Case: Melway Publishing Pty Limited v Robert Hicks Pty Limited [2001] HCA 13 ; (2001) 205 CLR 1
Outcome: applied
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. 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]. 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]. 1092 Moreover, the suggestion that QR took advantage of market power is at odds with three further principles which emerge from the authorities. First, I do not see how it can be said that to obtain possession with a view to converting the AR terminal to a common user facility as was sought in 1997-98 or a multi-user facility in 2003, was facilitated by the existence of the power: Melway at [51] and Rural Press at [53]. 1094 Third, QR's conduct cannot be said to have been "necessarily" an exercise of market power: Melway at [68]. 1095 I will deal briefly with Mr Ergas' contention that a number of the clauses of QR's open offer in the Draft Terminal Services Agreement, as amended on 6 July 2005, constituted a misuse of market power. Mr Ergas argued that only a firm with market power could make such an offer. He argued that in a competitive market, confronted by such an offer, the firm would go elsewhere. 1096 Mr Ergas' attack focussed upon three clauses of the draft document (as amended) which I have set out above. They are: first, the provision dealing with late trains contained in cl 6.7; second, the provision for PN to be able to increase the monthly throughput in the capacity of the AR terminal, in addition to the right to a 10% increase in the allocated monthly TEU provided for in cl 1(a)(ii) of Schedule 2. The provision for additional throughput is found in cl 7.5, which includes in cl 7.5(d) the notion of a deemed permanent increase with resulting increased costs for PN. 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). 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 .