended to make the alleged arrangement or reach the alleged understanding with Tip Top.
411 Be that as it may, in our view the pleadings encompass the principal submission advanced by the Commission on the appeal. When pars 7 and 8 of the Statement of Claim are read together, it is clear enough that the Commission is alleging, as one way of putting its case, that the arrangement or understanding between Safeway and Tip Top was made or reached by Mr Feldgen, acting at the direction of Mr Jones, on behalf of Safeway and Mr Lovett, acting on behalf of Tip Top. The particulars to par 7 identify the two occasions on which Mr Feldgen was said to have made the arrangement and also alleges the material facts on which the Commission relies to establish that Mr Feldgen had Mr Jones' authority to do so. The particulars to par 8, although provided in the context of a pleading that Mr Feldgen intended to make the arrangement with Tip Top alleges that he acted at the direction or with the consent of Mr Jones.
412 The primary Judge appears to have read the pleadings this way, since he addressed the principal argument the Commission wishes to advance on the appeal. It cannot seriously be suggested that Safeway has been confronted with this argument for the first time on the appeal. Accordingly, in our view, as a matter of pleading, the argument is open to the Commission.
413 The position is different in relation to the subsidiary argument put by the Commission on the appeal. The pleadings cannot fairly be read as alleging that an arrangement was made or an understanding reached between unidentified persons at Safeway and unidentified persons at Tip Top. His Honour did not address an argument put in these terms, and it appears to have been formulated for the first time on the appeal. No application was made on the appeal to amend the pleadings in order to accommodate the argument. Accordingly, it is not open to the Commission to rely on the argument at this stage of the proceedings.
9.6.1 The First and Second Findings
414 Safeway challenges the first two findings referred to in [381] above (that someone from Safeway informed Mr Feldgen of the conditions on which Tip Top bread would be reintroduced into Safeway Preston and told him to meet with Mr Lovett of Tip Top on 27 April 1995), primarily on the ground that Mr Feldgen's evidence as to what he was told before his first meeting with Mr Lovett, was too vague to permit the findings to be made by his Honour. Mr Smith points out that, as the primary Judge found, Mr Feldgen had an imperfect recollection of significant events and, indeed, admitted at one point that he could not be sure that the information he received concerning the conditions for Tip Top's reinstatement at Safeway Preston had actually come from somebody within Safeway itself.
415 The primary Judge was plainly conscious of Mr Feldgen's hesitancy on aspects of his evidence. Notwithstanding that hesitation, his Honour did not discern any attempt by Mr Feldgen at prevarication. Rather, his Honour interpreted Mr Feldgen's demeanour as indicating that he wished to make quite sure that he was giving accurate answers. Moreover, a reading of the relevant passages in the transcript shows that Mr Feldgen did give evidence that he had been instructed by someone at Safeway to meet Mr Lovett and that he had also been told by somebody within Safeway of the conditions on which Tip Top could resupply Safeway Preston.
416 In his evidence in chief Mr Feldgen said that he had been notified by a telephone call from the category manager's office that a representative from Tip Top was going to visit him at the Preston Safeway store. He said that he believed the call came from Mr Jones and that Mr Jones said that the Tip Top representative would discuss the reintroduction of Tip Top bread to the store. After refreshing his memory from documents, he testified that the person from Tip Top whom he was to meet was Mr Lovett.
417 In cross-examination by Mr Jones' counsel, Mr Feldgen accepted that his recollection did not extend so far as to determine whether the telephone call came from Mr Jones or someone else within that office. He also acknowledged that his belief that the Tip Top representative was Mr Lovett came from reading other witness statements. Nonetheless, he reiterated his belief that the telephone call came from someone within the Safeway organisation and that the call included notification of the conditions on which Tip Top was to be reinstated at the Safeway Preston. Later the following question was asked and answered:
"You certainly can't be sure that the information came from someone at Safeway, can you?---Given the passage of time, no."
418 It was a matter for the primary Judge to evaluate this evidence, taking account of his assessment of Mr Feldgen as a careful witness who (as his Honour found) did not engage in a "frolic of his own" in relation to the Preston Market stall. In our view, it was clearly open on the evidence to his Honour to find that the instruction to Mr Feldgen came from within Safeway and that it included information as to the conditions on which Tip Top would be permitted to resupply Safeway Preston.
419 We should add that Safeway also relies on Mr Feldgen's acknowledgement that he had been given clear instructions when he commenced duties at Safeway Preston that he was not to discuss the price of bread at the Preston Market stall with anyone employed by Tip Top. Mr Smith submits that this instruction made it unlikely that anyone at Safeway had told Mr Feldgen to visit the Preston Market stall. But there is no inconsistency between Mr Feldgen receiving "initial" instructions to that effect and later being told by Mr Jones, or someone else within Safeway, to meet Mr Lovett for a specific purpose. Mr Feldgen himself drew a distinction between a routine price check with a competitor and a "pre-organised meeting with a representative of Tip Top" at the Preston Market stall.
9.6.2 The Third and Fourth Findings
420 Safeway attacks the primary Judge's finding that Mr Feldgen reported to Mr Jones the result of his first visit to the Preston Market stall on two grounds. First, Mr Smith contends that the finding that Mr Gunton and Mr Jones had had a conversation between Mr Feldgen's two visits to the Preston Market stall is incorrect. (The significance of this submission is that the primary Judge relied on the conversation as corroborating the finding that Mr Feldgen had reported to Mr Jones after the first visit to the stall.) Secondly, Mr Smith submits that the primary Judge had been prepared to infer that Mr Feldgen had reported to Mr Jones because of Safeway's bread policy and the role of the category manager (Mr Jones) in relation to that policy, yet his Honour had not been prepared to draw the same inference when considering whether Mr Jones was the person within Safeway who had instructed Mr Feldgen to meet Mr Lovett on 27 April 1995.
421 In our opinion, neither of these arguments should be accepted. Contrary to Mr Smith's submission, there was no occasion for the Commission to particularise the conversation between Mr Jones and Mr Gunton. The fact of the conversation was merely one piece of evidence to be weighed by the primary Judge when considering whether Mr Feldgen had reported to Mr Jones after the first visit to the Preston Market stall. Nor is there any basis for Mr Smith's contention that the Commission never put to Mr Jones that the conversation with Mr Gunton had taken place. That very proposition was put to Mr Jones and he denied it, a denial the primary Judge did not accept.
422 While Mr Gunton's evidence was less than precise about the contents and timing of the conversation, it was open to his Honour to conclude that the likelihood was that the conversation took place between Mr Lovett's two visits to the Preston Market stall. There was strong support for this finding from Mr Lovett's evidence. Mr Lovett testified that he had spoken to Mr Gunton after the first meeting with Mr Feldgen and that Mr Gunton said that he had already received a telephone call from Safeway about what had happened at Preston Market that morning. His Honour was entitled to take Mr Lovett's evidence into account in determining when the conversation between Mr Gunton and Mr Jones took place.
423 Even if the primary Judge was wrong in relying on the conversation between Mr Jones and Mr Gunton as corroborative of the fact that Mr Feldgen reported to Mr Jones after his meeting with Mr Lovett, there was sufficient independent evidence to support that finding. Mr Feldgen said that such a conversation had occurred. While he could not recall the details, he said that he reported what he had seen and observed at the Preston Market stall, including the prices of bread and the type of bread being sold. Further, it was open to his Honour to infer that Mr Feldgen was likely to have reported the outcome of his visit to the Preston Market stall to Mr Jones who was, after all, the officer within Safeway responsible (so far as Mr Feldgen was concerned) for addressing bread pricing issues. Whether his Honour was consistent in his approach to similar issues elsewhere in the judgment is a separate question.
