Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Background 1 The respondent in the proceeding ("ANZ") seeks by motion an order that the statement of claim of the applicant ("ACCC") be struck out pursuant to Order 11, r 16(b) of the Federal Court Rules on the footing that the pleading has a tendency to cause prejudice or embarrassment as it fails to plead as required by Order 11, r 2(a) material facts necessary for the purpose of formulating a complete cause of action said to arise under ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) ("the Act"), having regard to s 45A of the Act. Thus, inconsistent with established principle, the pleading fails to define, it is said, the issues with sufficient clarity to enable the respondent to understand and have the opportunity to meet the case made against it and further, the pleading asserts conclusions unsupported by material facts. As to those principles, see: Dare v Pulham (1982) 148 CLR 658 at 664; Mitanis v Pioneer Concrete (Vic) Pty Ltd [1997] ATPR 41‑591 at 44, 151; Bruce v Odhams Press Ltd [1936] 1 KB 697 at 712‑713; and Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114‑5. 2 However, where a demonstrated failure to plead material facts gives rise to no real confusion or gives rise to no issue of substantive principle, the Court will be restrained in the exercise of the strike‑out power. Not all conclusionary pleadings will be struck out. Whether a pleading ought to be struck out will depend upon whether the facts have been pleaded at too great a level of generality or at too high a level of abstraction (HECEC Australia Pty Ltd v Hydro‑Electric Corp [1999] FCA 822; State of Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] ATPR 41‑691 at 42, 828‑9; Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association (WA) (1987) 13 FCR 413; and Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd [1991] FCA 557). The authorities governing the exercise of the discretion to strike out a pleading are usefully assembled by Weinberg J in McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at 415‑421; adopted by Tracey J in Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd [2008] FCA 1458; and as Tracey J notes, applied in Australian Automotive Repairers' Association (Political Action Committee) Inc. v NRMA Insurance Ltd [2002] FCA 1568 at [14]‑[17]; Australian Wool Innovation Ltd v Newkirk [2005] ATPR 42‑053 at 42, 669‑42, 670. It is not necessary to restate comprehensively the content of those well understood principles. 3 In the alternative, the respondent seeks an order that the applicant provide further and better particulars of various paragraphs of the statement of claim pursuant to a request made by the respondent's solicitors of the applicant's solicitors, said to be the subject of an inadequate response. As to the relationship between the "fundamental rule of pleading" that a pleading contain statements of material facts and the role of particulars, the adoption by Goldberg J in Sammy Russo Supplies Pty Ltd & Anor v Australian Safeway Stores Pty Ltd (1998) ATPR 41‑641 at 41, 093 (a case in which the applicant asserted contraventions of ss 45(2)(a)(ii) and 45(2)(b)(ii) and in the alternative contraventions of those sections having regard to s 45A), of Scott J's remarks in Bruce v Odhams Press Limited (supra), remains important: The cardinal provision … is that the statement of claim must state the material facts. The word "material" means necessary for the purpose of formulating a complete cause of action; and if any one "material" fact is omitted, the statement of claim is bad; it is "demurrable" in the old phraseology, and in the new is liable to be "struck out". The function of "particulars" is quite different. They are not to be used in order to fill material gaps in a demurrable statement of claim - gaps which ought to have been filled by appropriate statements of the various material facts which together constitute the plaintiff's cause of action. The use of particulars is intended to meet a further and quite separate requirement of pleading, imposed in fairness and justice to the defendant. Their function is to fill in the picture of the plaintiff's cause of action with information sufficiently detailed to put the defendant on his guard as to the case he has to meet and to enable him to prepare for trial. Consequently in strictness particulars cannot cure a bad statement of claim. But in practice it is often difficult to distinguish between a "material fact" and a "particular" piece of information which it is reasonable to give the defendant in order to tell him the case he has to meet; hence in the nature of things there is often overlapping. 4 The essential criticism of the pleading is that it is impermissibly reductionist. It reduces a structured pleading of material facts to a series of inter‑dependent definitions some of which are inclusive of particular matters and thus open‑ended rather than an exhaustive statement of the relevant matters. Those definitions are then adopted as defined terms to plead contraventions of the Act. The pleading in that form fails, it is said, to isolate the essential integers of a cause of action derived from ss 45(2)(a)(ii) and 45(2)(b)(ii) and 45A of the Act and, in consequence, fails to isolate and plead material facts establishing those integers. In order to plead to the statement of claim, ANZ is required, it is said, to either deny or admit that a term has the aggregated meaning attributed to it or to deconstruct the definition, isolate its component parts and admit or deny each part and plead contrary facts. This form of pleading is said to raise three faults. First, it fails to plead facts material to the cause of action and adopts or assumes terms the content of which need to be sequentially asserted as facts as their use as a "shorthand" for a collection of elements or notions is confusing contextually in the subsequent pleading. Secondly, the definitional device obscures the case put against ANZ. Thirdly, the device inverts the obligation of the ACCC to plead its case by requiring ANZ to isolate the ACCC's case from a collection of definitional terms, restate the perceived case and plead to that case. 5 In particular, the use of this definitional device is said to obfuscate whether ANZ provides the same, similar or substitutable services as those supplied by the market participant with whom ANZ is said to have imposed an s 45A provision in relation to prices as part of a contended contract arrangement or understanding struck with that participant. 