Marshall, Brenda --- "The Relevance of a Legitimate Business Rationale under Section 46 of the Trade Practices Act" [2003] DeakinLawRw 3; (2003) 8(1) Deakin Law Review 49
[*] Lecturer in Law, University of Queensland.
[1] All references in this article to ‘s 46’ are to s 46 of the Trade Practices Act.
[2] Trade Practices Act Review Committee, Review of the Competition Provisions of the Trade Practices Act (Commonwealth of Australia, report dated 31 January 2003, released 16 April 2003) Recommendation 3.1.
[3] The elements should be appraised sequentially. If the first element is not satisfied, there is no need to examine the other two. Likewise, if the first element is satisfied, but the second not, it is unnecessary to consider the third. Of course, a hypothetical assessment of any element is always permissible.
[4] These purposes are: (a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; (b) preventing the entry of a person into that or any other market; or (c) deterring or preventing a person from engaging in competitive conduct in that or any other market.
[5] [1989] HCA 6; (1989) 167 CLR 177. The Full Federal Court’s decision is Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1988] ATPR 40-841; and the Federal Court’s is Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1987] ATPR 40-810. (Hereinafter, ‘Queensland Wire’.)
[6] [2001] ATPR 41-805. The Full Federal Court’s decision is Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [1999] FCA 664; [1999] ATPR 41-693; and the Federal Court’s is Robert Hicks Pty Ltd v Melway Publishing Pty Ltd [1999] ATPR 41-668. (Hereinafter, ‘Melway’.) Note that Robert Hicks Pty Ltd traded as Auto Fashions Australia.
[7] [2003] HCA 5; [2003] ATPR 41-915. The Full Federal Court’s decision is ACCC v Boral Ltd [2001] ATPR 41-803; and the Federal Court’s is ACCC v Boral Ltd [1999] FCA 1318; [1999] ATPR 41-715. (Hereinafter, ‘Boral’.)
[8] The appellant’s successful appeal turned on the finding, by 6 of the 7 High Court justices, that the company did not have a substantial degree of market power in Melbourne’s concrete masonry products market: [2003] HCA 5; [2003] ATPR 41-915, 46,686 (Gleeson CJ and Callinan J); 46,695 (Gaudron, Gummow and Hayne JJ); 46,717 (McHugh J); Kirby J dissenting.
[9] In effect, the article presumes that the threshold requirement to the operation of s 46, that a corporation must possess ‘a substantial degree of power in a market’, has been satisfied.
[10] Boral sustains this theme, although, strictly speaking, it was unnecessary for the High Court to proceed beyond the ‘market power’ element of s 46 in that case. See the discussion of Boral in Part III(C) of the article.
[11] Daniel Clough, ‘Misuse of Market Power – “Would” or “Could” in a Competitive Market?’ (2001) 29 Australian Business Law Review 311, 312.
[12] See Michael O’Bryan, ‘Section 46: Law or Economics?’ (1993) 1 Competition & Consumer Law Journal 64, 64 (‘unpredictable outcomes’); Kathryn McMahon, ‘Refusals to Supply by Corporations with Substantial Market Power’ (1994) 22 Australian Business Law Review 7, 19 (no ‘coherent framework’); Weeliem Seah, ‘Fair Competition or Unfair Predation: Identifying the Misuse of Market Power under Section 46’ (2001) 9 Trade Practices Law Journal 236, 267 (‘practical difficulties’); Warren Pengilley, ‘Misuse of Market Power: The Unbearable Uncertainties Facing Australian Management’ (2000) 8 Trade Practices Law Journal 56, 56 (it is ‘impossible ... to make managerial decisions in certain conformity with the law’); and David Meltz, ‘“Market Entry – See Adjoining Map”: Melway and the Right Not To Supply’ (2002) 10 Trade Practices Law Journal 96, 109 (‘the hoped for clarity ... has not transpired’). Pengilly has even gone so far as to nominate Queensland Wire as one of Australia’s ten worst trade practices decisions: Warren Pengilley, ‘The Ten Most Disastrous Decisions made Relating to the Trade Practices Act’ (2002) 30 Australian Business Law Review 331, 339. Cf Sandra Welsman, ‘In Queensland Wire, The High Court has Provided an Elegant Backstop to “Use” of Market Power’ (1995) 2 Competition & Consumer Law Journal 280, 312 (there are ‘evidence outcome “certainties”’); and Rhonda Smith and David Round, ‘The Puberty Blues of Competition Analysis: Section 46’ (2001) 9 Competition & Consumer Law Journal 189, 192 (firms ‘do have certainty given the legal framework and existing precedent’).