424 Accordingly, the challenge to the third and fourth findings identified in [420] above should be rejected.
9.6.3 The Fifth Finding
425 Safeway challenges the finding that Mr Jones gave his approval to Mr Feldgen for the reintroduction of Tip Top bread at Safeway Preston. The challenge is founded on Mr Feldgen's statement, when pressed in cross-examination, that he could not recall a conversation with Mr Jones relating to the reinstatement of Tip Top bread.
426 Mr Feldgen said this in evidence in chief:
"How long after those changes did you get the go-ahead, as you said before, to bring Tip Top back into the Safeway Preston store?---I can't remember the exact time-frame.Can you give an approximate time range? Was it within a day, within a week, within a month?---One day to a week.
...Who gave you, to the best of your knowledge, the go-ahead to re-range Tip Top products at Safeway Preston?---I believe it was Mark Jones.
Do you recall how that approval was given?---I believe it was over the phone.
Can you recall anything as to what was actually said at that time?---No."
In cross-examination, Mr Feldgen in substance said much the same.
427 The primary Judge had to assess Mr Feldgen's evidence in the light of all the evidence in the case. His Honour recorded that Mr Feldgen was unable to say who arranged for the reintroduction of Tip Top bread. But since Safeway's bread policy required the reinstatement decision to be made by the bread category manager, he was satisfied that Mr Jones gave his approval to Mr Feldgen for the reintroduction of Tip Top bread.
428 It is difficult to fault this reasoning. Mr Feldgen was clear on one point: he was aware that an arrangement had been made for the reinstatement of Tip Top bread. In fact Tip Top bread was reinstated at Safeway Preston after Mr Feldgen's meetings with Mr Lovett. Mr Jones had been involved in the discussions concerning pricing at the Preston Market stall and (as his Honour found) Mr Feldgen reported on his visits to Mr Jones. Moreover, Mr Jones, as the bread category manager, was the person within Safeway who could be expected to make precisely that decision. There was ample evidence to support his Honour's finding.
9.6.4 The Sixth Finding
429 Safeway's final submission challenging the primary Judge's findings is that his Honour should not have preferred Mr Feldgen's evidence to that of Mr Jones. The foundation for this argument is a draft statement prepared by Safeway's solicitors and signed by Mr Feldgen in April 1997. In that statement Mr Feldgen said, inter alia, that he had "no clear recollection of the detail of the discussion about the reinstatement of Tip Top product in [Safeway's] Preston store". Mr Feldgen had added the word "clear" in his own handwriting to the typed statement before signing it.
430 The primary Judge specifically addressed the significance of this statement. His Honour recognised that there were some inconsistencies between the contents of the document, but that those inconsistencies did not reflect upon Mr Feldgen's credit. The primary Judge observed that the hesitant manner in which Mr Feldgen gave evidence was consistent with his not having a "clear recollection". In his Honour's view, this was different from not having any recollection.
431 The primary Judge had the advantage of observing Mr Jones and Mr Feldgen in the witness box. Both gave evidence for a prolonged period. This is not a case where Mr Feldgen could be characterised as inherently improbable or inconsistent with incontrovertible or unchallenged evidence: cf State Rail Authority v Earthline Constructions. This Court cannot interfere with the primary Judge's preference for Mr Feldgen's evidence over that of Mr Jones.
9.7 WAS THERE AN ARRANGEMENT OR UNDERSTANDING?
432 It is now necessary to consider whether, on the findings of primary fact actually made by his Honour, he erred in concluding that no arrangement had been made (or understanding arrived at) between Safeway and Tip Top relating to the price to be charged for bread at the Preston Market stall. In order to make out its contention that his Honour did err, the Commission challenged the conclusions that
(i) although someone within Safeway told Mr Feldgen to meet with Mr Lovett and informed Mr Feldgen of the conditions on which Tip Top could be readmitted to Safeway Preston, his Honour could not be satisfied that the person who had done so was Mr Jones;
(ii) Mr Feldgen lacked the authority to make the arrangement; and
(iii) Mr Feldgen did not intend to make an arrangement in relation to the price of bread to be charged at the Preston Market stall.
433 All three factual findings are closely related and the first is particularly important. It is common ground on the appeal that Mr Feldgen had no authority to make an arrangement with Tip Top concerning the price of bread simply by virtue of his position as manager of Safeway Preston. Nor does the Commission challenge the finding that Mr Feldgen had been instructed when he started as the store manager not to discuss prices with persons outside Safeway. For Mr Feldgen to have had authority from Safeway to make an arrangement with Mr Lovett, that authority must have been specifically conferred before the meetings with Mr Lovett or by subsequent ratification of Mr Feldgen's actions. On the reasoning of the primary Judge, the principal obstacle facing the Commission was the conclusion that it was not possible to determine the level of authority or responsibility possessed by the person who told Mr Feldgen of the conditions on which Tip Top bread was to be reintroduced into Safeway Preston. The conclusion that Mr Feldgen lacked authority to make an arrangement with respect to the price of bread rested in large measure on the proposition that he had not been instructed by Mr Jones to meet with Mr Lovett in relation to the price of bread at the Preston Market stall.
434 It would be very difficult to interfere with the primary Judge's finding as to Mr Jones' non-involvement in the first communication with Mr Feldgen if it was based simply on the primary Judge's acceptance of Mr Jones' denial that he ever had such a conversation. However, this does not appear to be the basis on which his Honour proceeded. The primary Judge rejected Mr Jones' denials that he had spoken to Mr Feldgen after the latter's first visit to the Preston Market stall or that he had been involved in reinstating Tip Top bread into Safeway Preston. Given these findings, it would have been difficult for his Honour to place much weight on Mr Jones' denial of a conversation integral to the reinstatement of Tip Top.
435 Rather, his Honour took into account that although Mr Feldgen believed that the conversation had been with Mr Jones, he (Mr Feldgen) conceded that his belief was based on an assumption rather than recollection. More importantly, the primary Judge considered that the "required standard of proof" did not enable him to be satisfied "to the required degree of satisfaction" that it was Mr Jones who gave the instruction to Mr Feldgen. In short, his Honour refused to draw an inference from circumstances that Mr Jones was the person within Safeway who set in train the meetings between Mr Feldgen and Mr Lovett.
436 In order for this Court to interfere with the primary Judge's finding of fact as to the source of the instructions to Mr Feldgen, error must be shown. This is so even though the finding is based on an inference from primary facts: Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359, at 368-269, per Beaumont and Lee JJ; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424, at 435-436 [21]-[24], per Allsop J. It is usually not enough to show that a trial judge has made a choice between competing inferences that are open: Hamsher, at 369.