6 The ACCC says its pleading exhibits none of these contended failings. It says the pleading of the contravention of s 45 in reliance upon s 45A is in truth a simple and straightforward matter. It says the adoption of a definitional device does not assume any or a collection of matters but rather asserts as facts that the content of terms are comprehended by the elements of the definition. The subsequent use of those terms in the pleading, although they encapsulate more than one element, makes the contention of contravening conduct plain and clear. As to the obfuscation of the services and whether they are the same, similar or substitutable services provided in competition in a market between ANZ and the relevant participant, the ACCC says that because it relies upon ss 45(2)(a)(ii) and 45(2)(b)(ii) in conjunction with s 45A, it is simply not necessary to plead all of the various layered onion rings of contestable conduct within the relevant market. What is necessary is to plead, at the centre, whether ANZ and the relevant participant are engaged in an identified market in the provision of identified services in competition. Whether others are in competition with those participants and isolating the composition and characteristics of the outer ring of contestable substitution is neither here nor there nor relevant. Pleading the full structural elements of the market and the boundaries of substitution is thus not required in order to establish the cause of action. Such a proposition is said to be supported by the observations of Heerey J in Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd & Ors (1997) ATPR 41‑570 at 43, 920 and consistent with Australian Competition and Consumer Commission v McMahon Services Pty Ltd (2004) ATPR 41‑996 per Selway J at 48, 671.

Preliminary principles 7 Section 45(2)(a)(ii) relevantly provides that a corporation shall not make a contract or arrangement or arrive at an understanding if a provision of a proposed contract, arrangement or understanding has the purpose or would have or be likely to have the effect of substantially lessening competition. Section 45(2)(b)(ii) symmetrically provides, relevantly, that a corporation shall not give effect to a provision of a contract, arrangement or understanding if that provision has the purpose, or has or is likely to have the effect, of substantially lessening competition. Section 45A provides that a provision of a contract, arrangement or understanding shall be deemed for the purposes of s 45 of the Act to have the purpose, or to have or 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, services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding … or by any of them, in competition with each other. 8 Accordingly, in order to plead a contravention of s 45(2), the applicant must plead material facts that establish the making of a contract or arrangement or an understanding arrived at between the relevant participants; isolate a provision of that contract, arrangement or understanding which is said to have the purpose or would have or be likely to have the effect required by the Act; isolate material facts from which an inference of purpose might be drawn or facts from which the contended effect might be established; and plead material facts that establish the relevant market in which competition would be lessened and the circumstances of lessening. If s 45A is to be relied upon, the applicant must isolate a provision of the contract, arrangement or understanding which has the purpose or has or is likely to have the effect 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 particular services. The applicant must plead material facts identifying the particular services either supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or by any of them (or related entities) and material facts which establish that the parties to the contract, arrangement or understanding engaged in the supply or acquisition of the relevant services are in competition with each other in relation to those services. 9 The pleading of material facts which establish the integers of s 45A give rise to a conclusion, for the purposes of the pleading, drawn from those facts of a contravention of s 45. Pleading material facts which establish the purpose, effect or likely effect of a provision of a contract, arrangement or understanding of the kind described in s 45A makes it unnecessary to plead facts going to purpose or effect or likely effect of substantially lessening competition. Section 45A, if established, effects a deemed contravention of s 45 as the parliament regards arrangements between competitors in relation to prices (of the kind described by s 45A) as perverse to competition as a process, a threat to consumers and inconsistent with the object of the Act (s 2). However, an essential integer of s 45A is whether the parties (or perhaps some of them) to the contract, arrangement or understanding are in competition with each other in the supply or acquisition or proposed supply or acquisition of the identified services. Competition is a "rich" and "dynamic" process which expresses itself as "rivalrous market behaviour". Whether firms compete "is very much a matter of the structure of the market in which they operate" (Re Queensland Co‑operative Milling Association Ltd; Re Defiance Holdings Limited [1976] 25 FLR 169 at 187, 188 and 189). 10 Section 45(3) provides that "competition" for the purposes of s 45A in relation to a provision of a contract, arrangement or understanding means "competition in any market in which a corporation that is a party to the contract, arrangement or understanding … supplies or acquires … services". 11 Thus, it is necessary to plead material facts which establish that the participants to the contract, arrangement or understanding embodying the s 45A provision are engaged in the supply or acquisition of the identified services in any market in Australia and secondly, that the participants are engaged in rivalry with each other in that market in those services. Rivalry however takes place within a field of transactions between buyers and sellers and the boundaries of the field of rivalry are to be determined by not only the services supplied or acquired by a participant to the contract, arrangement or understanding but also having regard to services that are substitutable for or otherwise competitive with those services (s 4E of the Act). Section 4E of the Act simply recognises the economic orthodoxy of close competition determined by strong substitution (over the long run - two years not simply transient demand or supply responses, given a sufficient price incentive) within a field of actual and potential transactions between buyers and sellers, as the determinant of the boundaries of a market. It is not necessary to repeat the well understood passage from Re Queensland Co‑operative Milling Association Ltd (supra) at p 190 adopted with approval by many authorities including Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Ltd (1989) 167 CLR 177 and Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374.

