The statutory language and the meaning of "likely"
213 Before turning directly to the meaning of the word "likely", a number of preliminary matters about s 50 should be noted. There was no material dispute between the parties about these matters.
214 First, a contravention of s 50 is a civil wrong which must be proved on the balance of probabilities: s 140 of the Evidence Act 1995 (Cth). The matter that must be proved on the balance of probabilities is that the impugned acquisition would have, or be likely to have, the effect of substantially lessening competition in any market.
215 Second, the matter that must be proved - the effect on competition of the acquisition - might be described as an "economic fact". It is a conclusion about a condition of the real world - it is in one sense observable - but the condition is observed and described through the tools and language of the social science of economics. Competition describes the nature and extent of rivalry between firms engaged in trade and commerce. Many of the observable facts that contribute to a conclusion about competition are listed in s 50(3) of the Act and include:
(a) whether products and sources of supply are substitutes for acquirers (on the demand side) or for suppliers (on the supply side);
(b) the level of concentration in a given market;
(c) the height of barriers to entry to a given market, which necessarily requires an understanding of the nature or cause of the barriers;
(d) the extent of vertical integration in a given market;
(e) whether acquirers have countervailing power, which also requires an understanding of the commercial conditions that cause that power to exist;
(f) the dynamic characteristics of the market, including growth, innovation and product differentiation over time; and
(g) pricing behaviours which might reveal market power or the absence of market power.
216 Third, the prohibition in s 50 is a forward-looking test and requires a comparison between the nature and extent of competition in the future with the acquisition and without the acquisition in any market potentially affected by the acquisition. It involves a prediction about the future. While the subject of the prediction - the effect on competition of the acquisition - must be proved on the balance of probabilities, it is not necessary that each relevant predicted fact be proved on the balance of probabilities.
217 An analogy, although imperfect, can be drawn with the Court's assessment of damages in respect of future periods of time, for example loss of earning capacity or the loss of a contractual opportunity. In Malec, the High Court confirmed that, in such circumstances, the court does not ignore a possible eventuality because the likelihood of it occurring is less than 50%. Rather, the court evaluates the possibilities, applying an appropriate discount to reflect the likelihood of the eventuality occurring in arriving at an assessment of damages (at 639-640 per Brennan and Dawson JJ and at 642-643 per Deane, Gaudron and McHugh JJ). While Malec concerned damages for personal injuries, that approach has been applied in the context of contractual damages (The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64) and statutory damages in respect of a contravention of s 52 of the Act (Sellars). The analogy is imperfect because the assessment of damages differs in many respects from the assessment required by s 50. In the context of damages, the court is concerned about the unfairness that would arise for a plaintiff that has been wronged if future eventualities (which would be otherwise compensable) could not be proved on the balance of probabilities (Malec at 643 per Deane, Gaudron and McHugh JJ). Nevertheless, s 50 requires the court to undertake a forward-looking assessment of the effect on competition of the acquisition. A common sense approach requires the court to assess what may occur in the relevant market in the future, taking into account the likelihood as a matter of possibility as well as probability, and weigh such predictions in the overall assessment of whether the acquisition would have, or be likely to have, the effect of substantially lessening competition on the balance of probabilities.
218 In the usual case, predictions about the nature and extent of competition in the future with and without the acquisition will be rooted firmly in past and present market conditions, which are susceptible of proof in the ordinary way. Most markets have a history from which an assessment of substitution possibilities, concentration, barriers to entry and other commercial behaviours and conditions can be undertaken and reliable predictions about the future can be made. Further, some future facts are more certain than others. For example, commercial firms and governments make plans about investment or entry into markets, which are observable facts able to be proved in the ordinary way. Such facts provide a platform on which a court is able to undertake the assessment required by s 50.
219 Fourth, the matter that must be proved is a substantial lessening of competition. "Substantial" is an evaluative, rather than a precise, legal standard. In Rural Press, in the context of s 45 of the Act, Gummow, Hayne and Heydon JJ adopted with apparent approval the statement of French J in Stirling Harbour (2000) ATPR 41-752 that the relevant question is whether the effect is substantial in the sense of being meaningful or relevant to the competitive process (at [41]). However, at footnote 67, their Honours noted that French J had referred to three authorities: Tillmanns in which Deane J expressed the view that "substantial" (in s 45D) meant "real or of substance and not insubstantial or nominal"; Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 in which Lockhart J said that (at 445) "[in s 45] the lessening of competition must be at least real or of substance", and said that he saw "considerable force in the view . . . that, in the context of s 45, the word means substantially in the sense of considerably"; and Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 385 in which Wilcox J rejected the view that an effect on competition which was more than insignificant was, for that reason alone, substantial (at 420-422). Their Honours observed that it was not necessary to decide between the foregoing statements, but concluded that it is plain that the authorities do not support the proposition that it would be sufficient for liability if the relevant effect on competition was quantitatively "more than insignificant" or "not insubstantial". The current state of the authorities shows that "substantial" means "real or of substance" and, in that sense, meaningful or relevant to the competitive process.
