Australian Competition and Consumer Commission v Liquorland

REASONS FOR RULING 1 In this matter, to this point, a body of lay evidence has been called by statements in chief and cross-examination. I do not propose to preface these comments with any unnecessary identification of the issues in the case. Those who are interested in what I am about to say know full well what those issues are. 2 I say that with one exception that should be recalled by all parties involved, including the experts, that the relevant issue ultimately is one of purpose by reference to a pleaded market, a market being relevant because of that pleading and because of, in particular, s 45(3) of the Trade Practices Act 1974 (Cth). Ultimately, the question is one of the purpose of one or more people entering into a number of deeds in relation to a number of applications before the Licensing Court. 3 We are now at the stage in the applicant's case in chief of seeking to call expert evidence in support of aspects of the case propounded. Two matters of importance are required to be noted about the procedural history or context of this. 4 The first is that I made a direction, the precise terms of which I do not have in front of me, that the experts prepare a document as to agreement or disagreement. I have been provided with a document entitled "Experts Template of Points of Agreement and Disagreement", of some 16 pages, identifying points of disagreement and agreement between Dr Jill Walker and Mrs Rhonda Smith. 5 The applicant proposes to call Dr Walker, who is ready to give evidence, and, as I understand it, the second respondent, Woolworths, proposes to call Mrs Smith. 6 The document, if I may say so, is a helpful one, but, no doubt due to my lack of precision in the order, does not fulfil what I had thought that I was requiring. What I do not have is any comprehensive document, beyond that which is contained in the template, identifying what aspects of the terms of Dr Walker's report are in contest. 7 The second point of procedural background to note at this point is that I made a suggestion early in the interlocutory stages that it might be of utility to have all the expert witnesses give their evidence towards the end of both cases, assuming that the respondent intended to go into evidence. 8 This was resisted by the second respondent on the basis that this was a penalty case and it was entitled to have the applicant's case closed before it made a decision as to whether it went into evidence. 9 This is a penalty case, and subject to any analysis of the particular circumstances, that prima facie is a position from which I am not prepared to attempt to order the second respondent to resile, in particular because there would be grave doubt as to whether I had power to order the second respondent to move from that position. 10 Thus, we have now Dr Walker giving evidence in the ACCC's case some time before any other expert will give his or her evidence. 11 That leads to an issue, to which I will come in a moment, as to what parts of Dr Walker's evidence I am dealing with. I have been given the volumes containing Dr Walker's material and supporting documents, they running to three volumes in the court book, together with two volumes of supporting material to which reference is made in Dr Walker's written opinion. 12 I do not pretend to have digested entirely those five volumes. I have read Dr Walker's report in chief and I have perused Dr Walker's report in reply. A significant number of objections were taken to Dr Walker's written material. They have been helpfully identified in Exhibit A3, which is a list of objections of the second respondent to economic witness statements proposed to be relied on by the applicant. That is a document with a number of headings dealing with the paragraph, the nature of the objection, a comment, a response by the ACCC and space for the ruling. The document runs to 56 pages. 13 I began this exercise on Monday by beginning to rule on the matters objected to. Junior counsel thereafter, on the basis of the rulings that I had made, helpfully agreed a position conformable and consistent with those rulings for all but approximately 15 sentences and paragraphs of the two reports. I am now invited to make rulings on those and allow the case to proceed. I propose to do that, but with some additional comments and some additional directions. 14 The next thing to understand as to the background to the course that I propose to adopt is that the objections are as to the evidence in chief of Dr Walker and her evidence in reply, that is, perhaps more accurately, the document prepared as her report in chief and the document prepared as her report in reply. 15 The report in reply is a report which deals with expert reports in these proceedings of Mrs Smith, Professor Janusz Ordover, Mr Anthony Dimasi and Mr Malcolm Higgs. Those reports are not in evidence. I have not read them. 16 One of the consequences of with the inability to deal with the experts together is the need to identify a convenient method of dealing with the expert evidence in chief. As one would expect, the witness who has given evidence in chief, in a sensible attempt to understand what the contest is, has read the proposed evidence in reply to her and made further comments. 17 The expression of Dr Walker's views in answer to those contradicting her may run into and become, depending on its form, another body of evidence in chief. Therefore, the view has been taken, which is one that is often taken where the litigious division between plaintiffs and defendants requires it, of putting all the initial experts' reports in before the defendant goes into evidence, in the confident expectation that the defendant or the respondent will in fact go into evidence. 