The Original Millmerran Contract
137 At [2998] to [3016] of the principal liability judgment, the organising principles in relation to s 45 of the Act are set out. At [3020], the relevant provisions of the "Ash Purchase Agreement" of 30 September 2002 between Pozzolanic as buyer, PIPL as guarantor and eight entities comprising Millmerran Power Partners ("MPP") as seller (otherwise called the "Original Millmerran Contract" or the "OMC") are set out: see also [930].
138 For the purposes of these reasons, it is not necessary to set out each of the identified provisions recited at [3020].
139 In the principal proceedings, apart from the contentions concerning s 46 of the Act, the ACCC contended (apart from, put simply, the "effects" and "likely effects" cases) that the provisions of the OMC at [3020] were included for the substantial purpose of [3017]:
… first, preventing any other person from acquiring unprocessed flyash from the Millmerran Power Station, second, hindering or preventing any other person from supplying concrete grade flyash in the SEQ concrete grade flyash market, third, lessening, hindering or preventing competition in the SEQ unprocessed flyash market, and fourth, lessening, hindering or preventing competition in the SEQ concrete grade flyash market.
140 At [3021] to [3069] (and Pt 43), I examined how the provisions came to be included in the OMC; whether a substantial purpose of the provisions was to substantially lessen competition in the relevant markets; whose purpose it was if such a purpose subsisted; and when did the relevant provisions reach their final form.
141 As those paragraphs reveal, the non-conforming tender of September 2001 to MPP was signed by Mr Maycock as director and Mr Schodel as secretary. QCL, Pozzolanic and PIPL put Mr Wilson forward as the manager of the tender process and the contractor's representative. Mr Ridoutt was an important person for QCL, Pozzolanic and PIPL in the process. Mr Hunt and Ms Knox were the important actors on the Millmerran side through the MPP operating entity "MOC". Mr Cameron represented MPA Energy. I mention here the role of these individuals having regard to [3070] to [3078] of the principal liability judgment, mentioned below.
142 As to the conclusions on the question of the purpose of the identified Millmerran provisions, I made these observations and findings from [3070] to [3078] which, for ease of reference, are set out below:
3070 The objective or end QCL sought to achieve in its bid, through Pozzolanic, for the Millmerran Ash Purchase Contract at the outset of the non-conforming tender in September 2001 was to secure an exclusive supply agreement for the "sale of ash into the cementitious market" in SEQ. The commercial strategy of QCL and Pozzolanic's approach to both the Millmerran and Tarong contracts (and Tarong North) was framed and executed by Mr Ridoutt and Mr Wilson, and put to the Directors. The strategy was discussed with Mr Arto as Director and CEO of QCL. Mr Ridoutt presented the strategy to the QCL Board Meetings. Mr Arto spoke of his dependency upon Mr Ridoutt and Mr Wilson.
3071 A substantial purpose of the framing of the final commercial bid to Millmerran was to prevent a rival from securing access to Millmerran unprocessed ash and to prevent threatened entry into the SEQ concrete grade flyash market for the supply of concrete grade flyash. These purposes, serving the end sought to be achieved by QCL and Pozzolanic through Mr Ridoutt, Mr Wilson and Mr Arto, were each a substantial subjective purpose of these individuals. These purposes were not the only purposes for the reasons already mentioned but they were each a substantial purpose. Mr Ridoutt and Mr Wilson persevered in their attempts to try and secure an exclusive arrangement in the lengthy negotiations with Millmerran over the contract terms, ultimately leading to cl 26.4 (not before giving rise to Ms Knox's frustrations set out in her note of 20 June 2002). Pozzolanic and QCL were including entities and their authorised negotiators, Mr Ridoutt and Mr Wilson (with the authority and thus approval of Mr Arto) subjectively held each of the substantial purposes of preventing entry of a person into a supply relationship with MPP and thus entry into the unprocessed flyash market, and preventing entry of a person into the SEQ concrete grade flyash market, using processed Millmerran flyash.