437 In our view the primary Judge did fall into error. He accepted that there was a "logical attraction" in concluding that it must have been Mr Jones who gave the instruction to Mr Feldgen. Indeed it might be thought that the inference was very strong indeed, if not overwhelming. Mr Jones was the category manager and was the person responsible within Safeway for bread pricing issues. He had previously communicated his concerns to Mr Gunton about the prices Tip Top was charging for its bread at the stall. Mr Feldgen, as his Honour found, acted on instructions from someone within Safeway when he met with Mr Lovett. Moreover, Mr Feldgen reported the results of the meeting to Mr Jones. In these circumstances, it is difficult to understand who within Safeway would have given instructions to Mr Feldgen other than Mr Jones or someone acting at Mr Jones' direction. Mr Smith was unable to suggest who else might have performed that role.
438 The primary Judge seems not to have reached the "required degree of satisfaction" that the instruction came from Mr Jones because he could not "exclude the possibility that Mr Feldgen received the instruction from someone else within the Safeway organisation" (at 177 [765]). His Honour had previously invoked the so-called Briginshaw standard, which requires the trier of fact, in determining what inferences to draw from the primary facts, to have regard to the seriousness of the allegations and the gravity of the consequences flowing from an adverse finding. But Briginshaw does not require a court to exclude all alternative possibilities before drawing an inference from the primary facts adverse to one of the parties. The question is whether the court is reasonably satisfied that the fact in issue has been established, having regard to "the nature and consequences of the fact or facts to be proved": Briginshaw, at 362, per Dixon J. In this connection, the court must take into account not only the seriousness of the allegation made and the gravity of the consequences of an adverse finding, but "the inherent unlikelihood of an occurrence of a given description": Briginshaw, at 362. It is not clear why his Honour thought it inherently unlikely that the person within Safeway responsible for the pricing of bread, who had taken a close interest in the pricing policy adopted by a competitor, was not the person within the organisation who gave the instruction to Mr Feldgen to meet with the competitor's representative and discuss the prices charged by that competitor.
439 In our view, his Honour erred by applying a standard of proof that was more rigorous than that required or justified by Briginshaw. It is therefore appropriate for us to reconsider the question of whether Mr Jones instructed Mr Feldgen to meet Mr Lovett and discuss the prices being charged for bread at the Preston Market stall. In undertaking this task we must take into account the primary facts as found by his Honour.
440 When the facts are examined it may be correct to say that there is a possibility that someone other than Mr Jones gave the instruction to Mr Feldgen. But if the primary facts found by his Honour are considered as a whole, we think it has been established to a standard of reasonable satisfaction that the instruction to Mr Feldgen to meet with Mr Lovett and discuss the conditions on which Tip Top would be reinstated to Safeway Preston was given by Mr Jones. In particular the facts referred to in [437] above make that conclusion compelling.
441 Once it is accepted that Mr Jones instructed Mr Feldgen to meet with Mr Lovett and to discuss the prices charged for bread at the Preston Market stall, it is difficult to resist the conclusion that an arrangement or understanding was reached by Mr Feldgen and Mr Lovett with the authority, respectively, of Safeway and Tip Top. Mr Lovett attended the meeting on 27 April 1995 as the result of instructions from Mr Gunton who told him that Preston Safeway store manager would look at the prices and give the "OK" for the reinstatement of Tip Top at the store. At the meeting, Mr Feldgen saw the price for Code C bread and told Mr Lovett the price he would like to see charged for Code D bread at the stall. Mr Feldgen agreed to Mr Lovett's suggestion of $1.90 per loaf.
442 Mr Feldgen reported the results of the meeting to Mr Jones and Mr Jones, in turn, spoke to Mr Gunton about the price of bread at the Preston Market stall. At the second meeting, Mr Feldgen approved the prices for Code C and Code D bread and told Mr Lovett when deliveries could be resumed to Safeway Preston. Deliveries were in fact resumed. Mr Jones gave his approval to the resumption.
443 An arrangement or understanding was made or reached between Mr Feldgen and Mr Lovett at the meetings of 27 and 28 April 1995. The making or reaching of that arrangement or understanding was authorised by Mr Jones for Safeway and Mr Gunton for Tip Top. Mr Feldgen and Mr Lovett had the necessary meeting of minds, as did Mr Jones and Mr Gunton. This is not a case, for example, where the Safeway representatives had a mere hope or expectation that Tip Top would act in a particular way. Safeway gave approval, through Mr Feldgen, for the prices to be charged at the Preston Market stall and in return Tip Top was readmitted as a supplier to Safeway Preston.
444 Although the primary Judge was not satisfied that Mr Feldgen and Mr Jones had the requisite intention to make an arrangement or arrive at an understanding, this finding seems to have been based on his view that Mr Jones had not instructed Mr Feldgen to meet Mr Lovett. In any event, the critical question is whether an arrangement was made or an understanding arrived at between Safeway and Tip Top. On the facts of this case it was.
445 Given that finding, there was no dispute that a provision of the arrangement or understanding had the purpose or was likely to have the effect of fixing, controlling or maintaining the price for bread supplied by Tip Top, one of the parties to the arrangement or understanding. Accordingly, s 45A(1) of the Act deems the provision, for the purpose of s 45(2), to have the purpose or to be likely to have the effect of substantially lessening competition. It follows that the Commission has made out its case that Safeway contravened s 45(2)(a)(ii) of the Act by making an arrangement or arriving at an understanding having the purpose or likely to have the effect of substantially lessening competition.
446 The Commission's pleadings also allege a breach of s 45(2)(b)(ii) of the Act in that the contract arrangement or understanding pleaded in par 7 was carried out or given effect. Section 45(2)(b)(ii) applies where a corporation gives effect to a provision of a contract, arrangement or understanding of the provision has the purpose or is likely to have the effect of substantially lessening competition.
447 It is clear enough that the arrangement or understanding between Safeway and Tip Top included a provision that Tip Top would be reinstated at Safeway Preston. It is also clear enough that Safeway gave effect to that provision. However, the Commission does not plead that the arrangement or understanding included such a provision.
448 It is arguable that Safeway gave effect to the provision of the arrangement or understanding that required Tip Top to sell Code C and Code D bread at the Preston Market stall at specified prices, although on one view only Tip Top "gave effect" to it. Neither the Commission nor Safeway addressed argument on this issue. Since this issue makes little or no practical difference to the outcome of the case on price collusion, in the absence of argument we do not propose to resolve it.
449 So far as Mr Jones is concerned, we think that the appropriate course is for the matter to be remitted to the primary Judge for determination in a manner consistent with these reasons. This will permit Mr Jones to make submissions on the basis of the findings of fact we have made.
10. DISPOSITION OF THE APPEAL
450 The Commission succeeds on the s 46(1) case against Safeway in relation to the incidents at Frankston, Cheltenham, Vermont and Albury (May 1995) and on the s 45(2)(a)(ii) case in relation to Preston Market. The matter is to be remitted to the primary Judge to consider the liability of Mr Jones and questions of penalty and the costs of the trial. Otherwise the appeal should be dismissed. The parties are to file written submissions as to costs within 14 days. The Commission should file and serve short minutes of order giving effect to these reasons for judgment, together with its submissions as to the costs of the appeal within 14 days. Safeway should file its submissions (if any) on the form of orders and on the costs of the appeal within a further 14 days.