18 The form of Dr Walker's report in chief, in particular, is one that throws up one of the difficulties of expert evidence in this kind of case. There has been a debate over many years as to the place of expert evidence in competition cases of this kind. One would have thought that the approach in principle to this problem would be one commonly known to practitioners and clearly now dealt with in the authorities. 19 To a degree, that is so. For instance, if I may respectfully say so, the very helpful discussion by Heydon J extra curially in a conference in Sydney in 2003 in the papers at that conference (otherwise unpublished), gives a very good illustration of some of the early economic evidence given in this Court, which one does not see today, such as expert evidence as to a meaning of phrases used in the legislation as economic concepts. 20 That is not to say that a reiteration of some of those basic principles in expert reports today is not very valuable. 21 Wilcox J in TPC v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299 at 315 -6, in strong terms, doubted the utility of some expert evidence in the case before him. Other judges have expressed similar views on other occasions. However, in cases such as this dealing with a social science, the views of Professor Brunt expressed, if I may respectfully say so, with her customary clarity in chapter 8 of the helpful compendium of her work "Economic Essays on Australian and New Zealand Competition Law", illuminates one aspect of the helpful, indeed essential, role for expert evidence in this field. Professor Brunt quoted Keynes at page 358, where that learned economist said: The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor draw correct conclusions. 22 Here we have a problem as to the assessment of the purpose of humans working a commercial environment. One aspect of that is the identification and the limitation of a relevant market in which to judge that purpose. 23 The activity being undertaken is a well known human activity: shopping. That is not to reduce what may be the commercial complexities and subtleties of the successful undertaking of the business of shopkeeping in this area. Many people try, and many people fail, to run simple businesses profitably. However, it is a human activity with human responses, human aims and human considerations. The task of the economist in these sorts of cases is a subtle one and a difficult one. 24 Traditionally, the law and lawyers divide matters between fact and opinion in these sorts of evidential debates. That is the intellectual framework in which the debate, reflected by exhibit A3, has been conducted. 25 The debate that exists, or may be seen to exist, between different intermediate courts of appeal in this country, about the role of assumptions, in my respectful view, may be seen to be more apparent than real. 26 There is a plain requirement, either out of fairness in terms of how evidence is deployed or as a requirement of admissibility, for there to be clarity in the presentation of the expert witness' views. It must be plain, to avoid unnecessary cost, confusion and prejudice, to identify what are assumptions and what are not, that is, what is assumed as fact and what facts the expert can give primary evidence of. In many cases, an expert, who is both expert and familiar with the discipline involved, can say from personal knowledge what are some of the underlying facts. 27 Then there is the clear identification of principle within the discipline. There appears to be no real debate in this case about that. 28 Then there is a question of the reasoning process. That can be difficult to distinguish from the assumption and the opinion, but it is important that the taxonomy that I am identifying is understood as including reasoning towards a conclusion. 29 With that fairly straightforward taxonomy in mind, one then comes to the role of the economist in a case such as this. Because it is a social science and because in one sense and in part it truly is a way of approaching matters and a way of thinking about matters, there is a role, it seems to me, for the economist to assist the court by expressing, in his or her own words, what the human underlying facts reveal to him or her as an economist and what it reflects to him or her about underlying economic theory and its application. 30 For instance, if here there were tendered a mass of industry data about consumer behaviour, about catchment areas for shops and about activities of shopkeepers, and learned senior counsel closed his case and addressed me on that question, I could well understand and expect one submission from the respondent to be that there was a startling and illuminating absence of evidence in this case - the lack of assistance that I was given from an economist putting together, sorting and ordering, within the confines of economic theory, the human behaviour reflected by that raw data. It might be said that a Jones v Dunkel inference or conclusion could be drawn if the ACCC could not find an economist to assist me with the interpretation, from an economic standpoint, of that raw data. That, I think, throws up the problem in some of these admissibility objections and, if I may say so respectfully without intending the slightest personal criticism, the problem in some respects of the form of the evidence. There does appear to me to be a leap from time to time from the body of assumptions that I am asked to make from other material into an opinion. 