Case: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2004] FCA 1678 ; (2004) 141 FCR 183
Outcome: considered
The authorities on s 45 of the TPA explain the concept of a 'contract, arrangement or understanding' as it is used in Pt IV: see Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2004] FCA 1678 ; (2004) 141 FCR 183 (' Leahy' ); Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission [2005] ATPR 42-078 (' Apco' ); Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75 ; (2003) 216 CLR 53 (' Rural Press' ); Trade Practices Commission v Email Ltd (1980) 43 FLR 383 (' Email' ); and Trade Practices Commission v David Jones (Australia) Pty Ltd (1986) 13 FCR 446 (' David Jones' ). Some assistance is also to be gained from authorities that have considered s 45E in its original form: Gibbins ; see also Keith Russell Simplicity Funerals Pty Ltd v Cremation Society of Australia (ACT) Ltd (1982) 57 FCR 472. 109 In Leahy , Merkel J discussed the concepts of 'arrangement' and 'understanding' where multiple parties were alleged to have been involved, in different capacities, in price fixing contravening s 45 of the TPA. In that case, the ACCC brought proceedings against eight corporations and eight individuals. A number of the respondents admitted to contraventions of the TPA. The remaining respondents did not seriously challenge the ACCC's case against the admitting respondents, but rather they sought to distinguish their actions from those of the admitting respondents. The contesting respondents submitted that, unlike the other respondents, they had not initiated any of the price increases in the pricing 'cycle' at the heart of the ACCC's case. While the contesting respondents did not dispute that price increases were communicated amongst competitors in the Ballarat petrol market, they argued that their price increases were the result of competitive market forces and not made pursuant to an understanding to increase petrol prices in the event of a 'price-increase call' by the initiating respondents. His Honour stated at 200 [54]: 'It is well established that, for the purposes of ss 45(2) and 45A , the term "understanding" is apt to describe something less than a binding contract or arrangement. An understanding will usually, but may not necessarily, involve some reciprocity of obligation: see Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 at 360 (ACCC v Amcor); Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 230-231 and Trade Practices Commission v Email Ltd (1980) 43 FLR 383 at 397. At the least, there must be a meeting of minds of those said to be parties to the understanding and a consensus as to what is to be done; not merely a hope as to what might be done or might happen. Thus, ordinarily, an understanding involves communication between the parties arousing expectations in each party that the other party/parties will act in a particular way: see Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2003] FCAFC 149 ; (2003) 129 FCR 339 at [409] '. 110 On appeal, in Apco , the Full Court of this Court (Heerey, Hely and Gyles JJ) considered whether an understanding necessarily involves the making of a commitment to a particular course of action, as opposed to giving rise to a mere expectation or hope that a party will act in a certain way. After considering Merkel J's findings in Leahy , their Honours said at 43,234 - 43,235: 'Whilst the appellants attacked the factual finding that the parties arrived at the price-fixing understanding outlined in [330] of the reasons for judgment, they did not dispute that the primary judge had enunciated the correct legal principles which are applicable in determining whether parties have entered into an understanding. In particular, the primary judge referred to the following observations of Lindgren J in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 ; (1999) 92 FCR 375 at [141] (emphasis in original) which were specifically endorsed by the Full Court in Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213 ; (2002) 118 FCR 236 at [79] : "The cases require that at least one party 'assume an obligation' or give an 'assurance' or 'undertaking' that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party. In the present case, for example, each individual who attended the meeting may have expected that as a matter of fact the others would return to their respective offices by car, or, to express the matter differently, each may have been expected by the others to act in that way. Each may even have 'aroused' that expectation by things he said at the meeting. But these factual expectations do not found an 'understanding' in the sense in which the word is used in ss 45 and 45A . The conjunction of the word 'understanding' with the words 'agreement' and 'arrangement' and the nature of the provisions show that something more is required." The primary judge's inference at [371] that Anderson [the Director and General Manager of one of the respondent companies] expected that his competitors would hold their increased price for a time whilst he was deciding whether or not to match their prices represents Anderson's assessment of what was likely to occur, without any assurance being given to him that the competitors would act in that way. It is no more than what Lindgren J described as a "factual expectation" which falls short of an "understanding".' Special leave to appeal the Full Court's decision was refused by the High Court in Australian Competition and Consumer Commission v APCO Service Stations Pty Ltd [2006] HCATrans 272. 111 As these passages from Leahy and Apco indicate, the authorities have expressly refrained from holding that the consensus or meeting of minds required by the words 'arrangement' or 'understanding' must involve a reciprocity of obligation. In Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 (' Amcor' ) at 359-360 [75], Sackville J said: 'An arrangement or understanding for the purposes of s 45(2) of the TP 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) 5 ALR 465; 24 FLR 286 at 290 1 (Aust Ind Ct, FC) per Smithers J. However, 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) 43 FLR 383 at 385 (Lockhart J); Ira Berk at FLR 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. There is no necessity for an element of mutual commitment between the parties to an arrangement or understanding, although in practice such an arrangement or understanding would ordinarily involve reciprocity of obligation: Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 230 1; 116 ALR 643 per Lockhart J.' There are, however, several cases in which the courts have said that an assumption of mutual obligations or reciprocal commitments will be the common situation: eg Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 5 FCR 140 at 144. In Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 230-231 and 238, the Full Court endorsed Lockhart J's observation in Email at 397 that it is difficult to envisage circumstances where there would be an understanding involving a commitment by one party as to the way it should behave, without some reciprocal obligation by the other party.