SECTIONS 45 AND 45a OF THE ACT
9 The applicant contends that, in entering into the alleged cartel agreement, the respondents had contravened s 45 of the Act. Reliance was placed on the deeming provision in s 45A(1) of the Act. Those provisions are in these terms:
"45(1) …
(2) A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding, if:
(i) …
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
…
(3) For the purposes of this section and section 45A, competition, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.
…"
10 Section 45A(1) provides that:
"Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other."
The term "market" is defined in s 4E, (in the absence of a contrary intention) to mean "a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services."
11 A common complaint of the respondents is that the applicant does not identify the relevant market or markets in which it alleges that any two or more of the respondents are "in competition with each other".
12 In its SASC the applicant alleges that the respondents provide inbound and outbound international airfreight services to and from Australia (paragraphs 13 and 14). The routes on which those services are provided are identified in paragraph 22 and Schedule 2. They are routes between a considerable number of foreign cities and Australian ports. The routes between particular Australian ports and particular foreign cities may vary, with different respondents sometimes using different intermediate ports. Each respondent is alleged, in paragraph 22, to have been in competition with one or more of the other respondents in providing inbound and/or outbound international airfreight services on one or more of these routes. There follow general assertions that each respondent was in competition with one or more other respondents within the meaning of s 45(3) of the Act, that the alleged cartel arrangement had the relevant purpose and effect for the purposes of s 45A of the Act and that each of the respondents had thereby contravened s 45(2)(a)(ii) of the Act (paragraphs 23, 24, 27 and 28).
13 In Sammy Russo Supplies Pty Ltd v Australian Safeway Stores Pty Ltd [1998] ATPR 41-641 at 41,094 Goldberg J identified the material facts which need to be pleaded in order to establish a cause of action under s 45(2)(a)(ii) of the Act. His Honour said:
"When pleading a cause of action under s 45(2)(a)(ii) it is necessary to identify and plead material facts in relation to:
(a) the making of a contract or arrangement or the arriving at an understanding;
(b) the identification of a provision in that contract, arrangement or understanding;
(c) an allegation that the provision has the purpose, or would have, or be likely to have the effect, of substantially lessening competition;
(d) an allegation identifying the relevant market in which competition would be lessened and the manner in which competition would be lessened.
If s 45A is relied upon it is still necessary to allege that the parties to the contract, arrangement or understanding are in competition with each other.
…
It is not sufficient simply to allege that a provision of a contract had the purpose of substantially lessening competition. It is necessary to allege material facts identifying a relevant market. This is made clear by s 45(3) …"
See also: Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 26 ALR 609 at 646-7; Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] ATPR 41-996 at 48,671.
14 The applicant seeks to distinguish Sammy Russo because the applicant in that case had not sought to place exclusive reliance on s 45A in order to establish the presence of the necessary purposes or effect of the arrangement. It conceded that no 'market' had expressly been identified in the SASC. It contended that it was not necessary for it to do so. It submitted that the pleadings in paragraph 22 are sufficient to establish that at least two of the respondents were in competition in a market and that all of the respondents were offering inbound and outbound international airfreight services on the routes there identified. This, it is said, is sufficient because, in a case such as the present, in which an applicant places exclusive reliance on the deeming effect on s 45A of the Act to characterise the relevant conduct, it will be sufficient for the applicant to prove that any two or more parties to the impugned arrangement are in competition in any market.
15 The applicant relies on certain observations, made by Heerey J, in Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd [1997] ATPR 41-570. In that case objection had been taken to the manner in which the relevant market had been pleaded by the Australian Competition and Consumer Commission ("the ACCC"). The pleading identified the major suppliers of services, described how the market operated and provided details of the barriers to entry to the market and its geographic limits. Although the pleading was objected to on the ground that it was "conclusionary", it was struck out, by his Honour, on the ground that it was prolix, unnecessary and irrelevant. Having referred to ss 45(2), 45(3) and 45A(1) of the Act his Honour continued (at 43,920):
"Thus competition relevantly means competition in any market in which the parties to the actual or proposed contract, arrangement or understanding are engaged. As long as the ACCC can establish that, in connection with the alleged arrangements or understandings, McPhee and DFE were competing in a market, it is not to the point that others may have been supplying the same services in that market, or that services other than express freight transportation services might have been provided, or that the geographical extent of the market might have been different from that pleaded. To illustrate the point, one might ask rhetorically what would it matter for the purposes of the present case if, after elaborate discovery and issue of many subpoenas, expensive expert evidence, and a trial lasting several weeks, if not months, it were proved that AirRoad and COPE were not participants in the alleged market, that some other firms not named in para 10 were participants, or that the alleged market did not cover the whole of Australia but only Victoria, South Australian and New South Wales?" (Emphasis in original).