[13] The author expressed a similar view, pre-Melway, in Brenda Marshall, ‘Refusals to Supply under Section 46 of the Trade Practices Act: Misuse of Market Power or Legitimate Business Conduct?’ (1996) 8 Bond Law Review 182.
[14] BHP was found to have contravened s 46 in this case.
[15] Here, there was no contravention of s 46 by Melway.
[16] This term is not used in s 46 itself, but is found in the marginal note to the section.
[17] Y-bar is used to produce star picket posts by cutting the Y-shaped steel into fence post lengths and drilling holes through which wire will pass. Star picket fencing is the most popular form of rural fencing in Australia.
[18] The High Court’s decision in Queensland Wire [1989] HCA 6; (1989) 167 CLR 177 confirms that supply on unreasonable or restrictive terms amounts to constructive refusal to supply. According to Mason CJ and Wilson J (185), the offer by BHP was at ‘an excessively high price relative to other BHP products’; Deane J (197) described it as an ‘unrealistically high’ price; and Toohey J (204) identified a refusal to supply at a ‘competitive’ price.
[19] [1987] ATPR 40-810, 48,819.
[20] Ibid.
[21] Queensland Wire [1989] HCA 6; (1989) 167 CLR 177, 191(Mason CJ and Wilson J); 194 (Deane J); 202 (Dawson J); and 213 (Toohey J). This point was expressly confirmed by the High Court in Melway [2001] ATPR 41-805, 42,754 (Gleeson CJ, Gummow, Hayne and Callinan JJ).
[22] Queensland Wire [1989] HCA 6; (1989) 167 CLR 177, 192 (Mason CJ and Wilson J); 197-198 (Deane J), 202-203 (Dawson J); and 216 (Toohey J).
[23] Ibid.
[24] Queensland Wire [1989] HCA 6; (1989) 167 CLR 177, 192 (emphasis added). Similar views were expressed by Dawson J (202) and Toohey J (216).
[25] Ibid 192 (Mason CJ and Wilson J); 197-198 (Deane J); 202-203 (Dawson J); and 216 (Toohey J).
[26] Section 46(4)(a) provides that the reference to ‘power’ in s 46(1) is a reference to market power. Thus, the power taken advantage of by the respondent corporation must in fact be market power.
[27] [1992] FCA 511; [1992] ATPR 41-196, where French J held that there was no evidence of a use of ‘market power’ (40,644).
[28] Ibid (emphasis added). French J’s approach in Natwest was expressly applied by Wilcox J in General Newspapers Pty Ltd v Australian and Overseas Telecommunications Corp Ltd [1993] ATPR 41-215, 40,956 to conclude that, even without substantial market power, the respondent company would have acted in the same way. For similar reasoning, see, more recently: Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2001] FCA 1056; [2001] ATPR (Digest) 46-212; Rural Press Ltd v ACCC [2002] FCAFC 213; [2002] ATPR 41-883; and ACCC v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861; [2002] ATPR (Digest) 46-215.
[29] Kirby J dissented.
[30] [2001] ATPR 41-805, 42,757 (emphasis added).
[31] The majority did not disturb the finding of the trial judge, Merkel J, that the refusal to supply the respondent was for a prohibited purpose, namely, to deter or prevent competition at the wholesale level, but warned of the danger of proceeding ‘too quickly from a finding about proscribed purpose to a conclusion about taking advantage’: ibid 42,755.
[32] Ibid 42,758. In dissent, Kirby J maintained that Queensland Wire stood for the proposition that to ‘take advantage’ of market power for a proscribed purpose, a corporation must simply ‘use’ that power (eg, by refusing supply) for a prohibited reason, and that it ‘was unnecessary to pose hypothetical questions (sometimes difficult to resolve) as to whether such corporation could or would, acting rationally, have engaged in the forbidden conduct if it were subject to effective competition’: ibid 42,769. With respect, Kirby J’s view is directly contrary to the competitive market test espoused by the High Court in Queensland Wire.