The proceeding 12 In this proceeding, the ACCC seeks a declaration in these terms: that the respondent (ANZ), by entering into an agreement with a mortgage broker [Mortgage Refunds Pty Ltd (MRPL)] on or about 10 May 2004, which agreement contained a provision that the maximum refund of commission offered by the mortgage broker to its customers, in respect of its provision to them of loan arrangement services for loan products, was to be no greater than the amount of the loan approval fee charged by ANZ for its loan arrangement services from time to time, has made a contract or arrangement or arrived at an understanding containing a provision which had a substantial purpose, and has or was likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, a discount, allowance, rebate or credit in relation to loan arrangement services supplied by the mortgage broker in competition with ANZ, and has thereby contravened section 45(2)(a)(ii) of the Act by operation of section 45A. 13 The ACCC also seeks a declaration that ANZ by accepting loan applications submitted to it by MRPL on condition that MRPL abide by the provision of the contract recited in the declaration, has given effect to the contravening provision and thereby contravened s 45(2)(b)(ii) of the Act by operation of s 45A. The ACCC seeks an injunction restraining ANZ for a period of five years by itself (or otherwise howsoever) from making, arriving at or giving effect to a contract, arrangement or understanding with a competitor containing a provision which has the purpose or effect or likely effect of fixing (adopting the remaining facultative language of s 45A) the amount of "refund, discount, allowance, rebate or credit that can be offered, by any of the parties, to a customer in relation to loan arrangement services provided by any of the parties in competition with one another". 14 The ACCC also seeks an injunction restraining ANZ from removing accreditation from a mortgage broker otherwise in compliance with ANZ's rules and standards of accreditation for the submission of loan applications to ANZ for ANZ loan products and an injunction restraining ANZ from refusing to accredit a mortgage broker seeking accreditation in circumstances where that broker complies with ANZ's protocols for accreditation. Further, the ACCC seeks an order that ANZ pay a pecuniary penalty to the Commonwealth as the Court determines and that orders of the Court so obtained be disclosed to shareholders at the next annual general meeting of ANZ's shareholders.

The statement of claim 15 In order to make good the claim to that relief and those orders, the ACCC delivered a statement of claim which proceeds on this basis. 16 By para 1, the statement of claim defines a number of terms which are used to frame assertions of fact in subsequent paragraphs of the pleading. The terms are these: "aggregator" means a person who contracts with a loan provider to accredit brokers to submit loan applications on behalf of customers for the loan provider's loan products direct to the loan provider and manages the brokers by ensuring, inter alia, that they comply with the loan providers' standard procedures and requirements in submitting a loan application. "broker" means a person who supplies loan arrangement services and is remunerated by either direct payment from the customer, or commission paid by the loan provider (either directly or through an aggregator) if the customer acquires the loan product of that loan provider, or a combination of both; and is expressly not an agent of the loan providers whose loan products they deal with. "customer" means a potential acquirer of both loan arrangement services and a loan product. "loan arrangement services" are services offered by suppliers to customers to assist them with choosing and acquiring a loan product. Such services include advising as to the respective features of available loan products from one or more loan providers; advising which available products best suit the customer; assisting customers to complete and lodge applications in a manner that meets the requirements of the chosen loan provider; acting as facilitator or liaison in the transaction for the acquisition of a loan product between the customer and those sections or divisions of a loan provider responsible for supplying loan products; and managing the ongoing relationship between the customer and the loan provider after the loan product has been acquired. "loan product" means a residential home loan offered by a loan provider. "loan provider" means a supplier of loan products within Australia. 17 By para 3, the applicant pleads that ANZ is a loan provider and was and is a supplier of loan arrangement services to customers through ANZ branches and franchises in Australia, including Queensland. By para 3.5, the applicant pleads that ANZ supplied loan arrangement services which included: 3.5.1 advising customers as to the respective features of the loan products available from ANZ; 3.5.2 advising which of its loan products were available to persons in the customer's circumstances; 3.5.3 advising customers which of its loan products best suited the customer's needs; 3.5.4 assisting customers to complete and lodge applications in a manner that met the requirements of the division of ANZ responsible for supplying loan products; 3.5.5 facilitating transactions for the acquisition of loan products between the customer and the division of ANZ responsible for supplying loan products; 3.5.6 managing, through its branches and franchises, the ongoing relationship between the customer and the division of ANZ responsible for supplying loan products, after the loan product has been acquired. 18 By para 3.6, ANZ charged customers who acquired its loan products, a direct payment known as an establishment fee or loan approval fee which from time to time ANZ fully or partially waived in order to secure the loan acquirer's custom. 