16 Later (at 43,921), his Honour concluded that:
"In the present case, if it were established that McPhee and DFE were offering, or contemplating the offer of, the same services (express freight transportation services), to the same existing or potential customer …, it would be open to a Court to conclude that McPhee and DFE were in competition with (at least) each other in a market for the supply (at least) of such services."
17 Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] ATPR 41-996 was also a case in which the applicant sought to rely on the deeming provision in s 45A(1) of the Act. The statement of claim alleged that there was a market "for the provision of demolition and asbestos removal services in the greater metropolitan area of Adelaide …". It was also alleged that certain of the respondents were in competition with each other in that market. Although the respondents denied the latter allegation they admitted that they were in competition in the market for "demolition services in the greater metropolitan area of Adelaide." The respondents sought further particulars of the allegations contained in these paragraphs. Selway J refused the application. In doing so his Honour said (at 48,671) that:
"The ACCC relies upon the deeming provision in TPA s 45A(1). That relates to agreements or understandings reached between parties "in competition with each other". "Competition" is relevantly defined in TPA s 45(3) to mean "competition in any market in which a [relevant] corporation is a party." "Market" is relevantly defined in TPA s 4E. Plainly enough it is material to the case that the ACCC seeks to establish that the relevant parties to the agreement or understanding are in "competition" with each other. It is also a material fact that they are operating in the same market. At the very least it is a necessary particular of that material fact to identify what that market is.
The respondents seek from the ACCC further particulars of the relevant market: the source or sources of business or businesses, the nature of the client or clients and details of the business or businesses in competition. In some contexts these particulars might well be necessary. For example, if the allegation related to the effect of an agreement or understanding on the overall operation of the market then it may be necessary for the ACCC to provide quite detailed particulars of that market in order to identify the relevant effect … However, in this case the relevant anti-competitive purpose or effect is strictly limited in scope. It relates only to the price of a particular contract let by the Department of Defence and particularised in the Statement of Claim. The competitors involved in that tender process are specified by name in the Statement of Claim. So too are those said to be parties to be arrangement or understanding. The price said to be fixed has not been particularised, but it is either the "price" contained in the offer by the fifth respondent … or the "price" obtained by the Department of Defence. Plainly enough it is not the price of services generally available in the market place. In any event, the broader market is identified and particularised."
18 Section 4E of the Act contemplates that there are both markets for particular goods or services (product markets) and geographic markets: see Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 26 ALR 609 at 647.
19 The requirement that the geographic area of a market be identified arises from the terms of s 4E. The market must be "in Australia". In economic terms "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": 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 The Broken Hill Proprietary Company Ltd (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. It cannot be assumed that, simply because the relevant services involved moving goods into and out of Australia, the market was located in Australia.
20 In my view an applicant, in a proceeding such as the present in which exclusive reliance is placed on s 45A of the Act, must, in its statement of claim, identify the market or markets in which it is said that the anti-competitive conduct has taken place. The pleadings must identify (at least) the relevant goods or services and the geographic boundaries of the market. The pleading need not descend to the degree of particularity to which Heerey J objected in McPhee or the detail which Selway J found to be unnecessary in McMahon Services. In both of those cases it was held that the identification of a market was a material fact or particular which had to be pleaded. This had been done in an acceptable way in McMahon Services. It is true that the necessary competition between those who have entered into arrangements can take place in any market. This does not mean that applicants are absolved from the need to identify the parameters of that market by reference to the relevant goods and services and the geographic area within which competition in relation to the supply of those goods and services is said to take place. In McPhee Heerey J deprecated the ACCC's attempt to define the market in minute detail. He did not, however, hold that no attempt to define the market was necessary. Indeed his reasoning proceeded on the assumption that a geographic and product market had been pleaded. As McMahon Services demonstrates this can be done succinctly and without unnecessary prolixity.
