Case: Queensland Wire Industries Pty Limited v Broken Hill Pty Limited [1989] HCA 6 ; (1989) 167 CLR 177
Outcome: referred to
Market power may be defined as the ability of a firm to raise prices above supply costs without rivals taking away customers: see Queensland Wire Industries Pty Limited v Broken Hill Pty Limited [1989] HCA 6 ; (1989) 167 CLR 177 (" Queensland Wire" ) at 188 and 200. Market power is not confined to the ability to influence prices; it may be manifested in practices directed at excluding competition, such as exclusive dealing or refusal to supply: Queensland Wire at 200. 978 The reason for this is quite straightforward. QR owned the relevant infrastructure, but the terms of NRC's occupation, that is to say as a tenant with the right of exclusive possession and control, was inconsistent with the existence of market power residing in QR. The market is for the supply of access to the infrastructure. QR had no powers in that market. It had no ability to ask, let alone raise, prices for the supply of that service: Queensland Wire at 188 and 200. 1023 Whether a firm has taken advantage of market power is often a difficult question to answer. This may be because the words "take advantage" have been equated with "use": see Queensland Wire at 191, 194, 202 and 213 214; but the word "use" does not capture the full meaning of "take advantage": Boral at [279]. 1024 The following ten principles emerge from Queensland Wire and the trilogy of cases which have explained the proper approach to construction:- (1) what is involved in answering the question of whether a firm has taken advantage of market power is the sufficiency of the connection between the market power and the conduct complained of: Melway at [44] and [67]; Boral [120] and [170]; Rural Press Limited v Australian Competition and Consumer Commission [2003] HCA 75 ; (2003) 216 CLR 53 (" Rural Press ") at [51]. McHugh J has said that a causal connection is required: Boral at [279]. (2) if the impugned conduct has a rational business explanation, that is a factor which points against the existence of a relevant connection between the market power and the conduct: Melway at [67]; Boral at [170]. (3) the words "take advantage" do not encompass conduct which has the purpose of protecting market power but no other connection: Rural Press at [51]. (4) in deciding whether a firm has taken advantage, is it relevant to ask how it would have behaved if it lacked power and whether it could have behaved in the way it did in a competitive market: Melway at [52] and [61]; Rural Press at [52]. (5) it may be proper to conclude that a firm is taking advantage of market power where it does something that is materially facilitated by the existence of the power: Melway at [51]; Rural Press at [53]. (6) McHugh J has said that the conduct must have given the firm an advantage it would not have had in the absence of market power: Boral at [279]. (7) the test may be whether the conduct was necessarily an exercise of market power: Melway at [68]. (8) one of the difficulties in determining what constitutes taking advantage stems from the need to distinguish between monopolistic practices and vigorous competition: Queensland Wire at 202. (9) the purpose of s 46 is the promotion of competition; it is concerned with the protection of competition, not competitors: Queensland Wire at 191 and 194; Boral at [87], [160], [164] and [260]; Melway at [17]. (10) it is dangerous to proceed from a finding of proscribed purpose to a conclusion of the existence of a substantial degree of market power, which can be taken advantage of; to do so will ordinarily be to invert the reasoning process: Boral at [123], [194]. 1089 There is a further reason why Mr Ergas' approach must be rejected. It is to be found in the reasons of the High Court in Queensland Wire and the trilogy of cases which explain the full impact of that decision. 1090 As Mason CJ and Wilson J said in Queensland Wire at 191, the operation of s 46 is predicated upon an assumption that competition is the means to protect the interests of consumers. Competition is by its nature deliberate and ruthless. All of the majority justices in Boral pointed out that s 46 is concerned with promoting competition, not protecting competitors: see [87], [160], [164] and [260]. Injuries to rivals are a necessary bi-product of vigorous competition. 1091 PN's approach is fundamentally flawed because it has at its heart the protection of its own position as a competitor of QR, not the interests of competition. It seeks to advance its own private interests over that of the public interest in promoting competition. It fails to distinguish between monopolistic practices which are prohibited and vigorous competition which is not: Queensland Wire at 202 per Dawson J. 1111 Purpose involves the notion of an intention to achieve the result spoken of in one or other of ss 46(1)(a) , (b) or (c): Queensland Wire at 214 and Melway at [31]. In the present case, PN contended that QR's purpose was to damage NRC or to deter it from engaging in competitive conduct in the East Coast Rail Linehaul Market: s 46(1)(a) and/or (c), or to prevent NRC or Toll from entering the North Coast Rail Linehaul Market or from engaging in competitive conduct in that market: s 46(1)(b) and/or (c). 1124 First, there are constant reminders in the authorities that competition is a ruthless process. As Mason CJ and Wilson J said in Queensland Wire at 191, competitors always try to injure each other by taking away sales and these injuries are the inevitable result of the competition that s 46 is designed to promote. In Boral at [88], Gleeson CJ and Callinan J pointed to the danger of confusing aggressive intent with anti-competitive behaviour: see also per Gaudron, Gummow and Hayne JJ at [160] and per McHugh J at [279].