3072 These specific purposes are the expression of a substantial subjective purpose of substantially lessening competition in each market as Mr Ridoutt, Mr Wilson and Mr Arto plainly believed that the face of future competition in each market, and particularly the SEQ concrete grade flyash market in which QCL was the seller supplier, would show contestability and rivalry in volume and price (and other aspects of the service offerings) should a competitor enter at Millmerran and enter the SEQ concrete grade flyash ash market through processed Millmerran ash. This entry would exhibit rivalrous responses and counter-responses that would likely see a volume, revenue and EBIT loss for Pozzolanic and QCL in the flyash business. The future face of competition in each market without entry of a rival at Millmerran would show diminished future (nascent) rivalry and thus impact upon the competitive process. Mr Maycock accepted that whatever shape rivalry might take, Pozzolanic and QCL would be unlikely to maintain their EBIT earnings in the flyash business once a rival entered the market for the sale of concrete grade flyash in the SEQ concrete grade flyash market having secured access to Millmerran ash for processing and supply.
3073 These ends or objectives were achieved through the vehicle of the purposes earlier described in respect of the provisions for which Pozzolanic and QCL were "including" parties. MOC accepted the provisions, no doubt because those provisions met the objectives and ends Millmerran sought to achieve of removing certain thresholds of waste ash from the site and securing an acceptable minimum revenue stream from the sale of ash. Whatever the ends, objectives or purposes of MOC may have been, the ends and objectives of Mr Ridoutt, Mr Wilson and Mr Arto were to secure the contract by adopting the final commercial minimum quantity take or pay term for at least a substantial subjective purpose (among the other purposes and reasons) of substantially lessening the competition QCL would face in the SEQ concrete grade flyash market and, in aid of that purpose, a purpose of preventing a potential rival from securing access to a source of likely contestable ash processed from Millmerran ash.
3074 Section 45 asks whether the identified particular provisions had the substantial purpose of substantially lessening competition and therefore the question is whether those substantial purposes were substantial purposes of the identified particular provisions upon which the Commission relies.
3075 Central to the contract are the commercial provisions concerning the minimum quantity of concrete grade flyash the seller must make available and allow Pozzolanic to take each Operating Year for seven years at 135,000 tonnes extracted, retrieved or processed from the volume of raw ash produced by the power station operations, at a price of $10.10 per tonne, according to the lump sum calculations and escalation provisions, of cls 5.1, 6.1, 6.2, 6.3, 7 and 10. These provisions were incorporated into the contract, at the adoption of Millmerran, by accepting the terms as put by Pozzolanic, but they were provisions initiated by Pozzolanic as the foundation commercial terms of the contract. Pozzolanic and QCL were including parties for these terms as was MOC for reasons entirely different to those actuating Pozzolanic and QCL. By these terms, Pozzolanic would have access to the necessary volume of raw ash at Millmerran to enable it to take either consistently each day, or each week, over each operating year, 135,000 tonnes of concrete grade flyash processed out of whatever volume of raw feedstock ash was required to obtain that volume, or take concrete grade flyash from the raw ash episodically throughout each operating year. In either case, the concrete grade flyash would be extracted from the required volume of raw ash through the buyer's installed facilities.
3076 I am satisfied that a substantial purpose of the inclusion of these commercial terms as framed, in substance, by Pozzolanic and QCL was to substantially lessen competition in the markets as earlier described for the reasons earlier described, by seeking to exercise a substantial degree of control over a sufficient volume of raw unprocessed Millmerran flyash necessary to extract, over time, 135,000 tonnes of concrete grade flyash and foreclose or discourage sustainable new entrant participation at Millmerran.