[33] Prompted perhaps by Pengilley’s criticism of using a perfectly competitive market as the benchmark for comparison: Warren Pengilley, ‘Misuse of Market Power: Present Difficulties – Future Problems’ (1994) 2 Trade Practices Law Journal 27, 41; and Pengilley, above n 12, 60. Featherston and Edwards share the view that it should not be incumbent on firms with market power to behave as if they were constrained by forces that operate in a perfectly competitive market: Roger Featherston and Geoff Edwards, ‘Recent Developments in Misuse of Market Power’ (2000) 8 Trade Practice Law Journal 79, 90.
[34] [2001] ATPR 41-805, 42,758.
[35] Ibid.
[36] Ibid 42,759. Steinwall describes this as a ‘qualification’ to the competitive market test: Ray Steinwall, ‘Melway and Monopolisation – Some Observations on the High Court’s Decision’ (2001) 9 Competition & Consumer Law Journal 93, 98.
[37] [2001] ATPR 41-805, 42,759. The point is that a competitive market may just as easily support exclusive distribution arrangements of the kind that Melway had in place as direct sales to retailers.
[38] [2001] ATPR 41-805, 42,760.
[39] Ibid. Note that here their Honours are asking the ‘corollary’ question under the competitive market test.
[40] Ibid, citing with approval Heerey J’s dissenting judgment in Melway in the Full Federal Court.
[41] Ibid 42,761 (emphasis in original).
[42] Ibid (emphasis added).
[43] See also Seah, above n 12, 243; and Steinwall, above n 36, 100.
[44] [2001] ATPR 41-805, 42,758 (emphasis added).
[45] See also Stephen Corones, ‘The Characterisation of Conduct under Section 46 of the Trade Practices Act’ (2002) 30 Australian Business Law Review 409, 420.
[46] Ibid.
[47] For background discussion, see Larelle Law and Brenda Marshall, ‘Misuse of Market Power: The Degree of “Causal Connection” Required under Australian and European Law’ (1997) 3 International Trade and Business Law Annual 197.
[48] In discussing these judgments, it is not suggested that the conclusion in respect of the ‘take advantage’ element is ‘wrong’ in every instance, merely that the underlying process of reasoning is flawed.
[49] See also Michael O’Bryan, ‘Section 46: Legal and Economic Principles and Reasoning in Melway and Boral’ (2001) 8 Competition & Consumer Law Journal 203, 211.
[50] See also Meltz, above n 12, 109.
[51] See also O’Bryan , above n 49, 212.
[52] Although Pincus J at first instance in Queensland Wire [1987] ATPR 40-810, 48,818-48,819 had also said, ‘I cannot (with respect) accept that characterising the acts complained of as merely an exercise of legal rights, whether contractual or otherwise, can be an answer to a claim based on s 46.’
[53] [1989] HCA 6; (1989) 167 CLR 177, 202.
[54] [1975] ATPR 40-004.
[57] Noting that, prior to 1986, s 46 required a corporation to be in a position ‘substantially to control a market’.
[58] [1975] ATPR 40-004, 17,115. Smithers and Hely JJ concurred in separate judgments.
[59] [1986] ATPR 40-714, 47,827.
[60] [1987] ATPR 40-781, 48,525. Confirmed by the Full Federal Court on appeal: Williams v Papersave Pty Ltd [1987] ATPR 40-818.
[61] [1990] ATPR 41-042.
[62] Ibid 52,129 (Wilcox, Spender and Pincus JJ).
[63] [1994] FCA 1096; [1994] ATPR 41-318.
[64] Ibid 42,236. Although, subsequently, in Helicruise Air Services Pty Ltd v Rotorway Australia Pty Ltd [1996] ATPR 41-510, 42,399, Hill J described the question of whether the exercise of a contractual right could constitute a contravention of s 46 as an ‘open one’.
[65] [1992] FCA 35; [1992] ATPR 41-165.
[66] Ibid 40,276.
[67] Ibid 40,277.