220 Fifth, s 50 contains two legal standards or limbs. The section is contravened if the acquisition would have the effect of substantially lessening competition; and the section is also contravened if the acquisition would be likely to have the effect of substantially lessening competition. No party suggested that the two legal standards have the same meaning. Each party accepted that the first limb imposes a higher standard of certainty than the second limb. Each party also accepted that the lower standard in the second limb effectively rendered the first limb redundant, although the ACCC emphasised that the redundancy was not impermissible and that it is a frequent redundancy in the law that a norm may be stated in two forms, one of which is more difficult to satisfy than the other. It should be observed, however, that there are two legal standards; it may well be, for instance, after looking at the evidence, a court could be satisfied to the necessary level of satisfaction that the acquisition would have the effect of substantially lessening competition. The dual legal standard in s 50 is also to be found in ss 45, 46, 47 and 50A, and a similar form of language is to be found in ss 45AD, 45D, 45DA and 45DB. It must be accepted that the same redundancy exists in each of those provisions and the language used is a form of drafting that has been replicated throughout the provisions of Part IV of the Act.
221 With that background, the meaning of "likely" can be considered in light of textual, contextual and purposive considerations.
222 As to the text, in our view the ordinary meaning of the word "likely" in everyday language is "probable" (in the sense of more probable than not) and that meaning is consistent with dictionary definitions. The ACCC argued that the definition in the Macquarie Dictionary, "reasonably to be believed or expected", conveyed a lower degree of expectation than "more probable than not". However, the whole definition is "seeming like truth, fact, or certainty, or reasonably to be believed or expected; probable", which conveys the sense of "more probable than not". The ACCC also relied on a passing comment of Mason, Wilson and Deane JJ in Boughey to the effect that the ordinary meaning of "likely" included "a substantial - a 'real and not remote' - chance regardless of whether it is less or more than 50 per cent" (at 21). However, the ratio of the case was the meaning to be given to the word in its statutory context (s 157(1) of the Criminal Code Act 1974 (Tas)), not the meaning of the word in ordinary language. Gibbs CJ, in agreement as to the result, considered that the ordinary meaning of the word is "probable" (at 14), and Brennan J, in dissent, observed that the dictionary definitions treat "likely" and "probable" as synonyms (at 42). The more significant point to be taken from cases such as Boughie, Jungarrayi and Deerubbin is that the word is capable of bearing a meaning of a real or substantial chance, even if it is less than 50%.
223 The juxtaposition of the dual legal standards in the section also supports the conclusion that "likely" means "probable". The first legal standard is that the acquisition would have the effect of substantially lessening competition, which conveys certainty. Of course, that standard must be proved to the civil standard on the balance of probabilities, but the language in which the standard is expressed conveys certainty of outcome. The second legal standard is that the acquisition would be likely to have the effect of substantially lessening competition. As a natural counterpoint to the first legal standard, the second legal standard would be expected to convey a probable outcome, not a "real chance". Respectfully, the reasoning of Deane J in Tillmanns, also adopted by French J in AGL No 3, that the first legal standard is concerned with the balance of probabilities conflates the standard of proof of the contravention with the legal test for contravention. The two matters are conceptually separate. As Middleton J observed in Vodafone Hutchison Australia Pty Limited v Australian Competition and Consumer Commission [2020] FCA 117 at [68] and the parties before us accepted:
…One must distinguish between the requirements of the substantive law (s 50) and the principles or rules of evidence. The content of s 50 is not addressing the evidentiary burden. … The burden of proof is set out in s 140 of the Evidence Act 1995 (Cth), …This does not take away from the evaluative or quantitative judgment a Court still needs to make, which will involve the concepts referred to by French J in AGL: 'commercially relevant or meaningful' (at 420 [355]), not 'a mere possibility' (at 416-417 [348]), and operating 'in the real world' (at 416-417 [348]). These concepts are relevant to the substantive requirement of s 50 to give effect to competition law and policy in the context of merger management. …
224 As to context, it is relevant to consider the legislative history and the broader statutory framework. It is also relevant to have regard to the decided cases in the context of the legislative history.
225 The original form of s 50, enacted in 1974, was similar to the present form, but it contained a single legal standard (likely to have the effect) rather than a dual standard. It stipulated that a corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate where the acquisition is likely to have the effect of substantially lessening competition. The relevant extrinsic materials are uninformative about the meaning of the word "likely".
