Case: Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1989] HCA 6 ; (1989) 167 CLR 177
Outcome: applied
The necessity for competition to exist before a "market" is constituted was emphasised in Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5 ; (2003) 215 CLR 374. As Gleeson CJ and Callinan J observed: "A market is an area of close competition; a field of rivalry. As the passage from Re Queensland Co-Operative Milling Association Ltd quoted above indicates, and as s 46(3) recognises, both the supply side and the demand side are relevant to an assessment of the market. It does not solve, but merely re-states, the problem to speak of sub-markets. There may be a wider, and a narrower, area of rivalry; but, if the narrowest area itself constitutes a market, then it is power and conduct in that area that must be examined." (at 422-423) (cf Deane J in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1989] HCA 6 ; (1989) 167 CLR 177 at 195) 75 The notion of "market power" in the sense of capacity to act in a manner unconstrained by the conduct of competitors has been the subject of frequent judicial consideration. The leading case in this context is Queensland Wire [1989] HCA 6 ; 167 CLR 177. Usefully, Lockhart J in Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 at 138 summarised from the judgment of Mason CJ and Wilson J in Queensland Wire 167 CLR at 188-190 the following factors as relevant in defining and identifying market power: "(a) "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"; (b) "the extent to which the conduct of [any of the respondents] in that market is constrained by the conduct of...competitors or potential competitors..." (s 46(3)); (c) market share of each respondent must be examined but this alone is generally not determinative of market power as "the relative effect of percentage command of a market varies with the setting in which that factor is placed" (Mason CJ and Wilson J adopted the language of Reed J in United States v Columbia Steel Co (1948) 334 US 495 at 528); (d) the presence of vertical integration is another factor, but its presence does not necessarily mean that a substantial degree of power exists; and (e) to what extent is it rational or possible for new entrants to enter the relevant market? That is to say, what are the barriers to entry? It is this factor which must be taken as the primary consideration in determining market power. See also the judgment of the Full Court of this court in Arnotts Ltd v Trade Practices Commission at FCR 336 9." 76 Further in Queensland Wire 167 CLR at 200, Dawson J observed: "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) ... Market power is thus the advantage which flows from monopoly or near monopoly..." 77 The comments of his Honour were adopted by Gleeson CJ, Gummow, Hayne and Callinan JJ in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13 ; (2001) 205 CLR 1 at 21 and 27, where their Honours said: "As Dawson J explained, in Queensland Wire , market power means capacity to behave in a certain way (which might include setting prices, granting or refusing supply, arranging systems of distribution), persistently, free from the constraints of competition..." (at 27) 88 However, with respect there is little material presented before me upon which I can find that the respondent does have a substantial degree of market power in the Retail Market. In particular, I note the following: &#8226; In the Joint Expert Statement of Areas of Agreement and Disagreement, the expert witnesses for both parties agreed that, because of the respondent's substantial degree of market power in the Wholesale Market, "it is able to substantially influence patterns of competition in the Retail Market". The respondent points out however, that the experts do not say that the respondent has a "substantial degree of market power" in the Retail Market. This is in contrast with their agreement as the respondent's substantial degree of power in the Wholesale Market. Indeed Mr Williams gave evidence at the hearing that he was not an expert in the Retail Market (TS p 88 ll 40-42) and that he had not put his mind to whether the applicant had a substantial degree of power in the Retail Market (TS p 78 ll 3-4). &#8226; Conduct in a wholesale market which in turn affects levels of competition in a "downstream" retail market is a relatively common phenomenon, and issues relevant to this phenomenon have been considered in this court, for example, in the context of claims of alleged anti-competitive conduct in Pt XIB TPA ( Telstra Corporation Limited v Australian Competition and Consumer Commission (No 2) [2007] FCA 493) , in relation to claims for access to services under Pt IIIA TPA ( Sydney Airport Corporation Limited v Australian Competition Tribunal [2006] FCAFC 146) , and in the context of acquisitions claimed to result in a substantial lessening of competition ( Australian Gas Light Company (ACN 052 167 405) v Australian Competition &amp; Consumer Commission (No 3) [2003] FCA 1525). However, the ability of an entity to "substantially influence patterns of competition" in a retail market because of its market power in a wholesale market, as agreed by the experts, is not, in my view, necessarily tantamount to "a substantial degree of market power" in the Retail Market or even, as submitted by the respondent, "market power" within the meaning of the s 46 TPA. &#8226; As I have already noted, the activities of the applicant and the respondent in the Retail Market are quite different, supplying different services to different customers. It is not in contention before me that there is "a" Retail Market in which both the applicant and the respondent are supplying information. However, whereas it is clear that the respondent supplies base data to members of the general public who pay the prescribed statutory fee and makes available its SmartMap product, it is also clear that the applicant offers a much greater range of sophisticated