Case: Boral Besser Masonry Limited v Australian Competition and Consumer Commission [2003] HCA 5 ; (2003) 215 CLR 374
Outcome: cited
In Melway Publishing Pty Limited v Robert Hicks Pty Limited [2001] HCA 13 ; (2001) 205 CLR 1 (" Melway ") at [43] the majority justices observed that the notion of market power as the capacity to act in a manner unconstrained by the conduct of competitors is reflected in s 46(3). The absence of constraint from customers is also a relevant matter. Matters of degree are involved: Boral Besser Masonry Limited v Australian Competition and Consumer Commission [2003] HCA 5 ; (2003) 215 CLR 374 (" Boral ") at [121] per Gleeson CJ and Callinan J. 969 The circumstances which may give rise to the absence of competitive constraint on a corporation are diverse. They are not confined to the matters identified in s 46(3): see Trade Practices Commission v Pioneer Concrete (Qld) Pty Limited (1994) 52 FCR 164 (" Pioneer Concrete ") at 172-173 and 176; see also Boral at [168] per Gaudron, Gummow and Hayne JJ. 979 Alternatively, any power arising from QR's ownership of the AR terminal was constrained by the grant of exclusive possession to NRC: Melway at [43], Boral at [121], and Pioneer Concrete at 172-173 and 176. 1020 Mr Ergas' opinion is that QR has market power by reason of its ownership of the track but that the declaration and the undertaking go to the question of whether it has taken advantage of the power. However, that view seems to me to be contrary to the authorities referred to above, in particular Melway at [43], Boral at [121], and Pioneer Concrete at 172 -173 and 176. 1022 Section 46 requires the co-existence of market power, taking advantage and proscribed purpose: Melway at [44] and Boral at [120]. 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]. 1078 As Heerey J said at first instance in Boral , this is a factor which points against a finding that the conduct constitutes taking advantage of market power: see (1999) 166 ALR 410 at 440. His Honour's views were adopted in the High Court: see [150] and [170]. 1079 It seems to me that these were matters of commercial judgment which, when considered in the light of QR's continuing offer of access to PN and its proposed conversion of the AR terminal to a multi-user facility, suggest that this was not an exercise of market power or a taking advantage of it. 1080 Mr Ergas considered the question of how QR would behave in a competitive market by assuming that QR would provide PN with a 30 year lease because PN is a more efficient terminal operator than QR and, accordingly, it would be more profitable for QR if PN controls the terminal. He criticised QR's conduct as irrational in a competitive market and supported his argument by reference to various hypothetical examples. 1088 PN criticised Mrs Smith's approach as based on faulty assumptions, including an assumption that there are several terminals equivalent to the AR terminal for standard gauge. That criticism is well placed but I accept the general effect of her approach which is plainly consistent with objective facts. As McHugh J said in Boral at [260], a rational business firm seeks to maximise profit and to increase its share of the market. That is the obvious explanation of QR's conduct. 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. 1093 Second, I do not see that QR's desire to run the AR terminal as a common user or multi-user facility gave it an advantage it would not have had in the absence of market power: Boral at [279]. 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]. 1158 I do not consider that this constitutes a sufficient connection to amount to taking advantage within the principle stated by the High Court in Melway and Boral .