226 As at 1974, the prohibition in s 45(1) was directed to contracts, arrangements or understandings in restraint of trade. However, s 45(4) used a dual legal standard. It stipulated that a contract, arrangement or understanding is not in restraint of trade unless the restraint has, or is likely to have, a significant effect on competition. Similarly, the form of s 47 as enacted in 1974 also used a dual legal standard. Section 47(10) stipulated that s 47(1) did not apply to the practice of exclusive dealing unless engaging in that practice has the purpose, or has or is likely to have the effect, of substantially lessening competition.
227 In 1977, s 50 was amended by the Trade Practices Amendment Act 1977 (Cth). The new section also contained a dual legal standard, but of a different kind. The section prohibited acquisitions if, as a result of the acquisition, the acquirer would be, or would be likely to be, in a position to control or dominate a market. The section also prohibited acquisitions by an acquirer that was already in a position to control or dominate a market where the acquisition would, or would be likely to, substantially strengthen the power to control or dominate that market. Section 45 was also amended to a form very similar to its present form. It prohibited the making of contracts, arrangements or understandings that contained a provision that has the purpose, or would have or be likely to have the effect, of substantially lessening competition, and the giving effect to such a provision. Section 45D was also enacted at that time. It prohibited what are colloquially called secondary boycotts. An element of the prohibition is that the conduct is engaged in for the purpose, and would have or be likely to have the effect, of causing substantial loss or damage to the business being boycotted.
228 The amended s 50 was considered by Northrop J in Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd (1978) 32 FLR 305. His Honour construed the word "likely" as meaning more probable than not (see for example at p 344 and 346), although it does not appear that the meaning of the word was the subject of debate.
229 The newly inserted s 45D was considered in Tillmanns. Bowen CJ, with whom Evatt J agreed, preferred not to put a gloss on the word "likely" by preferring one meaning over another as it was unnecessary in deciding the case (at 340). The relevant part of Deane J's reasons has been reproduced earlier. His Honour construed the word to mean "a real chance or possibility", although his Honour qualified those words by explaining: "Whether or not such conduct is likely (in that sense) to have that effect is a question to be determined by reference to well-established standards of what could reasonably be expected to be the consequence of the relevant conduct in the circumstances" (at 347-348). The qualification highlights the difficulties with synonyms.
230 A case that is often overlooked in this context is Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 (TNT Management). It involved a contravention of the original form of s 45(1), and considered the meaning of the word "likely" in s 45(4). Franki J noted the warning given by Bowen CJ in Tillmanns not to place a gloss on the section by preferring one meaning of "likely" rather than another if that is not necessary for the determination of a particular case. However, his Honour expressed a preference for the view that, whilst the meaning need not be restricted to a situation where the odds are greater rather than equally balanced or somewhat less than equally balanced, the probability must be something not very far short of "more probably than not" (at 49). His Honour also considered that the word "has" requires the question to be tested against the established facts, whereas the words "likely to have" allows any reasonable inference to be drawn (at 50).
231 As noted earlier, s 50 took its present form (in relevant respects) in 1992 by amendments enacted under the Trade Practices Legislation Amendment Act 1992 (Cth). The Explanatory Memorandum to the enacting Bill made the following observations:
11. The previous test of market dominance has been interpreted by the court as a situation where one firm has a commanding influence in the market. It is a test which focuses largely on changes to the structure of a market that would be affected by the acquisition but it also takes some account of the likely effect on the competitive process of such an acquisition. The substantial lessening test focuses on changes to the state of competition in the relevant market. As the Trade Practices Act is about competition, a test which concentrates on competition and whether there is a lessening of that competition is more consistent with the policy underlying the legislation.
12. The term 'substantially lessening competition' is used widely through the Principal Act. It is here intended to mean an effect on competition which is real or of substance, not one which must be large or weighty. While in many cases, a merger or acquisition would be caught by either the 'dominance' or the 'substantial lessening' test, there are some acquisitions that are more likely to be subject to the new test, for example, where an acquisition of a small effective competitor resulted in two well-matched competitors being left in the market.
232 The foregoing statements provide limited assistance in the interpretation of the word "likely". The language in paragraph 11 is consistent with a higher degree of certainty in the test (whether there is a lessening of competition) but does not directly address the intended meaning of the word "likely". Paragraph 12 makes clear that the phrase "substantial lessening of competition" was intended to have the same meaning as had been given to that phrase in other provisions of Part IV, namely "real or of substance". Again, though, the paragraph does not directly address the meaning of the word "likely". As at 1992, Tillmanns, TNT Management and Global Sportsman had been decided, but there is no reference to those cases or the "real chance" test (or any other test) in the Explanatory Memorandum.
233 The legislative history makes clear that the use of a dual legal standard in the provisions of Part IV was a legislative drafting style incorporated into the Act when it was first enacted (albeit not in the case of s 50) and was subsequently continued. As each of ss 45, 47 and 50 address a similar subject matter, trading and commercial conduct that harms competition, the dual legal standard must be given the same meaning in each provision.