[68] Ibid 40,278. In criticising Lockhart J’s reasoning in this case, Pengilley has said, ‘If this is the trend of the law, it seems as if access to facilities owned by others will rarely be ordered in Australia ... In respect of the denial of access by the owner of the facility, the owner’s argument is always that he is merely exploiting what he owns’: Warren Pengilley, ‘Denying a Competitor Access to Facilities’ (1992) 8 Australian & New Zealand Trade Practices Law Bulletin 11, 14. For similar criticism, see Peter Prince, ‘Queensland Wire and Efficiency – What Can Australia Learn from US and New Zealand Refusal to Deal Cases?’ (1998) 5 Competition & Consumer Law Journal 237, 251.
[69] [2002] FCAFC 302; [2003] ATPR 41-909, 46,549. The respondent in this case, PAWA, was a statutory authority established as a body corporate by the Power and Water Authority Act 1987 (NT).
[70] [2002] FCAFC 302; [2003] ATPR 41-909, 46,549 (Lee J); and 46,562 (Branson J); Finkelstein J dissenting. The case turned on the interpretation of s 2B of the Trade Practices Act, which states that the provisions of Part IV of the Act (including s 46) bind the Crown ‘so far as the Crown carries on a business’.
[71] [2002] FCAFC 302; [2003] ATPR 41-909, 46,549.
[72] Ibid 46,566 (Branson J); and 46,586 (Finkelstein J).
[73] Ibid.
[74] Ibid 46,582.
[75] [2002] FCAFC 302; [2003] ATPR 41-909, 46,582 (Finkelstein J). See also the judgment of Branson J: ibid 46,566.
[77] [2000] FCA 38; [2000] ATPR 41-752.
[78] [1997] ATPR 41-589, 44,132.
[79] Ibid.
[80] [2000] FCA 38; [2000] ATPR 41-752, 40,734.
[81] Ibid 40,699.
[82] Ibid 40,734. Confirmed by the Full Federal Court on appeal: Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 1381; [2000] ATPR 41-783.
[83] [2001] ATPR 41-805, 42,761.
[84] See also O’Bryan, above n 49, 209.
[85] In fact, a proscribed purpose need only be one of the purposes motivating the respondent corporation, provided it is a ‘substantial’ purpose: s 4F of the Trade Practices Act.
[86] [1989] HCA 6; (1989) 167 CLR 177, 191.
[88] Ibid. Cf Alexiadis’ claim that conduct fulfilling the requirements of s 46(1)(a), (b) or (c) cannot be anything but predatory: Peter Alexiadis, ‘Refusal to Deal and Misuse of Market Power under Australia’s Competition Law’ (1989) 10 European Competition Law Review 436, 452.
[89] Clarke and Corones maintain that the immediate effect of s 46 is ‘to protect individual (and in practice, small) firms from the predatory conduct of large firms, rather than to protect competition as such’: Philip Clarke and Stephen Corones, Competition Law & Policy: Cases and Materials (1st edition, 1999) 110.
[90] [1989] HCA 6; (1989) 167 CLR 177, 191 (emphasis added).
[91] See also Vijaya Nagarajan, ‘The Regulation of Competition by Section 46 of the Trade Practices Act’ (1993) 1 Competition & Consumer Law Journal 127, 128.
[92] [1989] HCA 6; (1989) 167 CLR 177, 194. Dawson J (198) noted his general agreement with the judgment of Deane J.
[93] Ibid 213.
[94] [2001] ATPR 41-805, 42,752 (Gleeson CJ, Gummow, Hayne and Callinan JJ).
[95] Emphasis added. The author adopts a macroeconomic perspective in interpreting s 2, equating the ‘welfare of Australians’ to ‘economic growth in Australia’. Competition is the means to this end, as economists widely agree that competition enhances efficiency, efficiency promotes productivity, and productivity drives the rate of economic growth: see, eg, Tony Makin, ‘Prioritising Policies for Prosperity’ (1999) 15 Policy 19, 20; and Dean Parham, ‘A More Productive Australian Economy’ (2000) 7 Agenda 3, 13.
[96] ASX Operations Pty Ltd v Pont Data Australia Pty Ltd [1991] ATPR 41-069, 52,222.
[97] General Newspapers Pty Ltd v Telstra Corp [1993] FCA 473; [1993] ATPR 41-274, 41,697.