I certify that the preceding four hundred and fifty (450) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey & Sackville. |
Associate: |
|
Dated: 30 June 2003
IN THE FEDERAL COURT OF AUSTRALIA |
|
VICTORIA DISTRICT REGISTRY |
V95 OF 2002 |
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: |
AUSTRALIAN COMPETITION & CONSUMER COMMISSION APPELLANT |
AND: |
AUSTRALIAN SAFEWAY STORES PTY LIMITED (ACN 004 319 939) FIRST RESPONDENT MARK JONES SECOND RESPONDENT |
JUDGES: |
HEEREY, SACKVILLE & EMMETT JJ |
DATE: |
30 JUNE 2003 |
PLACE: |
MELBOURNE |
EMMETT J:
PRELIMINARY
451 I have participated in the formulation of the joint reasons of Heerey and Sackville JJ. I agree with those reasons in their entirety except for the sections dealing with substantial degree of market power and taking advantage of market power. I agree with their conclusion that the appeal should be upheld in so far as it relates to the dismissal by the primary judge of claims for relief in respect of contravention of s 48 of the Trade Practices Act 1974 (Cth) (`the Act'). I also agree that the matter should be remitted to the primary judge for the consideration of the liability of Mr Jones in relation to the contravention of s 45 and the question of penalty and costs of the trial in relation to that contravention.
452 However, having regard to the way in which the claims of contravention of s 46 were formulated and the manner in which the proceeding appears to have been conducted, I am not persuaded, on balance, that a conclusion should be drawn that there was a taking advantage of market power within the meaning of s 46 of the Act. Specifically, I am not persuaded that the Commission has established that Safeway, at the time of the conduct complained of, had a substantial degree of power as an acquirer of bread by wholesale from plant bakers. My reasons for reaching that conclusion are set out below.
RELEVANT PRINCIPLES
453 Whether a corporation has a substantial degree of power in a market and whether that corporation's behaviour involves taking advantage of that power are closely related. However, they are two questions and not one: Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; (2003) 195 ALR 609 at 634[132]. Further, s 46 of the Act is not concerned with the effect produced by conduct. It is concerned only with conduct consisting of the taking of advantage of market power for a relevant purpose. Nevertheless, while the effect of the conduct may not be relevant to the question of whether the conduct in question constituted taking advantage of market power, the effect of the conduct may be relevant as to the degree of market power enjoyed by the corporation that engaged in the conduct.
454 Market power of a seller can be defined as 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: Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 188. If power on the part of a seller is the ability to raise prices above the supply cost without rivals taking away customers, one might expect that power on the part of a buyer is the ability to reduce the prices it pays to acquire the goods or services it requires without losing a source of supply.
455 Market power of a seller exists when a firm 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: Queensland Wire (at 200); Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1 at 21. Monopsony power may therefore be defined as the ability of a purchaser to obtain a market price lower than would otherwise be obtained in a competitive market, or to obtain more favourable terms of trade in the market than would otherwise be obtained in a competitive market.
456 A large market share does not necessarily mean that there is a substantial degree of market power. While a large market share may well be evidence of market power, the ease with which competitors or potential competitors would be able to enter the market must also be considered. The relative effect of percentage command of a market varies with the setting in which that factor is placed. It is only when, for some reason, it is not rational or possible for new entrants to participate in the market that a firm can have market power. Thus, there must be barriers to entry into a market before a firm will have power in that market. Significant entry barriers are the sine qua non of monopoly and oligopoly, for sellers have little or no enduring power over price when entry barriers are non existent: Queensland Wire (at 189-190). According to that reasoning, monopsony or oligopsony would also depend upon the existence of relevant barriers to the entry of further acquirers of goods or services.
457 The essence of market power is absence of constraint. Market power in a supplier is absence of constraint from the conduct of competitors or customers. When a question of the degree of market power enjoyed by a supplier arises, the Act directs attention to the extent to which the conduct of the firm is constrained by the conduct of its competitors or its customers: Boral Besser (at 632[121]). So much is reflected in the terms of s 46(3) of the Act. Section 46(3) relevantly provides that, in determining, for the purposes of s 46(1), the degree of power that a body corporate has in a market, the Court must have regard to the extent to which the conduct of the body corporate is constrained by the conduct of:
* competitors, or potential competitors of the body corporate in that market; or
* persons from whom the body corporate acquires goods in that market.
458 In the context of s 46, the existence of significant barriers to entry into a market carries with it market power on the part of those already operating within the market. Market power follows as a natural consequence of barriers to entry, which are also a pre-requisite to the establishment and maintenance of a monopoly. The identification of barriers to entry helps both to define the relevant market and to establish the existence of market power: Queensland Wire (at 201). The existence of barriers to entry will therefore be a prerequisite to the establishment and maintenance of monopsony or near monopsony.
459 Power in a supplier ordinarily means the ability to put prices up, not down: Boral Besser (at 635[138]). Correspondingly, power in a buyer would ordinarily mean the ability to force prices down. The fact that consumers are able to force a manufacturer "down and down" must be taken into account in considering whether such a manufacturer had a substantial degree of power in the relevant market: Boral Besser (at 586[60]). Similarly, lack of an ability to affect prices may be indicative of a lack of market power.
460 The term "market power" in relation to a supplier is ordinarily taken to be a reference to the power to raise prices by restricting output in a sustainable manner. However, 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 such practices may be as indicative of market power as the ability to influence prices. A firm may be said to possess market power when it can behave persistently in a manner different from the behaviour that a competitive market would enforce on the firm facing otherwise similar cost and demand conditions. Market power may therefore be said to be the advantage that flows from monopoly or near monopoly. Section 46(3) of the Act gives effect to that notion: see Queensland Wire (at 200-201).
461 Similarly, market power on the part of a buyer may be regarded as the advantage that flows from monopsony or near monopsony. Also, exclusive dealing or refusing to deal might also be a manifestation of monopsony power. That is to say, the ability to engage in such conduct persistently, without a loss of supply, may be indicative of market power if it can be shown that such conduct would have a different consequence if engaged in in a "competitive market".
THE COMMISSION'S CASE
462 In its Statement of Claim, the Commission alleged that Safeway had a substantial degree of market power in the market in Victoria for the supply, on a wholesale basis to food retailers and/or to the retail level, of bread products ("the Wholesale Market") by reason of the following matters:
(a) Tip Top, Sunicrust and Buttercup manufactured approximately 75-85% of bread products manufactured for wholesale supply in Victoria;(b) approximately 19.2% of Tip Top's production of bread products in Victoria, 50% of Sunicrust's production of bread products in Victoria and 17% of Buttercup's production of bread products in Victoria was supplied to Safeway. Approximately 27.6% of Buttercup's sales of bread and rolls to the major supermarket chains (which included Safeway, Coles, Franklins, Davids, and Composite Buyers and is known as the "grocery market") was to Safeway. Of this segment, 30% of Buttercup's sales were to Coles, 19.7% were to Davids supermarkets, 12.1% to Composite supermarkets, 5.6% to Franklins and 5.0% to other supermarkets;
(c) Safeway acquired approximately 21.5% of the aggregate of the production of bread products by Tip Top, Sunicrust and Buttercup manufactured for wholesale supply in Victoria;
(d) Safeway was a valuable customer of Tip Top, Sunicrust and Buttercup by reason of the following matters:
(i) Safeway had over 130 supermarkets located throughout Victoria, thus providing each of the plant bakers with major retail sites, attracting large numbers of consumers, from which it was able to promote sales of the bread products of Tip Top, Sunicrust and Buttercup;
(ii) Safeway, in promoting the supply of bread products through Safeway's supermarkets, generally generated marked increases in volume sales for the bread products of Tip Top, Sunicrust and Buttercup;
(iii) Safeway commanded (sic) and received financial contributions from the plant bakers in return for actively promoting the plant bakers' products;
(iv) sales by the plant bakers to the route trade (being small retail outlets, such as milk bars) was declining and large retailers such as Safeway were becoming more valuable to the plant bakers as a venue for mass sales;
(e) if Safeway reduced or ceased its purchases of bread from a plant baker, that plant baker would not be able to:
(i) sell such excess bead to other retailers;
(ii) further or alternatively, sell such excess bread to other retailers at the same or similar price that Safeway had previously paid for the same prior to such reduction or cessation;
(f) Safeway had and implemented in relation to the nine incidents a policy ("the Alleged Policy") that, if bread products of a plant baker were being "specialled" by an independent retailer in the vicinity of a Safeway supermarket at a price that was under the price being charged by Safeway at such supermarket, then all that plant baker's bread products would be deleted from that Safeway supermarket, and other Safeway supermarkets in the vicinity, while that plant baker's bread products were being specialled by that independent retailer;
(g) as a consequence of that implementation:
(i) the plant baker in the relevant case induced or attempted to induce the independent retailer to stop such discounting;
(ii) alternatively to (i), the plant baker in the relevant case was discouraged from supplying bread products to the independent retailer at prices that enabled the retailer to discount the bread products or from supplying bread products to independent retailers who were likely to retail the bread at prices cheaper than Safeway;
(iii) the plant baker suffered or was likely to suffer loss and damage.