21 The respondents in the present proceeding are entitled to know where in Australia it is said that they compete with each other named respondent for the provision of international airfreight services. This will depend on where negotiations between the respondents and their customers take place and contracts are entered into. These material particulars are not provided. It cannot be assumed that all or even some of the respondents are in competition, in the necessary sense, in all parts of Australia. In the absence of these material facts the pleadings are deficient in a significant respect. They also give rise to embarrassment. Respondents could not be expected to plead to paragraph 22(a) given that the paragraph does not identify which respondents are alleged to compete with each other on the scores of routes between unnamed Australian ports and named foreign cities or where that competition is said to have taken place. They cannot reasonably be expected to know where other respondents compete for business. The mere fact that two or more respondents are identified in Schedule 2 as providing services to or from particular overseas ports says nothing about where those respondents compete (if they do) to obtain contracts for the carriage of goods on those routes.
22 There is a further problem with paragraph 22(a). It appears to proceed on the basis of a tenuous construction of s 45A of the Act. That construction, which fastens on the words "or by any of them", admits the possibility that all parties to an alleged arrangement can be treated as being subject to the deeming provision in s 45A even if the party concerned is not in competition with the other parties in a particular market. It is sufficient to note, for present purposes, that there is authority for this proposition: see Trade Practices Commission v David Jones (Australia) Pty Ltd (1986) 13 FCR 446 at 473. It is strongly arguable that such a construction does not conform with the ordinary and natural language of s 45A or the statutory purpose which it seeks to serve. These construction issues may need to be resolved at trial. It will not, however, be possible to determine whether or not they arise until the applicant alleges and proves the markets in which each respondent competes with which other respondent.
23 The applicant's failure to identify, in its pleadings, the relevant market or markets has implications for other parts for the SASC. In paragraphs 80 and 81, for example, it alleges that the respondents were in a position to influence the price for international airfreight services because of the volume of international airfreight which they carried into and out of Australia. In paragraph 81 (when read with Schedule 3) the applicant identifies the percentages of inbound and outbound airfreight carried by each of the respondents between Australia and certain overseas countries. Curiously, in paragraphs 80(b) and 81(b) it is pleaded that the respondents "together and in combination" with other participants in the cartel "were able by their pricing behaviour to influence the price of international airfreight services" and, specifically, for routes between Australia and each of the places specified in Schedule 3. Even if the alleged cartel participants "were able" to influence the prices charged for international airfreight services, they would only be liable for damages for a contravention of s 45 of the Act if they did, in fact, by their conduct cause prices to be inflated. More importantly, the absence of a market definition prevents the respondents from knowing whether it is alleged that any attempt to influence prices, in furtherance of the alleged agreement, occurred in any market in Australia.
24 The failure to identify a market or markets creates a special problem for British Airways. It has the benefit of an authorisation under s 88 of the Act in relation to a joint services agreement which it has with Qantas. That agreement permits British Airways to agree with Qantas about the prices for services offered, including cargo services, on routes covered by the agreement. Such an authorisation provides British Airways with a defence against any claim that it has contravened s 45 of the Act. Unless British Airways is able to relate the routes covered by the authorisation to the relevant markets for the purposes of s 45 it will be unable to know whether it can plead a complete or partial defence based on s 88.
25 The ACCC made certain submissions as to whether, in a case in which a contravention of s 45 is alleged and exclusive reliance is placed on the deeming provisions of s 45A, it is necessary for the ACCC to plead a "market" when applying for a penalty to be imposed on a respondent who is party to a proscribed agreement. Certain aspects of those submissions which related to the need to identify a market were strongly opposed by the respondents. It is not necessary that I resolve these differences. They may require attention if and when the ACCC seeks to have penalties imposed on the respondents (or some of them). In the present context it is sufficient to record the submission of senior counsel for the ACCC that, if the Court "were satisfied that having regard to the nature of the matters alleged and the nature of the relief sought, that it was necessarily a fair requirement on the applicant facing the respondents that the applicant should identify to the respondents what the market was", the ACCC would not wish to be heard on that point.