3077 Plainly enough, however, Mr Ridoutt and Mr Wilson thought that it would also be necessary to secure an exclusive supply arrangement with MPP so as to prevent MOC and MPP from supplying any ash to anyone else for sale into the cementitious market. This conduct brought the integrity of the Pozzolanic negotiators into serious question according to the views expressed by Ms Knox. Pozzolanic's position on this question led to all of the steps earlier described culminating in cl 26.4 in the way explained by Clayton Utz. Having regard to those exchanges, I am satisfied that at least a substantial purpose of the termination provision on 60 days notice to Millmerran after 31 December 2006 with the reduction in the annual minimum payment was to discourage Millmerran from entering into another supply contract for concrete grade flyash extracted or processed out of raw Millmerran ash during the currency of the Ash Purchase Agreement with Pozzolanic so as to constrain rivalry in the sale and supply of concrete grade flyash in the SEQ concrete grade flyash market. Clause 26.4 was included in the contract either by Mr Ridoutt and Mr Wilson, or as a consensual inclusion as a result of a mediation between both parties to the contract of what was then an impasse. Nevertheless, Mr Ridoutt and Mr Wilson were including decision-makers for Pozzolanic and their subjective purposes for the provision was at least a substantial purpose as described and thus a substantial purpose of substantially lessening competition in the way earlier described.
3078 Neither Mr Ridoutt nor Mr Wilson were called by Pozzolanic or QCL to give evidence, and to the extent that there is any ambiguity about their subjective purposes, I am willing a draw a Jones v Dunkel inference, in light of the exchanges I have described, that their evidence on purpose would not have been helpful to Pozzolanic or QCL.
143 The observations at [3070] to [3078] on this topic are important in the exercise of the discretion under s 76 of the Act. However, without distracting from the precise content of those paragraphs, I note for present purposes, the following matters.
144 First, from the very outset of the evolution of the relationship with MPP (the tender of September 2001), the objective QCL sought to achieve in striking a supply agreement with MPP was an exclusive supply agreement for the sale of ash into the cementitious market in SEQ. The commercial strategy of QCL and Pozzolanic (as the buyer and ash processing entity within the QCL group of companies (as to which see [26] of the principal liability judgment concerning the QCL group up to 30 May 2003), was framed and executed by Mr Ridoutt and Mr Wilson. It was put to Mr Arto as CEO and a director of QCL, and through him, the directors. Mr Ridoutt presented the strategy to the QCL Board meetings. It was discussed with Mr Arto and he lent his support, authority and gravitas to the proposals of Mr Ridoutt and Mr Wilson: as to some aspects of Mr Arto's position and his engagement on these issues, see [1087] to [1097].
145 Mr Ridoutt and Mr Wilson were also influential in the formulation of the commercial strategy concerning the tender (and ultimate contract) for the ash supply arrangements with Tarong and Tarong North.
146 Although the question considered at [3070] to [3078] of the principal liability judgment concerning the OMC is whether the particular provisions (either individually or taken together) were included for any one or more of the contended substantial purposes thus giving rise to a contravention of s 45(2)(a)(ii), it remains contextually relevant to recognise, at least, by way of background, that to the extent that the relevant provisions were adopted for the purpose of substantially lessening competition in a relevant market, the provisions ultimately emerged out of an initial contextual commercial objective on the part of QCL and Pozzolanic to secure, if they could, a supply agreement under which MPP, through MOC, would exclusively supply Pozzolanic with ash and, in turn, QCL would not be confronted with a rival in the market for concrete grade flyash ("cgf") produced from Millmerran unprocessed ash.
147 Second, although there were other broader commercial purposes, the subjective purposes of preventing entry of a person (a rival or putative rival) into a supply relationship with MPP and thus entry into the unprocessed flyash market; and preventing entry of a person (a rival or putative rival) into the SEQ cgf market, using Millmerran processed ash, were substantial purposes.
148 Nevertheless, it is, of course, important to remember that in exercising the discretion under s 76(1) of the Act, an appropriate pecuniary penalty is to be imposed in respect of the contravening conduct, not a commercial strategy that reached or might have reached beyond the limits of the contravening conduct, as found. As in all things, however, context matters.