463 Those matters might be summarised as follows:
* Safeway acquired a substantial proportion of the output of bread products manufactured in Victoria: pars (a), (b) and (c) above;
* Safeway was a valuable customer of the plant bakers because it had 130 stores throughout Victoria and its promotion of bread products could generate marked increases in sales of the bread products of the plant bakers: par (d) above;
* if Safeway reduced its purchases of bread from plant bakers there were no alternative purchasers for those bread products: par (e) above;
* Safeway had, and implemented, the Alleged Policy: par (f) and par (g) above.
464 In his reasons, the primary judge also referred to five indicia relied on by the Commission as supporting the existence of substantial market power on the part of Safeway: see Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1. The five indicia were as follows (at 253[1097]:
* Safeway obtained from each of the three plant bakers trading terms that were at least as good as the trading terms given to any other purchaser;
* Safeway required the plant bakers to introduce a second delivery of bread each day to its stores;
* Safeway required plant bakers not only to deliver bread but to stack it on the bread racks;
* Safeway required the plant bakers to contribute substantial sums for promotion expenses, such promotional expenses being a considerable contributor to Safeway's gross profit in the bread category in the years 1994 and 1995;
* Safeway formulated and implemented the so-called policy.
465 The fourth of those indicia corresponds with the allegation in par (d)(iii) above concerning financial contributions from the plant bakers. The fifth of the indicia corresponds with the pleading of the Alleged Policy. The other three indicia appear to be terms of trade upon which Safeway did business with the plant bakers. Those three indicia were not referred to in the Statement of Claim.
THE PRIMARY JUDGE'S CONCLUSIONS
466 The primary judge found that Safeway had a relevant degree of market power as an acquirer of bread by wholesale from the plant bakers (at 254[1101]). His Honour considered that that market power was derived from a number of sources and factors (at 249[1073]), which may be summarised as follows:
* Ability to Impose Terms of Trade: Although the overall demand for bread at the retail level was price inelastic, demand was elastic between different brands of bread since there was a significant lack of consumer loyalty to individual brands. Safeway was therefore able to influence the terms on which bread products were supplied to it whilst, at the same time, maintaining the level of bread products it was offering for retail sale (at 249[1074], 249[1075], 251[1083], 252[1090] and 253[1094]);
* Excess Capacity: The plant bakers had significant excess capacity and a significant reduction in purchases by a buyer of the size of Safeway could not be replaced by sales to another similar organisation (at 250[1076]);
* Market Share: Safeway purchased significant proportions of the output of the plant bakers and was the largest individual purchaser in Victoria of plant baked bread (at 249[1073]);
* Barriers to Entry: Safeway's market power, as an acquirer of bread products in the Wholesale Market, could not be constrained, except by a new entrant of a size and store coverage comparable to that of Safeway. Any new entrant that could impinge upon or erode Safeway's market power would have to be able to set up a network of supermarkets of significant size throughout Victoria (at 249[1072], 251[1087]).
467 Market share, the third of the factors identified by his Honour, corresponds with the first matter pleaded. The second factor, excess capacity of the plant bakers, is the third matter pleaded. His Honour's first factor, the ability to impose terms of trade, corresponds, to some extent, with the matters pleaded as giving rise to the allegation that Safeway was a valuable customer of the plant bakers.
468 As his Honour observed (at 248[1070]), however, the existence of significant barriers to entry was not pleaded as a factor that was relevant to the existence of market power. Nevertheless, his Honour considered that the matter had been adequately raised to allow the expert witnesses called by Safeway to address the question.
THE FACTORS CONSIDERED BY THE PRIMARY JUDGE
ABILITY TO IMPOSE TERMS OF TRADE
469 The first four of the Commission's indicia appear to be related to the question of terms of trade that Safeway was able to impose upon plant bakers. It was accepted by the economist witnesses that market power was determined, not only by the power to reduce prices and output below competitive levels, but also by the ability to affect the terms of trade in the market (at 251[1085]). His Honour found that the lack of consumer loyalty to individual brands allowed Safeway to maintain its large volume of bread products through promotions in which Safeway reduced its purchases of the products of a plant baker, but increased its sales of the products of another plant baker. His Honour concluded that, by that means, Safeway was able to influence the terms upon which bread products were supplied to it, whilst at the same time maintaining the level of bread products it was offering for sale (at 249[1075]).
470 However, his Honour does not identify how it was that that conduct influenced the terms on which bread products were supplied. It was in the commercial interests of plant bakers to participate in promotional sales. The fact that Safeway obtained the same trading terms as other buyers does not point to the existence of power on the part of Safeway. It may be different if Safeway was able to obtain better trading terms than other participants in the relevant market.
471 There was no evidence that Safeway "required" plant bakers to introduce a second delivery of bread each day. In fact, the only plant baker that did provide regular second daily bread deliveries was Sunicrust and there was no indication in the evidence that it was only Safeway that received twice daily deliveries.
472 There was no evidence that Safeway "required" plant bakers to stack bread on the racks. In any event, shelf stacking appears to have been an industry practice of long standing that was common in relation to grocery products delivered direct to a store by the supplier and not distributed through central warehouses.
473 An example given by his Honour of Safeway's ability to influence the terms on which bread products were supplied to it was the co-operative promotional allowances that Safeway sought and obtained from the plant bakers as part of the terms of trade negotiated for the purchase of bread products. However, his Honour acknowledged that those allowances were not unique to Safeway. Other retailers sought and were given promotional allowances by plant bakers. Further, Safeway did not dictate to the plant bakers the terms and extent of the promotional allowances, which were a matter for negotiation between Safeway and the plant bakers (at 249[1075]). Safeway, in return for contribution of promotion expenses, provided substantial benefits for such expenses.
