Case: Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481
Outcome: cited
attempt to define a "market" with absolute precision confronts serious obstacles. The term "is a metaphor used to describe a range of competitive activities by reference to function, product and geography": see Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193 ; (2003) 131 FCR 529 at 545. The concept was succinctly explained by Fisher J in Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 26 ALR 609 at 647 where he quoted with approval a passage from a decision of the Trade Practices Tribunal: "The Trade Practices Tribunal considered the concept of market in some detail in Re Queensland Co-operative Milling Association Ltd (1975-6) 8 ALR 481 at 517, where the members said: "A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them ... Within the bounds of a market there is substitution substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive"...". As Re Queensland Co-operative Milling and other authorities to which I made reference in my previous reasons make clear, a market for services will exist only if there is strong substitutability between those services on both the demand and supply sides. In its submissions, Cathay Pacific cited a number of hypothetical examples which make good this point. There may be a high degree of cross-elasticity of demand between an international air freight service from Hong Kong to Sydney and an equivalent service from Hong Kong to Melbourne. An increase in the price of the Hong Kong to Sydney service might lead to customers using the Hong Kong to Melbourne service and then using land transport to move the goods within Australia. In such circumstances it could be said that the Hong Kong to Sydney and the Hong Kong to Melbourne services were part of the same market. On the supply side, if carriers were faced with reduced demand for services on the Hong Kong to Sydney route, and an increased demand on the Hong Kong to Melbourne route, the carriers which service both routes could move aircraft and other resources from the Sydney route to the Melbourne route to meet the changed demand. It could, therefore, be said that there was a high degree of cross-elasticity of supply between the services so as to justify treating the two routes as part of a single market. It would, on the other hand, be far more difficult, if not impossible, to establish the existence of cross-elasticity of demand or supply for international air freight services on the routes from Hong Kong to Moscow and from Dubai to Sydney. The applicant, nonetheless, maintained that the field of rivalry between the respondents, and hence the market, is worldwide. As has been noted, the material facts relied on by the applicant to establish the existence of a "global market" include the possibility that carriers are able to substitute routes and modes of carriage between hubs and ports when providing services. In some cases this will be suggestive of cross-elasticity of supply. It would not matter to the customer, assuming no material variation in charges or delivery time, whether goods sent from London to Melbourne were routed through Hong Kong or Singapore. That may be accepted and the two routes may be found to form part of the same market. That example, however, deals with but one of a myriad of routes comprehended by the substitutability pleading in paragraph 34. Not all of these routes could possibly be said to form part of the same market. It could not, realistically, be asserted that close competition and strong substitution could be found for the supply of international air freight services between one particular route and every other route in the world. Rather, there are potentially thousands of discrete markets, the existence of which will depend on the type of economic analysis referred to in the authorities. In order for there to be a "market in Australia", it is necessary for competitive activity to occur within Australia. As I said at [19]: "In economic terms "a market is the field of actual and potential transactions between buyers and sellers among whom there can be strong substitution, at least in the long run, if given a sufficient price incentive": see Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 190. In the same case a market was also referred to as an "area of close competition between firms": ibid; see also Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd [1989] HCA 6 ; (1989) 167 CLR 177 at 195 (per Deane J); at 199-200 (per Dawson J). Buyers and sellers of goods and services must negotiate and enter transactions in an area in which suppliers are engaged in close competition with each other. That area must be located within Australia". Competitive activity can take many forms. It may involve advertising campaigns by the suppliers of particular goods or services by which they attempt to attract customers. It may involve the efficiency with which services are provided or attempts to provide higher quality products. Firms may also compete by offering better quality after-sales service, or in ensuring the ready availability of spare parts. These competitive activities may take place within a geographic market even though contracts for the provision of the goods or services are negotiated or entered into elsewhere. In many cases, negotiations between seller and buyer will take place in a competitive environment in Australia and contracts will be signed here. When, however, there is a global or international market of which Australia forms part, it is possible for competitive activity of the kind earlier mentioned to take place in Australia even though contractual arrangements are formalised overseas. It has yet to be determined authoritatively that a "market in Australia" exists when goods and services are provided on a competitive basis in Australia, but the terms and conditions on which they are provided have been negotiated and agreed upon wholly outside Australia.