[98] Pursuant to s 46(7) of the Trade Practices Act, the existence of a purpose proscribed by s 46(1) may be inferred from the conduct of the respondent corporation.
[99] Donald Robertson, ‘The Primacy of “Purpose” in Competition Law – Part 1’ (2001) 9 Competition & Consumer Law Journal 101, 121-122 (emphasis in original).
[101] Ibid 40,123.
[102] This view reflects the ‘business justification’ defence available in the United States and European Union. See, eg, United States v Aluminum Co of America 148 F 2d 416 (1945); and Commercial Solvents Corp v Commission of the European Communities [1974] 1 CMLR 309.
[103] See, eg, Welsman, above n 12, 312-313 (‘if a legitimate reason substantially explains the conduct, then an entity is not misusing its substantial market power); Prince, above n 68, 243 (‘the key factor ... [is] whether the corporation’s actions were for a legitimate business purpose’); Peter Shafron, ‘QWI v BHP: A Flash in the Section 46 Pan?’ (1998) 72 Australian Law Journal 53, 60 (‘the focus is ... on the reasons behind the refusal to supply’); Christopher Hodgekiss, ‘Section 46 – Some Recent Developments’, Paper presented at Competition Law and Regulation Symposium, University of New South Wales, Sydney, 24-25 August 2000, 1 (‘the answer ... revolves around the reasons for the refusal to supply’); Seah, above n 12, 256-257 (‘the existence or otherwise of a legitimate commercial justification for the conduct under scrutiny, is highly probative’); and Warren Pengilley, ‘Misuse of Market Power: Australia Post, Melway and Boral (2002) 9 Competition & Consumer Law Journal 201, 225 (‘the business purpose or reason for which conduct in engaged in is highly relevant’).
[104] As Clough has similarly observed, in the post-Queensland Wire cases, ‘the focus has been on addressing the legitimacy of the conduct under the purpose test’: above n 11, 319.
[105] See also Meltz, above n 12, 109.
[106] Cf Corones’ preference for a corporation’s business rationale to be considered as part of the ‘take advantage’ element of s 46: above n 45, 415. Cf also, Kirby J’s remarks in dissent in Melway that it is in identifying the ‘purpose’ of the respondent corporation, ‘and not in characterising the acts as “tak[ing] advantage”, that the debates about proscribed, or permissible, conduct by a dominant market player arise’: [2001] ATPR 41-805, 42,768.
[108] Universal’s argument was that in the ‘hit-driven’ music industry, large amounts of money are spent by record companies on the promotion of titles, only a few of which will actually become ‘hits’. Persons importing titles from overseas are more likely to import hit recordings than non-hit recordings, thereby ‘free-riding’ on the investment of the record companies: ibid 44,685.
[109] Ibid.
[110] Ibid.
[111] Cf Patrick Ahern, ‘Refusals to Deal after Aspen’ (1994) 63 Antitrust Law Journal 155, 173-182.
[112] Free-riding represents a loss on investment made, and reduces the incentive for further investment, with negative implications for a firm’s ‘bottom-line’.
[113] Boral is discussed in Part III(C) below.
[114] The objective will be achieved if the legitimate business reason substantially explains the corporation’s ostensibly anti-competitive conduct. As mentioned previously, pursuant to s 4F of the Trade Practices Act, it is sufficient to constitute a breach of s 46 if a proscribed purpose in s 46(1) was one among other purposes, so long as the proscribed purpose was a ‘substantial’ one. It follows, therefore, that if a corporation can establish that it was motivated substantially by some ‘legitimate’ purpose, there will be no contravention of s 46.
[115] [1989] HCA 6; (1989) 167 CLR 177, 193 (emphasis added).
[116] For discussion, see Stephen Corones, ‘The Proposed Amendments to Section 46 of the Trade Practices Act: Some Problems of Interpretation and Application’ (1985) 13 Australian Business Law Review 138, 149; McMahon, above n 12, 11-12; Welsman, above n 12, 303; and Meltz, above n 12, 104-108.
[117] Ibid. All these factors fall into the ‘quality control/consumer welfare’ and/or ‘reputation/bottom-line’ categories identified previously.
[118] [1990] ATPR 41-042.
[119] Ibid 52,129.