19 As to MRPL, the ACCC pleads at para 4 that MRPL was a broker and supplier of loan arrangement services to members of the public in Australia including Queensland. By para 4.5, MRPL supplied all of the loan arrangement services described within the definition of that term. By para 4.6, MRPL was not a supplier of loan products and by para 4.7, MRPL was authorised by Australian Finance Group Ltd ("AFG") to submit loan applications on behalf of customers in respect of loan products to loan providers and to supply loan arrangement services to customers in respect of those products. By para 4.8, MRPL was remunerated for its supply of loan arrangement services by commission paid by a loan provider through AFG if the customer acquired the loan product of that provider. By para 4.9, MRPL from February 2003 was accredited by ANZ through AFG to submit loan applications to ANZ for ANZ loan products and by para 4.10, in the case of ANZ loan products, MRPL was paid commission for its loan arrangement services by ANZ through AFG if its customers acquired an ANZ loan product. By para 4.11, MRPL was not an agent of ANZ. 20 As to AFG, the ACCC pleads that it was an aggregator with contracts with loan providers for its accredited member brokers to submit loan applications on behalf of customers for the loan provider's loan products (para 5.2). It contracted with loan providers to ensure member brokers complied with the loan providers' standard procedures and requirements in submitting loan applications (para 5.3). From November 2002, AFG was the aggregator through which MRPL was accredited to submit loan applications on behalf of customers for loan provider's loan products (para 5.4) and from on or about February 2003, AFG was the aggregator through which MRPL was accredited to submit applications on behalf of customers to ANZ for an ANZ loan product (para 5.5). By para 5.6, AFG was remunerated by retaining a proportion of the commission payable by the loan provider to the broker who provided loan arrangement services. 21 As to the market, the applicant pleads: 6. At all material times: 6.1 there was and is a demand, from members of the public seeking to choose and acquire loan products, for loan arrangement services in Australia or, alternatively, in Queensland; and 6.2 loan arrangement services are and were supplied by, inter alia, brokers and loan providers, including ANZ 7. At all material times there was a market in which: 7.1 loan arrangement services were supplied to members of the public; 7.2 from February 2003 [MRPL] competed with, inter alia, ANZ to supply loan arrangement services, or alternatively loan arrangement services in respect of ANZ loan products; and 7.3 ANZ competed with, inter alia, [MRPL] to supply loan arrangement services, or alternatively loan arrangement services in respect of ANZ loan products. 22 As to the conduct, the ACCC pleads that from November 2002 MRPL offered customers a refund of part of the commission it received from a loan provider when the customer acquired a loan product from that provider through MRPL's loan arrangement services (para 8). From February 2003, MRPL offered customers such a refund in respect of its provision of loan arrangement services to those customers for an ANZ loan product (para 9). On or about 25 March 2004, ANZ by letter to AFG cancelled the accreditation of MRPL to submit loan applications to ANZ in respect of an ANZ loan product (para 10). ANZ engaged in that conduct for the reason that MRPL had offered customers a refund of part of its commission received from ANZ in respect of MRPL's provision of loan arrangement services for an ANZ product, to customers (para 11). On or about 29 April 2004, ANZ by letter to MRPL offered to enter into an agreement to re‑accredit MRPL to submit loan applications to ANZ in respect of its products (para 12). By para 13: It was a term of the offered agreement that the maximum refund allowed to be offered to customers by [MRPL] in respect of its provision to them of loan arrangement services for ANZ loan products, was to be no greater than the maximum loan approval fee that might be charged by ANZ to customers, as varied by ANZ from time to time. 23 On or about 10 May 2004, MRPL signed and entered into the maximum refund agreement (para 14). By para 15, the maximum refund provision: 15.1 had the purpose or a substantial purpose and further or in the alternative, had or was likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, a discount, allowance, rebate or credit in relation to loan arrangement services supplied or to be supplied by [MRPL], in competition with ANZ; and 15.2 by operation of section 45A, is deemed to have the purpose, or to have or be likely to have the effect, of substantially lessening competition for the supply of loan arrangement services in a market in Australia or alternatively in Queensland. 24 From on or about 10 May 2004, ANZ gave effect to the maximum refund agreement and the provision by accepting loan applications submitted by MRPL for an ANZ loan product and by paying commission to MRPL in respect of an ANZ loan product acquired by a customer through the provision of MRPL's loan application services, on condition that MRPL abide by the provision (para 16). 25 By para 17, the applicant contends that ANZ thus made a contract or arrived at an arrangement or understanding that contained a provision that had the purpose or effect of substantially lessening competition in contravention of s 45(2)(a)(ii) and gave effect to the provision that had that purpose or effect, in contravention of s 45(2)(b)(ii) of the Act. 26 Accordingly, the case made against ANZ is this. 27 First, there is a market for services described as loan arrangement services. They are services offered by a supplier to customers. A customer is a potential acquirer of both a residential home loan (a loan product) from a provider of residential home loans, and a loan arrangement service from a supplier of that service. The content of a loan arrangement service is defined as a service supplied to such customers of assisting them in choosing a particular residential home loan offered by a provider of such loans (i.e., a residential home loan lender). However, that service, by definition (para 1) has a number of component parts. A supplier of a loan arrangement service is someone that does these things: first, advises customers as to the features of available loan products from one or more residential home loan lenders; secondly, advises a customer of the available products that best suit the customer; thirdly, assists customers to complete and lodge an application for a loan which meets the lender's requirements; fourthly, acts as a facilitator or liaison between the customer and the lender in the transaction for the acquisition of a loan; and fifthly, manages the ongoing relationship between the customer and the lender after the loan has been taken up. This definitional statement of the content of loan arrangement services offered by suppliers of such services is expressed to be inclusive of these component parts. There may be other component services making up loan arrangement services but loan arrangement services at least include these elements. MRPL is a supplier of all of these services. ANZ however is not a supplier of loan arrangement services as defined by para 1. By para 3, ANZ is said to be a provider of loan arrangement services confined to its own loan products, their features, availability, terms and conditions, particular suitability to the customer's needs and the provision of assistance in the completion and lodging of applications to ANZ that meet the requirements stipulated by ANZ for such applications and the subsequent management of the banker/customer relationship in relation to that loan. 28 Secondly, the market for loan arrangement services is characterised by demand for these services in Australia or alternatively in Queensland from members of the public seeking to acquire a separate service, i.e., the acquisition of a residential home loan. 29 Thirdly, on the supply side, loan arrangement services are provided to those on the demand side by brokers (that is, a supplier not an agent of the lender, remunerated directly by the customer or by commission from the lender should the customer take up a loan (or a combination of both)) and by ANZ, among others. 