149 Third, Mr Ridoutt, Mr Wilson and Mr Arto believed (that is, they held the opinion) that, looking to the future, should a person secure access to unprocessed ash at Millmerran and should such a person enter the SEQ cgf market in which QCL was a seller/supplier (and a company that enjoyed a very substantial share of that market - a virtual monopolist; or a company enjoying a state of "dominance" as Mr Arto described it), the future face of competition in both the market for unprocessed ash and the SEQ cgf market would exhibit contestability and rivalry in the volumes sold, the price of cgf and supply-side service offerings; and that such entry would produce rivalrous responses and counter-responses that would likely see a loss of volume, revenue and EBIT earnings (and thus a decline in the preferred earnings margin of 30%-33% Mr Arto regarded as key as to which see [2266]), for Pozzolanic, and therefore QCL.
150 Moreover, Mr Maycock, the non-executive Chairman of QCL from 1998 and, from that date, a Senior Vice-President of QCL's ultimate owner, Holcim, accepted that whatever shape new entrant rivalry might take, Pozzolanic and QCL would be unlikely to maintain their EBIT earnings. See also [2408] to [2413].
151 In the principal liability judgment I found that the identified provisions had as their purpose, securing an objective of preventing third party putative new entrant access to each market.
152 At [3073], I found that Mr Wilson, Mr Ridoutt and Mr Arto adopted the final commercial minimum quantity take or pay term for at least a substantial subjective purpose (among other purposes) of substantially lessening the competition QCL would face in the SEQ cgf market and, in aid of that purpose, a purpose of preventing a potential rival from securing access to a source of likely contestable ash processed from Millmerran ash.
153 At [3076], I found that the identified provisions discussed at [3075] were included by Pozzolanic and QCL in the OMC for a substantial purpose of substantially lessening competition in the market for unprocessed ash and the SEQ cgf market, by adopting provisions that enabled Pozzolanic and QCL (by reason of the group company structures and decision-making processes within QCL) to exercise a substantial degree of control over a sufficient volume of raw unprocessed Millmerran flyash necessary to extract, over time, 135,000 tonnes of concrete grade ash and foreclose or discourage sustainable new entrant participation at Millmerran.
154 At [3077], I found that cl 26.4 was included in the OMC for the substantial purposes held by Mr Ridoutt and Mr Wilson as described in that paragraph.
155 I also noted at [3078] that neither Mr Ridoutt nor Mr Wilson was called by the respondents to give evidence and I found that their evidence, on this topic, would not have been helpful to Pozzolanic or QCL.
156 As to the effect or likely effect of the identified provisions at the time of making the OMC on 30 September 2002, see [3079] to [3088].
157 For ease of reference, those paragraphs are set out below:
3079 As to the effect or likely effect of the provisions substantially lessening competition at the date of making the contract containing the provisions, a question arises about the role in such an assessment of the factor that the Millmerran ash had not been produced at that date and was unknown as to its future quality. Would inclusion of the provisions have the effect of substantially lessening competition in a product when the market participants could not know the characteristics, features and qualities of the new ash until it entered the market, contested for supply and acceptance, and its substitutability became apparent? Would, viewed at the date of inclusion, the provisions be likely to substantially lessen competition in either market in a forward looking way by diminishing the future shape of the competitive process by constraining competitor entry of Millmerran ash when the future contestability of the ash could not be known until entry, contestability and substitutability were later determined?
3080 These questions were answered, in substance, for the assistance of the Court by the expert evidence of Professor Hay.
3081 Professor Hay accepted, as a matter of economics, that if a competitor won the contract at Millmerran, and Pozzolanic thought that at some time in the future the competitor would start supplying Millmerran concrete grade flyash into the concrete grade flyash market, that circumstance, "might produce a quite prompt price response on the part of Pozzolanic" (T, p 2559, lns 21-25) and that would particularly be "likely to be the case" if Pozzolanic's prices, at the time the competitor wins the Millmerran contract, were "supra-competitive prices" (prices above prices which would prevail in a workably competitive market) (T, p 2559, lns 27, 28). Professor Hay also unsurprisingly accepted that if the source of a price constraint upon QCL or Pozzolanic was loss of the Millmerran contract to a competitor, that source of constraint would not operate if Pozzolanic won both the Tarong and Millmerran contracts (T, p 2559, lns 39-41). Professor Hay also observed that if a competitor won the contract at Millmerran, that circumstance would reduce the degree of Pozzolanic's market share and therefore tend to reduce its degree of market power and would "likely" lead to the quite prompt price responses on the part of Pozzolanic earlier mentioned in Professor Hay's evidence (T, p 2559, lns 43-47; p 2560, lns 1-7).