[120] [1987] ATPR 40-809, 48,800. Although, in this case, the respondent’s contention that it was refusing supply because the applicant’s conduct could bring the product into market disrepute was rejected on the facts.
[121] See also Berlaz Pty Ltd v Fine Leather Care Products Ltd [1991] ATPR 41-118.
[122] [1994] FCA 1096; [1994] ATPR 41-318.
[123] Ibid 42,236 (Hill J).
[124] Hodgekiss has said of this case that it ‘illustrates that so much depends upon whether the court is satisfied with the explanation as to the purposes of the respondent engaging in the particular conduct’: above n 103, 27.
[125] [1975] ATPR 40-004.
[128] Unsatisfactory performance was also the legitimate business reason relied on in Venning v Suburban Taxi Services Pty Ltd [1996] ATPR 41-468.
[129] [1993] FCA 427; [1993] ATPR 41-263.
[130] Ibid 41,553. Confirmed by the Full Federal Court on appeal: Petty v Penfold Wines Pty Ltd [1994] FCA 1095; [1994] ATPR 41-320. See also Natwest Australia Bank Ltd v Boral Gerrard Strapping Systems Pty Ltd [1992] FCA 511; [1992] ATPR 41-196, where the respondent’s legitimate business justification for refusing supply was to secure payment of a debt.
[131] [2000] FCA 38; [2000] ATPR 41-752.
[132] Ibid 40,734.
[133] Ibid. Confirmed by the Full Federal Court on appeal: Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 1381; [2000] ATPR 41-783.
[134] [2003] FCAFC 149; [2003] ATPR 41-935.
[135] ACCC v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861; [2002] ATPR (Digest) 46-215, 53,363.
[136] Ibid 53,346-53,347. Goldberg J’s judgment is discussed at length in John Carmichael, ‘Tip Top Result Goes Stale: ACCC v Australian Safeway Stores Pty Ltd (No 2)’ [2002] DeakinLawRw 19; (2002) 7 Deakin Law Review 387.
[137] [2003] FCAFC 149; [2003] ATPR 41-935, 47,034 (Heerey and Sackville JJ). Emmett J’s dissent was based on his Honour’s conclusion that Safeway lacked a substantial degree of power in the relevant market: ibid 47,064.
[138] Ibid 47,034-47,035.
[139] See, eg, Seah, above n 12, 257; and Tristan Gilbertson, ‘New Zealand’s Commerce Act Reforms: An Australian and International Perspective’ (2002) 10 Trade Practices Law Journal 150, 156, where it is contended that ‘anti-competitive purpose can easily be concealed by a strategically created trail of documents designed to show legitimate business reasons for conduct actually engaged in for an anti-competitive purpose.’
[140] Refer to Robertson’s comments on establishing ‘purpose’: see text accompanying n 99 above.
[141] Whether, in the particular circumstances, the conduct is a ‘normal’ response, or consistent with industry practice, would be a relevant consideration: see, further, Corones, above n 45, 417.
[142] Such as those explained in the text accompanying n 117 above.
[143] [1999] FCA 664; [1999] ATPR 41-693.
[144] Ibid 42,863 (emphasis added). Quoting from the judgment of the Court of Appeals (6th Cir) in Byars v Bluff City News 609 F 2d 843 (1979) 862, Heerey J also stated that ‘[a] finding of antitrust liability in a case of a refusal to deal should not be made without examining reasons which justify the refusal to deal’: ibid.
[145] [1999] FCA 664; [1999] ATPR 41-693, 42,863. Commenting on the Full Federal Court’s decision in Melway, Robertson said that, in contrast to Heerey J, the majority judges (Sundberg and Finkelstein JJ) failed to appreciate ‘the economic and commercial reasons for efficient distribution networks’: above n 99, 126. For further criticism of Melway in the lower courts, see Warren Pengilley, ‘Can an Entity with Substantial Market Power Change its Distributor?’ (1999) 14 Australian & New Zealand Trade Practices Law Bulletin 139.
[146] Corones, above n 45, 414.
[147] [2001] ATPR 41-805, 42,752.
[148] Ibid 42,753.
[149] Ibid 42,761. As O’Bryan points out, once the High Court accepted that Melway’s distribution system maximised its sales, it was ‘relatively straightforward to reach the conclusion that the corporation would be likely to engage in the same conduct in a competitive market’: above n 49, 229.