30 Fourthly, from February 2003 MRPL was in competition with ANZ (among others) in the market to supply loan arrangement services to those on the demand side of the market. Alternatively and more narrowly, MRPL was in competition with ANZ in the supply of loan arrangement services to customers simply in respect of ANZ loan products; and ANZ was in competition with MRPL and others in the supply of loan arrangement services or simply in respect of ANZ loan products. 31 Fifthly, the provision (para 13 [22]) contained in the maximum refund agreement between ANZ and MRPL had the substantial purpose of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to loan arrangement services supplied or to be supplied by MRPL in competition with ANZ. Thus, ANZ is said to have made a contract, arrangement or understanding containing the provision and subsequently to have given effect to it. 32 The pleading therefore sets up a market in which there are only two identified supply side participants, brokers which include MRPL and ANZ. The services supplied by each are not said to be the same services. Plainly, it would be an odd pleading that asserted that ANZ was a provider of the five content services described at [27] to a potential acquirer of a residential home loan, making enquiries of ANZ. The bank confines its attention, as para 3 of the pleading makes plain, to the features, availability and qualifying conditions and management of applications relevant to its own residential home loan products. That seems to raise some fundamental questions. Is there a separate market for services which might be described as loan arrangement services supplied to those seeking a residential home loan? If so, what is the content of those services? Who are the essential participants on the supply side of that market? Does ANZ provide any of those services? If ANZ provides not those services but other services (such as arrangements in relation to its own loan products) are those other services strong substitutes in close competition with services provided by particular suppliers in the asserted market or categories of suppliers (such as brokers etc) in that market? Is ANZ in the provision of advice to a potential borrower and in undertaking all of the relevant steps required by whatever protocols govern the lodging, analysis and assessment of applications for residential home loans, engaged in steps which are a necessary incident of engaging in lending services? If the services provided by ANZ described at para 3 of the statement of claim are a necessary incident of lending services, is ANZ a participant in a market for the supply of lending products rather than a participant in an entirely separate field of rivalry for the services of arranging a loan. If there is a separate market for the services of arranging a loan, is ANZ in the market for the acquisition of such services from brokers including MRPL? A central element of the ACCC's case necessarily involves pleading material facts which demonstrate a contended market in which there is contestability and close competition between ANZ and MRPL. That close competition necessarily arises in a market which must be pleaded in a way which establishes contestability within the boundaries of a separate market for the asserted services. 33 Where one of the central questions in the controversy is whether there is a separate market in which the suppliers of differentiated services are in close competition and thus engaged in a field of actual and potential transactions between buyers and sellers, the market must be pleaded with some degree of specificity even if only to demonstrate that MRPL and ANZ are in the same market and in close competition in that market for the supply of a relevant service. For example, the pleading would ordinarily assert facts identifying the market as a market for a particular service or services. It might be asserted as a fact that the service is comprised of particular activities undertaken by suppliers of that service. The market might be identified by pleading the primary or core participants on the supply side of the market that provide those services. Broader categories of suppliers might be identified. The acquirers of that service would be identified. The services provided by the respondent would be identified together with the acquirers of that service. If the services are differentiated services, facts would be pleaded which assert strong substitution by acquirers of the primary service and the ANZ service and services provided by other relevant market participants but in particular MRPL. 34 In this case, two alternative markets are, in effect, pleaded by para 7 of the statement of claim in which competition between MRPL and ANZ is said to occur. First, a market for at least the content services at [27] comprising loan arrangement services for residential home loans made or to be made by lenders of such loans to members of the public and secondly, a market for loan arrangement services (as defined: presumably the five defined content services at [27]) but confined to (and thus different services) loans made or to be made by ANZ. The first market is plainly broader than the second and contends for supply side contestability between ANZ in the provision of its services and the range of content services as defined. Is ANZ, for example, providing advice in relation to the comparative merits of loan products (i.e., the characteristics, terms and conditions of residential home loans) offered by other lenders of such loans to acquirers of residential home loan products. If not, and ANZ simply provides advice about its own internal or domestic products, is it nevertheless doing so (when engaging with potential borrowers) on the supply side of the broader market where others, including brokers and presumably banks, are supplying similar or substitutable services? 