474 Thus, it is difficult to see why co-operative promotional allowances constituted an example of the manner in which Safeway was able to influence the terms on which bread products were supplied, since other purchasers obtained similar terms. Indeed, as his Honour acknowledged, Safeway could not affect the terms of trade in the market but was simply able to effect its own terms of trade with a particular supplier.
475 His Honour characterised the situation as one where Safeway had a degree of market power, in the sense that it could affect its own terms of trade but, at the same time, not having sufficient market power to influence the terms of trade throughout the whole market. Nor was Safeway able to raise its rivals' costs. The evidence was insufficient to enable his Honour to reach a conclusion that Safeway was able to obtain persistently better buying terms than the independent retailers.
476 The last of the five indicia relied on by the Commission is the existence of the Alleged Policy and its implementation. Even if the Alleged Policy existed, deletion of a plant baker's bread in an individual store does not require a substantial degree of power in a market, as his Honour found. In any event, one of the independent retailers effectively implemented a deletion policy of his own to secure what he regarded as good deals on bread.
477 Further, at least in the case of Buttercup and Sunicrust, Safeway's ploy of deleting the relevant plant baker's products from its supermarket did not have the effect of deterring that plant baker from supplying the independent retailer in question at substantially discounted prices for extended periods, in some cases up to months. Tip Top was the only plant baker that appears to have responded to the threat of deletion, in relation to the incidents at Albury (May and November 1995), Ferntree Gully and Preston. Thus, to the extent that the implementation of a deletion policy was an attempt to impose terms on the plant bakers, it was not entirely successful and, indeed, was to a significant degree, a failure.
EXCESS CAPACITY
478 The Commission contended that any market power enjoyed by Safeway was derived from the plant bakers' dependence upon it as a customer for large quantities of their production. Thus, the Commission contended that Safeway's market power would be eliminated if the plant bakers could sell all the bread they could produce regardless of Safeway's purchases (see Appeal Transcript, 17 February 2003 at 228]. Safeway would lack relevant market power only if the plant bakers could sell elsewhere any bread that Safeway did not purchase.
479 While the overall demand for bread at the retail level was price inelastic, demand was elastic between different brands of bread. Thus, it was apparent that there was a significant lack of consumer loyalty to individual brands. The volume of sales of a particular plant baker's bread varied according to whether it was being sold on a cyclical or periodic promotion. As a result, Safeway was able to maintain its large volume of sale of bread products although, from time to time, it reduced its purchases of a particular plant baker's products but at the same time increase its purchases of another plant baker's products. His Honour accepted that there were many individual retail outlets to whom the plant bakers might turn if Safeway sought to influence the terms of trade adversely to the plant bakers' interests. However, his Honour considered that the extent of market power that Safeway possessed was to be measured by reference to the extent of its buying power overall.
480 Excess capacity means no more than capacity to produce more product than the market demands. That simply means that the market is a buyers market rather than a sellers market, since any buyer is able to impose terms that it would not otherwise be able to impose if supply was more limited, in the sense that it equated or was exceeded by demand.
481 Excess capacity is a characteristic of a market. Any participant in a market where there is excess production capacity would have the same opportunity as any other participant to take advantage of that excess capacity. Thus, excess production capacity in a market could not, of itself, give rise to market power on the part of any one participant in that market. The existence of excess production capacity on the part of suppliers in a market is equivocal as to the existence of market power.
482 There was clearly competition between plant bakers. The excess capacity meant that all buyers in the market had an enhanced bargaining power in relation to suppliers. That is to say, all retailers who acquired bread from the plant bakers were in stronger bargaining position by reason of the excess capacity of each plant baker. Thus, a plant baker may give more favourable terms to a retailer in exchange for the opportunity to supply greater quantities of product to that retailer. Excess capacity on the part of producers has nothing to do with the existence of market power on the part of retailers acquiring product from those producers.
483 So, any acquirer of bread products in the Wholesale Market would have the ability to say to any particular plant baker that it did not wish to acquire the products of that plant baker. That plant baker would then not be in a position to sell the bread that it might otherwise have sold to that prospective purchaser. Such a prospective purchaser could be any of the independent retailers as well as the other supermarket chains such as Coles or Franklins. Those circumstances do not give rise to market power on the part of all retailers.
484 If Safeway had market power in the Wholesale Market, it was not because any excess capacity on the part of plant bakers but because of some other factor. It is necessary to find some factor attributable to Safeway, the absence of which would have the consequence that Safeway could not have acted in the way in which it did. If Safeway had power because of excess capacity, it would not demonstrate market power if other players had some power.
MARKET SHARE
485 His Honour accepted that the five indicia relied on by the Commission as supporting the existence of substantial market power on the part of Safeway did not demonstrate control of the relevant market or monopsonistic power. His Honour also accepted that market share does not, of itself, indicate market power (at 254[1098]). Nevertheless, his Honour considered that the five indicia were indicators of a degree of market power, having regard to the extent of Safeway's size and its relevant market share.
486 Safeway purchased significant proportions of the output of the three major plant bakers and was the largest individual purchaser of plant baked bread in Victoria. Safeway's proportion of the wholesale market in 1995 for the acquisition of bread from the three plant bakers, independent plant bakers and in-store bakeries was in the order of 23% to 25%. However, while Safeway purchased significant proportions of the output of the three major plant bakers and was the largest individual purchaser of plant baked bread in Victoria, that, of itself, is not sufficient to constitute market power. It is necessary to determine whether there were any significant restraints on Safeway's ability to influence the conduct of other participants in the Wholesale Market.
BARRIERS TO ENTRY
487 His Honour accepted that it was also necessary to determine whether there were any significant restraints on Safeway's ability to exercise the extent of market power that it possessed (at 254[1099]). Since the question of the likelihood of the entrance of a new participant of the scale and size of Safeway was not pleaded, there was no exploration of that matter.
488 His Honour found that the existence of other wholesale acquirers of bread, such as Coles, Franklins and other wholesale organisations associated with "banner stores", did not constitute a constraint at the wholesale level. The plant bakers had significant excess capacity, and thus the other wholesale acquirers were purchasing all the bread they needed. His Honour found that, if Safeway deleted the products of a plant baker, that plant baker could not find a substitute purchaser for the deleted products (at 254[1100]).
489 Safeway's competitors in the Wholesale Market were other retailers of bread products, including the other supermarket chains such as Coles and Franklins. The plant bakers were persons from whom Safeway acquired goods in the Wholesale Market. By reason of s 46(3), it is necessary to have regard to the extent to which Safeway's conduct was constrained by the conduct of those other supermarket chains and other retailers, as well as by the conduct of the plant bakers.
490 His Honour considered that Safeway's market power was derived, at least in part, from its ability to negotiate state-wide terms of trade, prices, discounts and rebates as a result of the overall purchases it was prepared to make on a state-wide basis. His Honour appears to have concluded that, if a plant baker was not prepared to accept terms of trade required by Safeway, such as a case deal, it could only replace Safeway's purchases (if the plant baker's products were deleted from a Safeway supermarket) by going to a large number of retail outlets (at 248[1068]).
491 His Honour's reliance on the fact that a plant baker could only replace Safeway's purchases by going to a large number of retailers assumes that Safeway, in dealing with a plant baker, would delete a plant baker's product not only from one store but from the whole of its 130 stores throughout Victoria. That must be so because the factor would have weight only if Safeway deleted a particular plant baker's bread from all of its stores.