3082 This exchange then occurred in cross-examination with Professor Hay at T, p 2561:
Q I had understood you to say that if a competitor won the Millmerran contract, that would have an effect on competition as soon as the contract was won. Is that right or not?
A It might, yes, and that also depends upon the assumption that there was substantial market power at the time.
Q I understand what you say. And it is not only a question of "might", is it? … It is better put that it would be likely that as soon as a competitor won the Millmerran contract, there would have been an effect on competition, correct?
A It is possible. It may depend upon the assumption about the quality of the ash, but yes, it is certainly possible.
Q Well, if we leave hindsight to one side for a moment, when the Millmerran contract is won, nobody knows that there is going to be a problem with the colour of the ash, correct?
A Well, I don't know for sure, but I will assume that to be the case.
Q Assume that to be the case. Then what Pozzolanic knows is that there is a competitor who now has a source of supply of fly ash which can be used to sell fly ash into the south-east Queensland concrete-grade fly ash market, correct?
A Correct.
Q And that knowledge is what is likely to cause Pozzolanic to regard its prices as being constrained, correct?
A It could have that effect, yes.
Q And it would have that effect if Pozzolanic had been charging supra-competitive prices prior to the competitor winning the Millmerran contract?
A It could have had that effect, yes.
Q You say it could have that effect. It is likely to have had that effect, isn't it?
A I will say it could have had that effect. I'm not sure how likely it is, but it may be likely. It is certainly possible.
Q Well there was at least a real chance it would have had that effect, correct?
A I think there was a chance, yes.
Q A real chance?
A Well, I take a chance to be a real chance.
Q You agree, then, that the effect on competition is not dependent on taking a hindsight view of how long it might have taken a competitor to bring that fly ash to market?
A Well, I think that's right. … if someone else had achieved the contract, then there could have been an effect and the question then is how long - would that effect last long, what would happen with the colour and how quickly would it dissipate. That's right.
[emphasis added]
3083 Professor Hay's observations on this topic and the related comments in his report are made in the context of the colour variability problem which ultimately emerged throughout 2003 and resulted in the scientific investigations in the latter part of 2003 and 2004, and beyond. Professor Hay in these quoted passages accepted that there was a real chance of a likelihood of an effect upon competition once a competitor won the Millmerran contract but the constraining effect might dissipate over time as a quality, colour problem, emerged.
3084 The relativity in the degree of dissipation of the immediate constraining effect was examined in these passages (T, p 2562, lns 26-45):
Q Someone else wins the Millmerran contract. At that stage, no-one knows there is a colour variability problem and we have discussed what the consequences might be. Do you accept the proposition that unless it is found that the Millmerran ash can never be sold as concrete-grade fly ash in the south-east Queensland market, there will remain a degree of constraint on Pozzolanic's prices from the existence of that competitor's alternative source of [concrete-grade fly ash]?
A I think that may overstate it. It seems to me the question would be the extent to which it is anticipated that the Millmerran ash would be an alternative source of ash, or people would otherwise buy Pozzolanic ash. Whether it can be sold, the concrete-grade ash may not be the same - saying it can or cannot be sold as concrete-grade fly ash may not be the same assumption.
Q So what one is looking at is whether it turns out to be a substitute for those who would otherwise have bought Pozzolanic's ash?
A If it's clear that it's not a substitute, then I would expect it to have no significant constraining effect upon Pozzolanic.
Q And if it remains a substitute to some extent, then it has a constraining effect. Is that right?
A I would expect there to be some degree of proportion between the degree of substitution and the degree of constraint.