35 The alternative market pleaded is confined to a market for services in relation to ANZ residential home loan products. This market is, in effect, said to be a separate product specific services market related solely to ANZ residential home loans. Presumably, the services in that market include some of the defined loan arrangement services but not others. For example, presumably a supplier of services in that market provides advice to customers of that service as to the features of available loan products from one or more residential home loan lenders. Presumably, when such a customer chooses to pursue a residential home loan product of ANZ, the field of loan arrangement services provided by such a supplier is then limited to the product specific loan arrangement services related to an ANZ residential home loan. 36 The pleaded cap or limitation upon the extent to which MRPL might pass on a rebate, discount or allowance for providing particular services to a customer taking up a loan from ANZ seems to suggest, at least as pleaded, contestability and substitution for particular services was occurring at material times between ANZ and MRPL by reference to price. 37 It seems to me however that material facts must be pleaded that establish each of the contended markets in which competition between MRPL and ANZ occurs. Those facts in this case would isolate the services for which there is a market; the principal suppliers of those services; the services supplied by MRPL; the services supplied by ANZ; the contestability and strong substitution between the services offered by MRPL and those offered by ANZ to those seeking to acquire services within the contended services market. Those material facts might plead the subsistence of a broader market in which MRPL and ANZ are supply side participants for one or more of the content services or a narrower services ANZ product specific market. 38 Perhaps the real difficulty with the present pleading is that it defines a market by reference to the collective activities of a contended participant and then asserts that ANZ does some of those things with the result that the service offerings between the two are said to be contestable within a market for the service offerings of the selected participant, rather than first defining the market by reference to the functional services making up one or more of the contended markets and then identifying the participants in each of those markets, the relevant service offerings and the level of contestability between those offerings, thus leading to a conclusion of competition between ANZ and MRPL in a market. 39 The ACCC contends that the Court will not be called upon in resolving the matters in controversy in this proceeding to determine the market in which MRPL and ANZ are in competition. The ACCC says that it is sufficient, in order to establish the cause of action, for the Commission to establish that there is at least a market, whatever the boundaries of that market might be, in which MRPL and ANZ are in competition. Thus, a detailed pleading of the structure of the market, the boundaries of the field of rivalry and range of substitution possibilities is irrelevant as it does not matter whether a particular field of market participants are engaging in rivalrous behaviour so long as MRPL and ANZ are shown to be rivals in a market in respect of particular services. 40 In broad terms, aspects of that submission are correct. However, whilst it is true that the outer layer of contestability need not be pleaded and nor is it necessary to scope in a prolix and detailed way every structural facet of each of the contended markets, it remains necessary to plead material facts which establish a field of rivalry within which MRPL and ANZ experience contestability and strong substitution. Section 45A is a deeming provision that stands or falls in its application (apart from anything else) on whether or not the pricing conduct meeting the section occurred between competitors in the supply of contestable services. The need to plead a market and prove contestability is an essential element of s 45A thus leading to a conclusion that A and B are in competition in the supply of the relevant services in the market or markets adopted by the pleading. It is true that the content of the pleading of a market said to exhibit the relevant close competition between the participants to an s 45A provision within the contended contract, arrangement or understanding will necessarily vary according to the relationship between the contended conduct and the market for goods or services in which the conduct occurred. 41 For example, a company might be engaged in the transportation of manufactured goods (clothing made by a particular manufacturer in Adelaide) from Adelaide to Sydney. Such a company may have enjoyed the benefit of a contract for the acquisition of its transportation service by that manufacturer for some years. Such a manufacturer might elect to invite nominated other providers of that service to submit a quotation for the future supply of that service. An incumbent supplier that strikes an arrangement with an invitee requested to supply a quotation for the provision of that service, to fix or control the price for the service potentially to be provided after the expiry of the contract would, no doubt, face the contention that such conduct contravened s 45 by reason of s 45A of the Act. In pleading such a contravention, plainly enough, it is reasonably straightforward to isolate a market for the transportation of goods including clothing from Adelaide to Sydney, which may be part of a broader geographic market for that service. Secondly, the service is precisely the same service of transporting clothing from Adelaide to Sydney to be provided by, potentially, either party to the arrangement. Thirdly, the proposed arrangement relates to services to be provided to a particular customer in respect of a particular contract. In such a case, it is a simple matter to identify material facts which isolate the market, the transaction, the participants and the service to be supplied in respect of which the participants are in close competition and in respect of which the participants have struck the price controlling arrangement. 42 In analogous circumstances, Heerey J in ACCC v J McPhee & Son (Australia) Pty Ltd & Ors (supra) at 43, 921 observed in respect of the relationship between ss 45(2)(a)(ii), 45(2)(b)(ii) and 45A that: If it were established that McPhee and DFE [two providers of express freight transportation services] were offering or contemplating the offer of the same services (express freight transportation services), to the same existing or potential customer (Just Jeans or ACI Florapak) 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. 