492 The fact that a buyer acquires a large share of the product in a market might be evidence of market power, but only where it would not be rational or possible for new entrants to participate in the market. Thus, his Honour's conclusion concerning barriers to entry, being the necessity to set up a network of stores of significant size throughout Victoria, is also dependent upon the assumption that it was commercially practical for Safeway to delete a plant baker's products from all of its supermarkets throughout Victoria.
493 While there was clearly a deletion made by Safeway from time to time at specific locations, there was no basis for concluding that it had the ability to delete a plant baker's products state-wide. That being so, a conclusion that a competitor would need to establish a network of stores throughout Victoria is based on a false assumption.
494 Safeway's capacity to act in a particular way could be constrained by a series of independent retailers at different locations throughout Victoria. There is no particular barrier to the entry of large numbers of independent supermarkets. So long as there are sufficient buyers of products in the market, a large share of the putative exerciser of market power could not force down prices. Thus, the only barrier to entry for a relevant competitor is the cost of setting up a single supermarket at any given location. That conclusion is supported by the allegation, and acceptance of the allegation, of the existence of numerous retail markets throughout Victoria.
495 A corporation without market power would be commercially compelled to stock the full range of products that it could afford to purchase in order to satisfy consumer demand. It could not have afforded to do otherwise if it lacked substantial market power. The Commission says that if Safeway did not have market power, it could not have pursued the practice of deletion because it would have produced harm for itself without any countervailing benefit. That contention, of course, assumes deletion on a state-wide basis.
496 The assumption that Safeway could delete a plant baker's products from all of its supermarkets was critical to his Honour's conclusion that there was no constraint on Safeway at the wholesale level (at 254[1100]). However, there was no evidence that Safeway would ever consider engaging in such a state-wide deletion. Indeed, Mr Brookes gave evidence that he did not give consideration to a state-wide deletion, since that would "have a big impact on our profitability". That is not decisive, but it must be possible to demonstrate that it was a commercial possibility to act in the manner suggested. There was no attempt made by the Commission to explore that question and there is therefore no basis upon which a conclusion could be reached that, as a matter of commercial reality, Safeway could have deleted a plant baker's products from all of its 130 stores throughout Victoria.
COUNTER INDICATIONS
497 The contention that the fact that Safeway had, and implemented, the Alleged Policy was an indicator of market power is misconceived. If it were established that implementation of the Alleged Policy in a particular case, by deleting a plant baker's bread products from a particular supermarket, would deter the plant the baker from supplying cheap bread to an independent retailer, that might be an indicator of a degree of power. However, unless the implementation of the Alleged Policy had that effect, it could not be said to be an indicator of any degree of power. That is to say, while it is not necessary, in order to demonstrate a contravention of s 46, to show that conduct complained of had a particular effect, the mere engaging in conduct could not be an indicator of power unless the conduct had some consequence that would only flow by reason of the existence of power.
498 One might expect that a purchaser in the wholesale market that had substantial market power could be expected to prevail upon a supplier to provide special discount or case deals. However, in none of the instances where Safeway sought a case deal from one of the plant bakers, did it obtain such a case deal.
499 While Safeway's deletions might be characterised as refusing to deal with plant bakers, such conduct would be indicative of market power only if it could be effectively engaged in persistently. The deletion of a plant baker's products, even over-deletion as described above, was not effective to prevent Buttercup or Sunicrust from continuing to supply cheap bread to independent retailers for extended periods, sometimes months. The fact that the deletions did not achieve their intended effect, of deterring competitive conduct, indicates that they were not a manifestation of market power on the part of Safeway.
500 While the primary judge recognised that the issue was whether Safeway could extract terms from the plant bakers unconstrained by market forces, his Honour did not at any stage identify just what terms Safeway could extract. As indicated above, Safeway was unable to extract a case deal from any of the plant bakers in any of the nine incidents in question. Further, Safeway could not affect the terms of trade on which, or the price at which, any of the plant bakers supply bread to Coles or to Franklins. It could not influence the terms of trade throughout the whole wholesale market and was not able to raise its rivals' costs.
501 The economist witnesses were in agreement that a traditional method of determining whether an organisation had market power as a purchaser was to determine whether it had the ability to reduce prices, and output, below competitive levels (at 251[1085]). His Honour concluded that Safeway did not have that ability. It was never alleged by the Commission that Safeway either sought, or had the market power, to raise the price of bread in the retail market above a competitive level. His Honour found that it was clear from the evidence that Safeway could not do so, having regard to the level of competition in the retail market from the other chains, such as Coles and Franklins, independent retailers, hot bread shops and in-store bakeries. His Honour concluded that Safeway did not have the ability to force down to the wholesale price of bread or the ability to raise the cost of the bread supplied to its retail competitors.
502 Those factors indicate that Safeway could not behave persistently in a manner different from the behaviour that a competitive market would force on it. The primary judge did not identify any conduct in which Safeway could have persisted that was different from the conduct in which it would engage in a competitive market.
503 His Honour also found that competition at the retail level prevented Safeway from raising the prices of bread in the retail market above competitive levels. That is to say, the restraints that retail competition from hot bread shops and independent bakeries imposed on the plant bakers are a significant factor in determining whether substantial market power existed on the part of Safeway. The constraints that flowed from retail competition clearly impacted upon the Wholesale Market in a way that was not consistent with the existence of substantial market power on the part of Safeway.
504 The primary judge made a number of findings concerning the ability of Safeway to influence the Wholesale Market and the retail market as follows:
(1) Safeway was not able to obtain persistently better buying terms that independent supermarkets (at 253[1093]);
(2) Safeway did not have the ability to force down the wholesale price of bread (at 252[1088]);
(3) Safeway did not have sufficient market power to influence and could not affect the terms of trade throughout the whole of the Wholesale Market (at 251[1083]);
(4) Safeway did not have the ability to raise the costs of the supply of bread to its retail competitors (at 251[1083], 252[1088]);
(5) Safeway did not have the ability to affect the terms of trade on which, or the price at which, Tip Top, Sunicrust or Buttercup supplied bread to Coles or to Franklins (at 252[1090]);
(6) Safeway did not have the ability to raise bread prices generally above competitive levels in the retail market (at 252[1090], 253[1094]);
(7) Safeway was able to affect its own terms of trade with a particular supplier (at 251[1083]);
(8) Safeway's terms of trade with the plant bakers included a term that Safeway bought at the best price being offered in the market place (at 253[1093]);
(9) the existence of other wholesale acquirers of bread such as Coles, Franklins and other wholesale organisations associated with banner stores did not constitute a constraint on the conduct of Safeway at the wholesale level (at 254[1100]).
505 In the light of those findings, it is difficult to follow the reasoning the primary judge that led to his Honour's conclusion that Safeway had a substantial degree of market power as an acquirer of bread by wholesale from bread manufacturers in Victoria. His Honour's express findings that Safeway could not affect the terms of trade in the wholesale market, did not have the ability to force down the wholesale price of bread and did not have the ability to raise the costs of the supply of bread to its retail competitors do not suggest any degree of market power in the Wholesale Market.
506 Further, his Honour considered that the fact that Safeway did not have the ability to raise prices generally above competitive levels in the retail market was relevant to the existence of power at the wholesale level because it might indicate an absence of power at the wholesale level as an acquirer of bread, or might otherwise impinge upon, and neutralise any such power it otherwise might have had the wholesale level. Thus, his Honour's finding that Safeway did not have the ability to raise prices generally above competitive levels in the retail market is indicative of an absence of power at the wholesale level.