31 It may only be a matter of form, but there is an important question of presentation and understanding involved in the distinction between saying, after a body of assumptions, "Accordingly, in my opinion", something, and saying, "If the material revealed by what has gone in the assumptions is correct, that conforms with conclusions that can be drawn from basic or complex economic theory in the following way." 32 That then identifies, with some precision, what is happening in terms of this evidence; that is, that the economist may, through his or her skill and background and expertise, be able to identify critical aspects of the underlying material as important to economic theory and consumer behaviour and economic behaviour, illustrating or illuminating the application of simple, or perhaps complex, economic theory. From that, conclusions can be drawn, through a reasoning process, which may be very short, as to what this economist thinks is the appropriate way to order, prioritise, synthesise and explain that underlying material. 33 That role, it seems to me, is important in cases such as this, but it needs to be expressed in terms not simply of the lawyers' taxonomy that I have identified, but in a way which permits the exercise of the judicial power of the Commonwealth according to the law of evidence. 34 One of the underlying problems in the approach to the form may be the tendency to forget that in undertaking virtually identical subject matter tasks before the Tribunal and before this Court, two quite different exercises of power are being undertaken. 35 The notion of admissible evidence before the Tribunal is an oxymoron. What is before the Tribunal is material before executive and administrative persons, even if they, in their other incarnations, act as Judges. I am obliged to approach the matter under the Evidence Act 1995 (Cth). In part, that is because this is an exercise of judicial power, not an exercise of executive power, and to the extent that that requires some reordering of approach, unfortunately that is necessary. 36 I do not think ultimately it requires that different an approach, but it requires a recognition that I need to be able to understand, with clarity and comprehensively, what is really assumed, what can be given evidence of personally, whether by observation or by recitation of economic theory, and if there is an opinion, what it is. 37 The important aspect of that here is that I need to understand whether the opinion is the kind of opinion that I have previously identified, that is, whether it is what might be said to be the infused theory or opinion of the witness ordering, categorising and explaining the primary assumed facts in terms of economic approach and economic theory. 38 I used the expression earlier this week, in asking Mr Yates some questions, as to whether Dr Walker was simply "retailing" primary evidence. (If I may be excused for the bad pun.) 39 Those comments should not be seen as critical. What I was attempting to say, in shorthand form, was what I have said today. If it is a retailing of that primary evidence, it will be inadmissible unless it is retailing in a particular way; that is, what I have said, the use of the social science, of the experience, of the way of thinking, to categorise, order, prioritise and explain. 40 I do not propose to have the expert evidence in this case bogged down in a degree of pedantry in approach. In saying that, I am not being the slightest bit critical of Mr Jones, junior counsel for the second respondent, who has had the carriage of the objections. However, I do require that I understand with precision Dr Walker's evidence, in fairness to her, apart from anything else, and to the ACCC, but importantly for her. 41 One of the difficulties, as I said earlier, in requiring her to give evidence before all the lay evidence and before the expert evidence of Mrs Smith, is that I do not have the benefit, and will not have the opportunity at this point, of a direct engagement with the two experts contemporaneously, or almost contemporaneously. 42 The way that I propose to approach the matter, however, I will now explain. It may lead to some increase in cost; I hope not. If it does, then we will have to deal with that. I do not propose at the moment to receive an expert's evidence in reply. That invites, it seems to me at this stage, an unnecessarily complex three stage process in the reception of this evidence. 43 It is not clear to me yet that all of that evidence will be led in the case by Woolworths. However, I appreciate that in Dr Walker's consideration of the material put by those various people, she may have been called on to reassess and, in some circumstances, elaborate on her primary position. 44 What I propose to do is to rule on the paragraphs of Dr Walker's statement in chief in volume 33. I am going to invite counsel for the ACCC to have Dr Walker explain to me, with the benefit, I hope, of having heard me today, her primary opinions, how they are derived and what she otherwise would like to say in chief, as it were, about what might be said contrary to her views. 45 If that invitation is not taken up, I will do it. I want to understand from Dr Walker, with some clarity, the precise nature of her opinions as opinions in the way that I have expressed. Putting the matter that way should not be taken in the slightest as a criticism of the exposition by Dr Walker in her first report. It is no doubt a reflection on me. 46 The extent to which there then comes the question of needing to deal in detail with evidence of others who come later, that can be dealt with in evidence in reply, and at that point, if it be the case that the second respondent goes into evidence and calls expert witnesses, I will then make orders, in dealing with those witnesses, together with Dr Walker, that will enable me to deal with that witness, or those witnesses, together with Dr Walker, in a way where I can most clearly resolve what appear to be the outstanding difficulties. 47 To the extent that this may require the reorganisation of people's schedules, then I am afraid that will have to be done. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Ruling herein of the Honourable Justice Allsop .