43 At 43, 920, his Honour also said this: 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 service 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 Air Road 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 Australia and New South Wales. 44 His Honour further observed that the paragraphs of the pleading before him pleading the structural elements of the market "are prolix, unnecessary and irrelevant and raise false issues which are likely to embarrass and delay the fair trial of this proceeding". 45 With respect, his Honour's observations are undoubtedly correct in that case as there was no contest between the parties that precisely the same service was in issue involving precisely the same customers in respect of a readily identifiable market for express freight transportation services between particular geographic points. Whether the market comprised broader rings of geographic boundary or outer rings of particular participants was irrelevant to the question of whether McPhee and DFE were in competition in the identified express freight transportation market in respect of precisely the same service. However, it is plain from ACCC v McPhee that pleading material facts of the particular market in which there is competition for the relevant services between the participants to the s 45A provision of the pleaded contract, arrangement or understanding, remains fundamental. In principle therefore, having regard to the relationship between contended conduct by the parties to the provision and the market in which the conduct is said to have occurred, the pleading of material facts establishing close competition in the market might well be quite contained, as Heerey J concluded in the circumstances of the case before his Honour. 46 Similarly, in Australian Competition and Consumer Commission v McMahon Services Pty Ltd (supra) Selway J at 48, 671 noted the precise limitations in the scope of the conduct alleged in that case. The conduct concerned a contended arrangement in relation to a tender price for a specific contract to be let by the Department of Defence arising out of the tender process. The ACCC relied upon s 45A of the Act. Selway J noted: [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 the arrangement or understanding. The price said to be fixed has not been particularised, but is either the price contained in the offer by the fifth respondent (which seems to be the case that the ACCC intends to put) or the price obtained by the Department of Defence. Plainly enough, it is not the price of services generally available in the marketplace. 47 His Honour also noted at 48, 671: … 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. 48 Because the conduct involved a quite specific price fixing allegation between particular parties in respect of a particular tender (and consequential contract) let by the Department of Defence in respect of the supply and acquisition of construction services, his Honour concluded that the pleading of those elements, that is, the market, the contract, the participants, the identical services in the context of that transactional arrangement, did not require any greater or more detailed pleading of the market. However, the issue was not whether the applicant was required to plead material facts going to the market for the services and competition between the participants to the contract, arrangement or understanding in respect of those services but whether the material facts pleaded by the statement of claim, in the context of the transaction in question, adequately put the respondent on notice of the case to be met. His Honour concluded that it did. Again, there was no controversy that the service in question was precisely the same service provided in an uncontroversial market for the provision of construction services and the conduct related to a single party, the Department of Defence, in respect of a particular tender transaction. With respect, his Honour was plainly correct in concluding that it was not necessary to plead the market in any broader sense. 49 In simple terms, there is no great leap of pleading faith in either of these cases that the participants to the arrangement containing the s 45A provision were in competition in the supply of the relevant service in a market. 50 The distinction between these authorities and the present case is that here, the very question in controversy, is whether there is a separate market or markets as asserted in which close competition between MRPL and ANZ takes place. The pleader can not simply say there is such a market unless that contention is made good as a logical conclusion drawing together and drawn from material facts that plead the subsistence of the contended markets and contestable participation by MRPL and ANZ in each market. That is not to say that a pedantic or prolix and detailed pleading of the boundary of the entire field of rivalry need be scoped in the pleading or that the outer boundary of contestability between all participants in the market need be framed. It is however important to start at the centre and work outwards by identifying the services which are the subject of one or more markets, the core or emblematic participants in the contended markets for those services (i.e., the core or essential suppliers of the identified services; and the class of acquirers of the service (potential residential home loan borrowers seeking the relevant related services)), the services in fact provided by MRPL and those services in fact supplied by ANZ and the material facts which demonstrate that those services are strong substitutes thus falling within a separate market. Having done so, the pleading, in principle, need do no more so far as the market is concerned. In order to make good the remaining elements of s 45A, the applicant must plead that the provision of the contract, arrangement or understanding has the purpose or effect or likely effect of, put in abbreviated terms, fixing a price for the contestable supply of these services. 