[emphasis added]
3085 In concluding this discussion, Professor Hay accepted that if there is an assumption that the Millmerran ash is an alternative source of supply, then there is a possibility, looking forward, that a competitor winning the Millmerran contract is going to bring about "some impact" on competition in the SEQ concrete grade flyash market (T, p 2563, lns 1-6).
3086 Professor Hay accepts that the event of entry itself into the Millmerran contract by a competitor would "likely" produce "a quite prompt price response" from Pozzolanic in the SEQ concrete grade flyash market assuming, in a forward looking way, that the ash would be usable in the concrete grade flyash market. Professor Hay also accepts that Pozzolanic's "knowledge" of a competitor at Millmerran with a source of flyash that Pozzolanic would assume could be sold into the SEQ concrete grade flyash market (since no hindsight view of an emergent colour problem would be relevant at that moment in time) would give rise to at least a "real chance" of causing Pozzolanic to regard its prices as being constrained and there would be at least "some impact" on competition in the SEQ concrete grade flyash market.
3087 It follows that, at the date of entry into the contract, with the clauses I have mentioned (cls 5.1, 6.1, 6.2, 6.3, 7, 10 and 26.4), those clauses would have the immediate effect and would be likely to have, in a forward looking way, a real chance of substantially lessening competition in the SEQ concrete grade flyash market because the future field of rivalry or the future state of the competitive process with the provisions is substantially diminished, on all of the evidence as nascent competition in a Pozzolanic/QCL dominated market was hindered and prevented. However, the constraining effect would have begun to dissipate once it became clear to the market that a problem was emerging in the quality of the Millmerran flyash and that problem was unlikely to be resolved either at all, or within a period of time which would make Millmerran ash a real substitute for Pozzolanic ash, assuming a rival in Millmerran. The extent of the constraint and its potential to dissipate is ultimately a question of degree. However, I am satisfied that upon entry into the Millmerran contract by a rival, participants would have proceeded on the assumption that the Millmerran ash was, in all probability, likely usable in the SEQ concrete grade flyash market and that once a competitor had access to a source of ash at Millmerran (notwithstanding that the concrete grade flyash would not be available for some little time), there would likely be quite prompt price responses from Pozzolanic in a market which had been characterised, otherwise, by a virtual monopoly with delivered pricing, and pricing above a competitive level characterising a workably competitive market.
3088 In a market exhibiting the characteristics of the SEQ concrete grade flyash market throughout 2001 and 2002, competitive entry by a rival at Millmerran was very important to the future competitive process, in a forward-looking way, and thus the likely effect upon what would have been emerging competition based on Millmerran ash was large or significant and truly meaningful. Had the frustrations exhibited by Ms Knox in her memorandum of 20 June 2002 resulted in no further negotiations with Pozzolanic, with Millmerran contracting with FAA as the next best option, the likely price responses and counter-responses would likely have been very vigorous. Mr Maycock said that confronted with some of the scenarios postulated by Management arising out of the loss of one or more of the contracts, QCL and Pozzolanic would have found a way to compete and would have responded to the challenges presented to it. Had FAA won the contract at Millmerran, with its tied shareholder concrete producers, Pozzolanic would very likely have vigorously responded in its supply and service offerings to those major shareholders to try and hold some proportion of QCL's sales to those particular buyers, apart from contesting for all marginal sales as Mr Clarke said of FAA. The provisions described at [1347] were the expressions of these substantial purposes.
158 In those paragraphs I also note some aspects of the evidence of Professor Hay.
159 In the course of his evidence, Professor Hay considered a postulate of a "real chance" of a constraint upon QCL's prices for cgf in the SEQ cgf market, in a future world in which either a rival would have won the OMC (and Pozzolanic/QCL would not have won it) or a future world in which, alternatively, a rival would have at least secured "access" to a "source of supply of ash" from Millmerran. A rival agitating for access to Millmerran ash might secure a source of supply from Millmerran in a future world where Pozzolanic/QCL had won the contract with MPP but on terms that did not contain the identified provisions: a future "but for" world.