products to a different customer base, namely parties who are prepared to subscribe to the applicant's services, as distinct from any members of the public who seek information over the counter. It is also apparent from the evidence before me that the applicant does not view the respondent as a significant competitor in its area of the Retail Market (RP Data Information Memorandum Document 1 pp 14, 15; evidence of Mr Catelan TS p 57 ll 37-42). In this respect, the "market power" of the respondent in the Retail Market, viewed in light of its activities in this broad Retail Market, is not obvious. Even if the respondent had market power in its area of the Retail Market in respect of its supply of raw data to end-users, it has not been demonstrated that such market power extends throughout the entire Retail Market as was the subject of consideration by the Full Court in Singapore Airlines Limited v Tabropane Tours WA Pty Ltd (1991) 33 FCR 158. &#8226; I note the submission of Mr Hinson SC for the respondent that the evidence fell short of establishing that the respondent had any market power let along any substantial degree of market power in the Retail Market. Further, I note that, notwithstanding para 7 of the amended statement of claim, Mr Hinson SC also submitted and this was not contested by Mr Jackson QC at the hearing that the respondent did not understand the applicant's case to assert that the respondent had a substantial degree of power in the Retail Market (note TS p 370 ll 12-17). &#8226; I also note that: o despite a number of oral submissions in his opening statement (TS p 2 ll 1-14, p 7 ll 19-23), Mr Jackson QC for the applicant did not subsequently press the claim that the respondent had a substantial degree of power in the Retail Market o Mr Jackson QC, in his written submissions concerning the issue of power in the Retail Market, confines the position of the applicant to the agreed position of the experts, and does not specifically submit that the respondent has a substantial degree of power in the Retail Market. &#8226; I have carefully reviewed the transcript and after submissions in the opening statement, I can identify no subsequent submissions made on behalf of the applicant that the respondent had a substantial degree of power in the Retail Market. &#8226; As pointed out in Queensland Wire , the existence of market power is identifiable by reference to factors including pricing, barriers to entry, market share. However in this case I note, for example, that: a. no evidence is lead as to the impact on prices in the Retail Market of conduct of the respondent b. although the entry of retailers into the market appears dependent upon their ability to obtain a licence from the respondent, there is no evidence before me as the extent to which this is a barrier to market entry by retailers c. no evidence is lead as to market share (if any) in the Retail Market held by the respondent. 95 So for example, in Queensland Wire [1989] HCA 6 ; 167 CLR 177 Deane J held that the identification of the proscribed purpose in that case led directly to the conclusion that BHP was taking advantage of its market power, because the nature of the purpose was such that, in the circumstances of that case, it could not have been achieved by the conduct impugned had it not been for the existence of the market power ( Queensland Wire 167 CLR at 197-198, Melway 205 CLR at 17). The majority in Melway at 18 also noted comments of Scalia J in the Supreme Court of the United States when his Honour said: "Where a defendant maintains substantial market power, his activities are examined through a special lens: Behavior that might otherwise not be of concern to the antitrust laws or that might even be viewed as procompetitive can take on exclusionary connotations when practiced by a monopolist." ( Eastman Kodak Co v Image Technical Services Inc (1992) 504 US 451 at 488) 97 However as was pointed by the High Court in Queensland Wire [1989] HCA 6 ; 167 CLR 177, and subsequently reiterated by the majority of the High Court in Melway 205 CLR at 17, "take advantage of" does not mean anything materially different from "use" and does not require conduct which is predatory or morally blameworthy: per Mason CJ and Wilson J at 191, Deane J at 194, Dawson J at 198, Toohey J at 212-214 (cf also the Full Court in Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213 at [137] ). In terms of s 46 it does, however, entail an analysis of actions in the context of a competitive environment, and identification of a determinative approach in the entity with the substantial market power to achieve an outcome proscribed by s 46. So, as Heerey J said in ACCC v Boral Ltd (1999) 166 ALR 410 (at 440), subsequently approved by the majority of the High Court in Boral Besser [2003] HCA 5 ; 215 CLR 374 (at 434): "If the impugned conduct has a business rationale, that is a factor pointing against any finding that conduct constitutes a taking advantage of market power. If a firm with no substantial degree of market power would engage in certain conduct as a matter of commercial judgment, it would ordinarily follow that a firm with market power which engages in the same conduct is not taking advantage of its power." 118 Fourth, I do not accept as material the distinction drawn by the respondent between the facts of this case and other refusal to supply cases such as Melway [2001] HCA 13 ; 205 CLR 1 and Queensland Wire [1989] HCA 6 ; 167 CLR 177, in that in those cases there was a refusal to supply one of several acquirers of goods and services. Whether or not all licensees were being treated equally in this case is not germane to the issue of whether the respondent, for reasons of its own, was taking advantage of its market power. (Whether it is relevant to purpose is a different question, which I shall consider shortly). In, for example, a hypothetical situation where a wholesale supplier formulated a strategy of itself entering the retail market and as part of that strategy informed its customers who were retailers in that retail market of its decision to henceforth refuse supply of its products, the fact that all retailers were equally disadvantaged does not mean that the wholesale supplier has not taken advantage of its market power. 