51 Once the question of whether a separate market subsists and whether MRPL and ANZ are in competition in one or more separate markets arises, material facts which demonstrate those matters must be pleaded and ultimately established (Trade Practices Commission v Nicholas Enterprises Pty Ltd & Ors (No. 2) [1979] 40 FLR 83 pp 110‑115; (1979) 26 ALR 609 at 645‑651) notwithstanding that reliance is placed upon s 45A of the Act. 52 It seems to me that the pleading as presently formulated fails to clearly plead material facts which establish the market and other elements discussed in these reasons. The failure to plead those material facts can not be cured by an order for particulars (Bruce v Odhams Press Limited (supra) [3]). Accordingly, it seems to me that the proper course is to strike out the statement of claim and give leave to deliver an amended statement of claim. That is not to say that the contentions advanced by the ACCC are inherently unsound. The contentions however must be framed by material facts going to each of the integers of the cause of action as the foundation on which the claims are to be made good. As to close competition, the Tribunal in Re Queensland Co‑operative Milling Association Ltd (supra) said at p 190: If the firm were to "give less and charge more" would there be, to put the matter colloquially, much of a reaction? And if so, from whom? In the language of economics the question is this: from which products and which activities would we expect a relatively high demand or supply response to price change, i.e. a relatively cross‑elasticity of demand or cross‑elasticity of supply? By this pleading, the ACCC contends that MRPL supplied certain services to customers (as defined) and ANZ supplied particular services to the same customers. The pass‑through by MRPL to customers of a proportion of a commission fee it received from ANZ so as to reduce the price of activities undertaken by MRPL in connection with an approved ANZ residential home loan below the establishment fee charged by ANZ (whether as part of a loan service or, as contended, a price for separate services) seemed, as pleaded, to produce put colloquially "a bit of a reaction". The reaction, as pleaded, was the withdrawal of accreditation and re‑accreditation on terms which involved the price of a service provided by MRPL. Whether MRPL and ANZ are in the same market needs however to be properly pleaded. 53 I do not propose to deal in any detail with the second limb of ANZ's motion seeking, in the alternative, an order that the applicant provide further and better particulars of the statement of claim in response to a request made by ANZ's solicitors. The pleading of material facts by an amended statement of claim ought to deal with many of those matters. However, it may be helpful to say something about the general area of earlier disagreement on those matters which may or may not remain relevant having regard to a re‑formulated pleading. 54 First, ANZ sought a statement of the services comprising "loan arrangement services" since the definition was inclusive rather than exhaustive. The ACCC confirmed that the scope of the services was said to be inclusive and as to any other services, the request was not a proper request for particulars. It seems to me, as I have said, that the applicant ought to identify the services comprising of the markets alleged, the services provided by MRPL and those provided by ANZ. 55 Secondly, ANZ sought particulars of each loan provider MRPL dealt with at any material time in relation to residential home loan products of such a lender. Those particulars were sought because a broker is someone that provides loan arrangement services as defined. Loan arrangement services include giving advice to customers as to the respective features of loan products from "one or more loan providers". Some illustrative specificity of those loan providers is likely to focus an understanding of the services provided by brokers. For example, presumably brokers provide, as MRPL is said to provide, all of the presently pleaded loan arrangement services in respect of particular banks, building societies and other classes of residential home loan lenders. It seems to me to be unnecessary for the applicant to isolate each and every loan provider MRPL dealt with at material times provided examples of each class of lender reflecting each different category of lender is identified. Such information goes to the services offered by brokers and in particular MRPL, to be compared with the services provided by ANZ. For example, are brokers and MRPL intermediaries at large in the residential home loan market standing between lenders and borrowers and providing particular services adapted to particular classes of lenders (such as prime lenders, sub‑prime lenders, lenders of last resort etc)? The range or character of services supplied by brokers might vary according to the class of lender. It may not. Illustrative examples of participants in each class might usefully be identified. 56 Thirdly, MRPL is said to provide all of the defined loan arrangement services which includes acting as a facilitator or liaison in the transaction for the acquisition of loan products between the customer and those sections or divisions of a loan provider responsible for supplying loan products. Further, MRPL as a broker is said to manage the ongoing relationship in relation to the relevant home loan product, as part of a separate service between the banker and customer once that relationship has been struck as to that loan. ANZ has sought particulars of MRPL having acted as a facilitator and as a manager in the sense described. It seems to me that since these matters go to the particular services performed by MRPL said to be in competition with ANZ, particulars of those matters ought to be given. 57 Fourthly, to the extent that AFG is an accreditor of MRPL and reliance is placed upon AFG's role, any relevant contract between AFG and MRPL should be identified. 58 Fifthly, at para 6.2 the applicant pleads that loan arrangement services are supplied by brokers and loan providers including ANZ. ANZ has sought confirmation of whether it is alleged that loan arrangement services were provided by persons other than brokers and loan providers and if so which categories of providers. These matters go to the isolation of the services as already discussed and the extent to which close competition is occurring. 59 The ACCC has delivered notices requiring the production of a range of documentation from ANZ pursuant to s 155 of the Act. It seems to be uncontroversial that documents falling within the scope of the s 155 notices have been produced by ANZ. It ought therefore not to be unnecessarily difficult for the ACCC to provide particulars of the relevant matters. 60 Accordingly, I propose to order that the statement of claim be struck out. The applicant is given leave to file and serve an amended statement of claim by 12 December 2008. I propose to reserve the costs of and incidental to the notice of motion pending submissions on costs. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

Associate: Dated: 31 October 2008 Counsel for the Applicant: Mr S Couper QC and Ms M Brennan

Solicitor for the Applicant: The Australian Government Solicitor

Counsel for the Respondent: Mr P O'Shea SC and Dr M J Collins