160 Professor Hay accepted that had a rival gained access to Millmerran ash by winning the ash supply contract at Millmerran, there was a "real chance" of a constraining effect upon QCL's prices for cgf and at least some effect upon competition. This would have been especially so, he agreed, if QCL had been charging supra-competitive prices in the absence of any competition.
161 At [3087], I found that, at the date of entry, the identified provisions had the immediate effect, and in a forward-looking way, would be likely to have the effect of substantially lessening competition in the SEQ cgf market: see particularly [3087] and [3088].
162 Fourth, including provisions in the OMC at 30 September 2002 which had a substantial purpose of substantially lessening competition in the cgf market and had as their effect and likely effect a substantial lessening of competition in that market, was very important for the future state of rivalry and the future competitive process in a cgf market characterised, at 30 September 2002, as one in which QCL was a virtual monopolist. New entrant rivalry, depending upon the scale of entrant and the scale of entry, would have produced a greater or lesser degree of contestability and counter-responses. Competition is critical to the public interest because it is the process which causes rivals to alter supply-side offerings in response to contestable offerings and adjust prices which, in turn, creates incentives for rivals to eliminate inefficient costs. Competition, as a process, "competes away" inefficient costs. That is how the process serves the public interest. That is why most regulatory pricing models attempt to replicate "efficient cost" analogical models of "perfect competition" where only efficient costs remain and risk weighted rates of return are calculated on the efficient cost base (which has many components).
163 Provisions which have, as their purpose, effect or likely effect, a substantial lessening of competition in a relevant market are susceptible of at least a substantial statutory maximum penalty under the Act because they damage the very process of rivalry itself and the dynamic elimination of inefficient costs through contestability.
164 Thus, such provisions damage the public interest.
165 I found that had FAA won the Millmerran ash supply contract or had it secured access to Millmerran ash under a set of circumstances in which Pozzolanic/QCL had won the OMC on terms that nevertheless enabled FAA (or Transpacific) to source a supply of Millmerran ash for processing with some commercial degree of regularity (that is, absent the identified provisions of the OMC), the likely rivalry as between FAA and QCL would have been vigorous: see [3088]. Transpacific would likely have stimulated reasonably vigorous rivalry. Had the entrant not been FAA but a less resourced entrant without the benefit of shareholder buyers such as Boral, Hanson and Rinker, the rivalry would have been less vigorous. Nevertheless, I found that new entrant rivalry in a future world without the provisions would have been real, meaningful and important, for the reasons already mentioned: see [3088].
166 Fifth, although the relevant provisions of the OMC at 30 September 2002 had the effect and would be likely to have the effect, in a forward-looking way, of substantially lessening competition as described, the effect and likely effect would have dissipated as information flows emerged into an informed market which made it plain to market participants that a problem had emerged in the quality of the Millmerran ash (as extensively outlined in the principal liability judgment). I concluded at [3236] that the provisions of the OMC had the effect or likely effect of substantially lessening competition from 30 September 2002 until 31 December 2003.
167 At Pt 50 of the principal liability judgment, I set out at [3232] to [3236] other conclusions concerning the OMC, which for ease of convenience are set out below:
PART 50
The ultimate conclusions
3232 I am satisfied that a substantial purpose of entry into the Original Millmerran Contract on 30 September 2002 was to prevent a rival entering into a contract with MPP for access to unprocessed flyash and to prevent a rival from entering the SEQ concrete grade flyash market with the supply and sale of Millmerran processed ash. I am satisfied that although Pozzolanic sought to risk manage its exposure to a loss of a contract with TEC in the tender process, and thus a loss of its historical source of supply of flyash, nevertheless a substantial purpose of entry into the Millmerran Contract was each of the two purposes I have described. More importantly, however, those purposes were purposes of the identified provisions of the Millmerran Contract as discussed in these reasons and particularly the provisions by which Pozzolanic was entitled to a substantial volume of concrete grade flyash from the Millmerran Power Station processed out of raw ash produced at that station, each year.