SAFEWAY'S CONDUCT
507 The actual conduct of Safeway in relation to the Wholesale Market is critical to the question of whether it had a substantial degree of power in that market. Thus, it is necessary to examine Safeway's actions, and the effect those actions, in order to determine whether it had relevant power. Further, the fact that it attempted to achieve certain ends and failed is also relevant to the question of the existence of power. An attempt to achieve ends that fails may be an indication of the absence of power to achieve those ends.
508 In relation to the incidents at Albury, both in May 1995 and November 1995, and at Ferntree Gully, involving the supply of bread by Tip Top, Safeway's actions in deleting Tip Top's products, or threatening to do so, resulted in Tip Top increasing the price at which it was supplying bread to Safeway's competitors at those locations. Putting aside the question of Safeway's purpose in deleting Tip Top's products in those incidents, those three incidents indicate that Safeway had the capacity to influence the terms upon which Tip Top supplied bread to Safeway's competitors in the retail markets at Albury and Ferntree Gully. The effect of that conduct by Safeway was to increase the price at which the independent retailers at those locations sold bread by retail in their stores.
509 Further, Safeway had the ability to persuade Tip Top to increase the price at which it sold its own products by retail at the Preston Markets. That effect was achieved in the context of discussions concerning deletion of Tip Top's products from the Safeway supermarket at Preston. The threat of continued deletion of Tip Top products from the Preston supermarket led to Tip Top's agreement to increase its prices at its store in the Preston Market.
510 Those four incidents indicate a capacity on the part of Safeway to influence the terms upon which its competitors in those three retail markets were able to sell bread by retail. In three of the cases, it also had the effect of influencing the price at which its competitors acquired bread products by wholesale from Tip Top. All four incidents indicate that Safeway's actions in deleting or threatening to delete Tip Top products from its supermarkets at Albury, Ferntree Gully and Preston had a significant influence upon Tip Top's action in the Wholesale Market and in the retail market at Preston. An inference can be drawn that the reason why Tip Top's action had that consequence so far as Tip top was concerned was that Safeway had power to influence the Wholesale Market and not simply because it may have had some power in relation to any of the retail markets in question.
511 Tip Top was a significant participant in the Wholesale Market. It supplied approximately 20 per cent of all of Safeway's purchases in the Wholesale Market in Victoria. Having regard to the number of supermarkets operated by Safeway throughout Victoria, that quantity must be taken to have been a substantial proportion of the total bread products supplied by wholesale in Victoria. Those considerations suggest a degree of power on the part of Safeway.
512 Against that, of course, must be considered the inability of Safeway to influence Buttercup or Sunicrust in relation to their respective supply of products in relation to the other six incidents. There does not appear to have been any exploration of the reasons why Tip Top was affected by Safeway's actions in deleting its products but neither Buttercup nor Sunicrust was influenced by similar conduct. It may be, for example, that the proportion of Tip Top's production supplied to Safeway was much more important to the viability or profitability of Tip Top than the proportion of the output of Buttercup and Sunicrust supplied to Safeway was to their respective viability or profitability.
513 Be that as it may, the question is whether Safeway had a substantial degree of power in the Wholesale Market. It is not sufficient to establish that Safeway was able to influence the actions of a particular participant in the Wholesale Market. Of course, if the part played by that participant in the market were that of a monopolist or near monopolist, influencing the conduct of that participant may be tantamount to influencing the market as a whole. It may not be necessary to show that Safeway had power to influence all participants in the Wholesale Market, but it must be necessary to show a degree of power in the market, not simply power over Tip Top.
514 While the primary judge found that Safeway did not have the ability to raise the costs of the supply of bread to its retail competitors, it is clear that Safeway was able to influence the price at which Tip Top supplied bread to certain of its competitors in the several retail markets. That, however, is an instance of influencing a single participant in the Wholesale Market, rather than influencing that market. There is no quarrel by Safeway with the finding by the primary judge that Safeway did not have the ability to raise bread prices generally above competitive levels in the retail market. The Commission made no allegation to that effect. The most that can be said is that Safeway was able to prevent discounting by retailers supplied by one of the plant bakers, namely, Tip Top.
515 The difficulty with the conclusion reached by the primary judge, that Safeway had a degree of power in the wholesale market as an acquirer of bread, is that his Honour did not identify just what Safeway's power enabled it to do. His Honour found that Safeway was not constrained but failed to make a finding about what it was that Safeway was not constrained from doing. That is probably explained by the absence of any pleading of the existence of any constraint.
516 The primary judge found that Safeway had market power by reason of the existence of barriers to entry that were not alleged by the Commission in the Statement of Claim. However, there does not appear to have been any examination of the question of whether there were barriers to the entry of competitors in relation to the power to influence Tip Top, as distinct from the power to influence the market generally. Again, that is explained by the absence of any pleading of such matters.
517 Before it is possible to examine the question of whether Safeway took advantage of some power, it is necessary to identify just what was the power in the Wholesale Market that Safeway had at the relevant time. It clearly had some power to influence the actions of Tip Top. However, for the reasons indicated above, that is not of itself power in the market.
518 To find a contravention of s 46(1) it must be possible to identify the power that Safeway had and of which it took advantage. The difficulty in identifying the relevant power, of course, is inherent in the pleading. The Statement of Claim makes no attempt to identify the power that Safeway is alleged to have. As indicated above, the Statement of Claim simply alleges that, by reason of a number facts, Safeway "had and has a substantial degree of market power in the wholesale market as an acquirer of bread products in the wholesale market". In the absence of an allegation of some power to do something in market, unconstrained by competitors in that market, it is impossible to reach a conclusion as to whether there has been a taking advantage of such a power.
519 The difficulty is emphasised by the conclusion that would follow if a conclusion were reached that Safeway had a substantial degree of power in the Wholesale Market. Assuming that power to influence Tip Top was sufficient to constitute a substantial degree of power in the Wholesale Market, the only instances where Safeway took advantage of that power, on the case alleged by the Commission, and on the basis of the findings made by the primary judge, is in relation to the incidents involving Tip Top at Albury in May 1995 and November 1995 and at Ferntree Gully. However, in the light of the conclusions reached above, it would only be in relation to the Albury incident in May 1995 that Safeway took advantage of its power for a purpose referred to in s 46(1).
CONCLUSION AS TO MARKET POWER
520 The factors relied on by the primary judge do not compel a finding that Safeway exercised a substantial degree of market power in the Wholesale Market. Indeed, the counter indications suggest otherwise. I consider, on balance, that the Commission has failed to establish that, at the relevant times, Safeway had a substantial degree of power in the Wholesale Market.
I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett . |
Associate: |
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Dated: 30 June 2003
Counsel for the Appellant: |
J I Fajgenbaum QC, R A Brett QC with D Star |
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Solicitor for the Appellant: |
Australian Government Solicitor |
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Counsel for the Respondents: |
R M Smith SC with P R Whitford |
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Solicitor for the Respondents: |
Clayton Utz |
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Date of Hearing: |
10, 12, 17, 18, 19, 20 and 21 February 2003 |
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Date of Judgment: |
30 June 2003 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2003/149.html