[150] See also Corones, above n 45, 417.
[151] In his dissenting judgment in Melway in the Full Federal Court, Heerey J reasoned that ‘the concept of taking advantage of market power has to be seen in terms of efficiency. If the conduct complained of would have been engaged in irrespective of degree of market power but rather to conduct the corporation’s business more efficiently, there will be no taking advantage of market power’: [1999] FCA 664; [1999] ATPR 41-693, 42,862 (emphasis added). His Honour credits Frances Hanks and Philip Williams, ‘Implications of the Decision of the High Court in Queensland Wire’ [1990] MelbULawRw 4; (1990) 17 Melbourne University Law Review 437, 445 with the genesis of this view. The paramountcy of efficiency arguments in assessing the ‘take advantage’ element of s 46 was also recognised, pre-Melway, in O’Bryan, above n 12, 84.
[152] This is productive efficiency.
[153] See Corones, above n 45, 419. According to Corones, the question to ask is, ‘Would a rational actor acting under competitive conditions engage in the same conduct?’: ibid.
[154] Eg, Edwards applies a transaction cost economics framework to the High Court’s decision in Melway [2001] ATPR 41-805 and concludes that ‘efficiency arguments ... support Melway’s desire to maintain its exclusive distribution system’: Geoff Edwards, ‘Melway – a TCE Perspective’ (2002) 10 Trade Practices Law Journal 77, 84. Edwards explains that in order ‘to encourage distributors to specialise and devote optimal effort to distributing the manufacturer’s product, it may be of benefit for the manufacturer to provide distributors with some protection from erosion of their geographic or customer segments by the activities of other distributors’: ibid 83. For similar ‘economic’ analysis of the Melway case, see Daniel Clough, ‘Law and Economics of Vertical Restraints in Australia’ (2001) 25 Melbourne University Law Review 20.
[155] Refer to O’Bryan’s comments above, n 147.
[156] [1993] FCA 473; [1993] ATPR 41-274.
[157] Ibid 41,701.
[158] Ibid 41,700.
[159] [1999] FCA 1318; [1999] ATPR 41-715.
[160] The ACCC instituted proceedings against BBM and its holding company, Boral Ltd. However, the trial judgment focuses on BBM, and the subsequent appeals were pressed only in relation to that company.
[161] [1999] FCA 1318; [1999] ATPR 41-715, 43,231.
[162] Ibid.
[163] Ibid 43,234. Even though, in his Honour’s view, BBM did have the proscribed purpose of driving at least one competitor out of the market: ibid 43,236. Corones has criticised Heerey J for not attempting to ‘weigh or rationalise the interplay between legitimate business reason and the proscribed purpose’: above n 45, 412. However, as mentioned previously, and reiterated now in Heerey J’s defence, the elements of s 46 require sequential analysis. Thus, having found that the ‘take advantage’ element was not satisfied, there strictly was no need for his Honour to consider the ‘purpose’ element at all.
[164] See ACCC v Boral Ltd [2001] ATPR 41-803.
[166] Boral Besser Masonry Ltd v ACCC [2003] HCA 5; [2003] ATPR 41-915, 46,687.
[167] Ibid 46,678.
[168] Ibid 46,691.
[169] Ibid 46,717.
[170] Ibid.
[171] See McMahon, above n 12, 28.
[172] Indeed, in the aftermath of Queensland Wire, Lee warned of the difficulty of establishing a contravention of s 46 in cases ‘where the hallmarks of sporadic and discriminatory conduct are absent, where there are no damaging admissions and where relevant witnesses are prepared to testify as to some legitimate commercial reason for their conduct’: Sandra Lee, ‘Queensland Wire Industries: A Breath of Fresh Air’ (1990) 18 Federal Law Review 212, 227.
[173] See, eg, the cases discussed in Part III of the article.
[174] See also Corones, above n 45, 419.
[175] As failure to give such evidence will entitle the court to assume that the evidence would not have helped the respondent corporation: TPC v Nicholas Enterprises Pty Ltd [1979] ATPR 40-126. Refer, eg, to the comments of Mason CJ and Wilson J in Queensland Wire: see text accompanying n 115 above.