3233 I am satisfied that upon entry into the Original Millmerran Contract containing the identified provisions, the effect and likely future effect of the provisions would be to substantially lessen competition in the SEQ concrete grade flyash market as that contract, with those provisions, would have the immediate effect of discouraging third party regular and consistent access to Millmerran unprocessed ash for processing.
3234 However, the effect and likely effect of the provisions would, like the effect of entry itself into a contract per se, dissipate as information flows emerged in the market which made it plain to market participants that a problem had emerged in the quality of the Millmerran ash of the kind extensively discussed in these reasons. At that point, the provisions, prima facie, did not operate to have the effect or likely effect of substantially lessening competition, in the with and without sense already discussed. The effect or likely effect upon competition in connection with the utility and possible use of the Millmerran flyash was an effect or likely effect of the compromised quality of the Millmerran ash itself. As I have found, the quality problems with the ash in terms of its colour and variability were not a confected or manufactured problem. They were real and enduring problems. They were the subject of extensive work and analysis by both MOC and Pozzolanic and professional third party analysts. The Millmerran ash was not substitutable for the Tarong ash, in the sense that it could not be applied as a substitute for the diversity of applications to which the Tarong ash could be applied. Mr White thought that the Millmerran ash was capable of being used in "niche" applications, in the context of his strategy paper. Others within Cement Australia thought that the Millmerran ash would be capable of use in applications which were not sensitive to colour. Others thought that the question was not so much simply one of use in non-colour prominent applications but a concern more generally that concrete producers would simply not want to be supplied with (and would not accept) dark ash one week, and light ash the next, as a general supply proposition. Consistency in the quality of the ash was seen as a critical matter.
3235 It is true that ultimately the Millmerran flyash was able to be used and a supply arrangement was ultimately struck which provided for substantial volumes of Millmerran ash to be supplied and used. However, I am satisfied that viewed in the period 2003 to 2005, that once the colour problem emerged by the end of 2003 with the problem reflecting the features described in the various reports, the effect or likely effect of a substantial lessening of competition by reason of the provisions of the Millmerran Contract had dissipated and had become displaced by an effect or likely effect upon potential contestability through the use of Millmerran ash, by reason of the colour variability of the ash itself.
3236 I am satisfied that Pozzolanic entered into the Original Millmerran Contract and adopted the identified provisions for at least a substantial purpose of preventing rival entry as earlier described, and I am satisfied that the provisions had the effect or likely effect of substantially lessening competition from 30 September 2002 until about the end of 2003.
168 In the result:
(1) Pozzolanic contravened s 45(2)(a)(ii) of the Act by making the OMC containing provisions that had the purpose and likely effect of, and until 31 December 2003 the effect of, preventing a rival from securing access to Millmerran ash (in the unprocessed ash market) and preventing a rival of QCL from entering the SEQ cgf market and substantially lessening competition in those markets: see Declaration 6; [5] of these reasons.
(2) QCL, by funding Pozzolanic with knowledge of the purpose, likely effect and effect until 31 December 2003, was knowingly concerned in all elements of that conduct: see Declarations 6 and 7; [5] of these reasons.
(3) Pozzolanic gave effect to the provisions having the purpose, likely effect of, and until 31 December 2003 the effect of, substantially lessening competition: see Declarations 6 and 8; [5] of these reasons.
(4) QCL gave effect to the provisions by funding Pozzolanic's day-to-day performance of the contract, relevantly in the period 30 September 2002 to 31 December 2003: see Declarations 6 and 9; [5] of these reasons.
(5) PIPL, by electing to give, and by entering into the guarantee of Pozzolanic's obligations to MPP under the OMC containing provisions which it knew that the purpose, likely effect and until 31 December 2003, the effect of, substantially lessening competition, was knowingly concerned in Pozzolanic's contravention of s 45(2)(a)(ii): see Declarations 6 and 10; [5] of these reasons.
(6) The relevant provisions of the OMC ceased to have the effect and likely effect, as found, of substantially lessening competition, by 31 December 2003.