121 Irrespective whether the respondent has taken advantage of its substantial degree of market power in the Wholesale Market, as a matter of law it will only be in breach of s 46 if it has done so for a purpose proscribed by s 46(1). That this is so is demonstrated by the unambiguous terms of s 46(1) , and decisions in Australia at the highest level confirming this principle (for example Queensland Wire [1989] HCA 6 ; 167 CLR 177, Melway 205 CLR at 22). 123 In relation to identifying the "purpose" of the respondent, as illustrated by the cases listed in Miller's Annotated Trade Practices Act 28th edition para 1.46.65, the weight of authority indicates that the relevant purpose is to be identified on the basis of a subjective test rather than objectively, although purpose may be established by inference from the conduct of the respondent (s 46(7)). As Toohey J observed in Queensland Wire 167 CLR, the reference to "for the purpose of" carries with it the notion of an intent to achieve the result spoken of in each of the paragraphs in s 46(1) (at CLR 214). I note that the subjective nature of the relevant intent was also endorsed by the High Court in Boral Besser 215 CLR at 484. 161 Second, in my view the "purpose" of the respondent, which as Toohey J observed in Queensland Wire [1989] HCA 6 ; 167 CLR 177 carries with it the notion of an intent to achieve a certain result, was to prevent the Excluded Data being used for direct marketing. The clear inference which can be drawn from the conduct of the respondent is that, despite publicly expressed concerns of the respondent concerning usage of its data for direct marketing, and although the licensees were required by the licence agreement between themselves and the respondent to ensure that end users had agreed not to use the data or data products supplied by the licensees for direct marketing, nonetheless end users (primarily some real estate agents) were engaging in direct marketing using data sourced originally from the respondent. I note that the possibility of the Excluded Data being withdrawn because of inappropriate use by end users had been anticipated by cl 9.11 of the 2003 licence agreement which provided: "The Licensor reserves the right to exclude future supply of certain particulars forming part of the Licensed Data if the Chief Executive of the Licensor is satisfied on reasonable grounds, that inclusion of the data may result in inappropriate use or disclosure. Furthermore the Licensor may prohibit or limit distribution of certain particulars forming part of the Licensed Data." 162 It is because of the respondent's view that Excluded Data was being misused for direct marketing that the respondent formulated its proposal to exclude the Excluded Data from the Collected Data it supplied the applicant and the other licensees. Excluded Data could still be obtained from the respondent, because the respondent was statutorily obliged to supply it. One obvious result of end users obtaining Excluded Data on the basis of individual searches is that the cost and process of so obtaining that information is a clear disincentive to direct marketing activities, which is compatible with the stated purpose of the respondent. 163 Third, the applicant made a number of claims in the amended statement of claim concerning the alleged intention of the respondent to harm the applicant. I make the following observations: &#8226; In relation to the claim of the applicant that the respondent had an intention to harm and prevent the applicant competing in the market place by offering another party, Infopac, favourable terms in order to compete with the applicant (amended statement of claim para 10(b)(i)(B)(I)), no evidence is produced other than that of Mr Catelan in his affidavit, referring to alleged statements of Mr Witt in 1998. I note that these statements were allegedly made almost 10 years ago, and appear to bear little relationship to the complaint before me. Further, I note that Mr Witt was not cross-examined in relation to these statements, nor did any other person who could give direct evidence as to such an offer give evidence. I also note Mr Oakley was cross-examined in relation to a letter from Infopac received by him in 1998 (pp 278-279) however there was no substantiation that the respondent had sought to cause harm to the applicant in connection with an contractual relationship between the respondent and Infopac. I therefore give no weight to this aspect of the claim. &#8226; Similarly Mr Witt was not cross-examined concerning the allegations of the applicant with respect to Mr Edwards and Residex (amended statement of claim para 10(b)(i)(B)(II)). No evidence was given by Mr Edwards, and Mr Edwards did not appear as a witness in these proceedings. I also give no weight to this aspect of the claim. &#8226; In relation to the claim of the applicant that on 4 February 2005 Mr Fry and Mr Oakley said to Ms Jane Woodward of the applicant that if the applicant did not agree to the new licence conditions the applicant would not receive any Collected Data in the future, I note that: o Mr Fry stated in para 28 of his affidavit that what occurred was that "I said that if RP Data did not agree to the new licence conditions and refused to enter into a licence agreement then RP Data would not be able to receive licensed data after 30 June 2005. This would apply to the other seven licensees." Mr Fry was not cross-examined with respect to this statement. o Ms Woodward gave no evidence in these proceedings. o It is clear from the evidence of Mr Fry that all licensees were being treated in the same way, and this evidence does not establish a breach of s 46 as alleged.