234 As already noted in connection with the parties' submissions, the interpretation favoured by Deane J in Tillmanns has been followed on a number of occasions by the Full Federal Court: News Limited in 1996 in relation to s 4D (now repealed); Monroe Topple in 2002 in relation to s 45; Universal Music in 2003 in relation to s 47; Seven Network in 2009 in relation to s 45; and, most recently, Cascade Coal in 2019 in relation to s 4D (now repealed).
235 The prohibition of cartel conduct in Division 1 of Part IV was enacted in 2009 by the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth). As enacted, s 44ZZRB (now s 45AB) contained a definition of the word "likely" as including "a possibility that is not remote". In Division 1, the word "likely" is used in connection with the definition of cartel conduct, which is a different use to the competition tests in ss 45, 47 and 50. The Explanatory Memorandum to the enacting Bill explained the inclusion of the definition in the following terms (at 1.51):
The term likely appears in the purpose/effect condition, the purpose condition and the competition condition. It enables a court to look not only at what has been established on the facts, but also to infer, from those facts, the likely consequences of the provision of the contract, arrangement or understanding. The term is also used in other provisions of the Bill in so far as they relate to those conditions. Likely is defined to include a possibility that is not remote, in relation to four fact situations: a supply of goods or services, an acquisition of goods or services, the production of goods, or the capacity to supply services. This clarifies the position following judicial observations made in the case law in relation to the term (for example, in Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331, 27 ALR 367, by Bowen CJ at 339 and by Deane J at 346).
236 The first two sentences of the Explanatory Memorandum appear to be referencing Franki J's observation in TNT Management that the word "likely" allows the Court to have regard to reasonable inferences arising from the established facts. The latter sentences express a legislative preference for the "real chance" test in Tillmanns. However, the amending Act was not concerned with the prohibitions in ss 45, 47 and 50.
237 Section 46 was amended in 2017 by the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Cth). The section now prohibits a corporation with substantial market power from engaging in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition. Thus, the prohibition now has a similar form to ss 45, 47 and 50. The Explanatory Statement to the amending Bill stated (at para 1.22):
The concept of the purpose, effect or likely effect of substantially lessening competition is new to section 46. This concept already exists in a number of provisions in Part IV of the Act, and it is intended that the existing jurisprudence will inform the application of this concept in the context of section 46.
238 At the time of enactment, the "existing jurisprudence" must be taken to include, at the least, Monroe Topple, Universal Music and Seven Network.
239 The legislative history reveals the following matters. First, the prohibitions in Part IV of the Act have been drafted with a dual legal standard from their enactment in 1974. Second, from a relatively early date, the word "likely" was not interpreted as being synonymous with "probable", although a number of phrases have been used to express the necessary degree of likelihood from time to time (even within Tillmanns itself). Third, the provisions of Part IV of the Act have been amended on a regular basis over the past 46 years, without any change to the use of the dual legal standard. A conclusion which can be drawn is that the judicial approach to the interpretation of the dual legal standard has not caused any perceived difficulties requiring legislative intervention.
240 As to the broader statutory framework, the ACCC referred to the fact that acquisitions that would contravene s 50 are able to be authorised by the ACCC if it is satisfied that the acquisition would result or be likely to result in a net public benefit (see s 90(7)). The contention was to the effect that the legislative policy was to prohibit mergers where there is a risk of competitive harm that is less than probable, because beneficial mergers can be authorised. In our view, the availability of administrative authorisation of mergers does not assist in the construction of the word "likely". Whichever legal standard applies under s 50, administrative authorisation will be applicable to allow mergers that can be shown to generate public benefits that outweigh anti-competitive detriments.
241 As to statutory purpose, s 2 states that the object of the Act is to enhance the welfare of Australians through, relevantly, the promotion of competition. It can be accepted that the Act reflects a policy objective of promoting competition in Australian markets, and that policy is believed to enhance the welfare of Australians. It is consistent with that policy objective to prohibit conduct that creates a risk of substantially harming competition, even if that result is not certain. However, the statutory purpose does not otherwise assist in defining the degree of risk that must exist for the prohibitions in Part IV to apply.
242 Turning to the existing authorities, the respondents correctly submitted that, in almost all of the Full Federal Court decisions since Tillmanns, the meaning of the word "likely" has not been contested and the Court has generally adopted the approach of Deane J without further analysis. The one exception is Seven Network. In that case, the Full Court concluded that it should follow Monroe Topple, observing (at [750]):
… We therefore consider that we should follow the decision in applying s 45 unless we are satisfied that it is clearly wrong. Reconsideration of policy matters will not generally be an appropriate basis for such satisfaction, at least in the absence of any evidence as to wide-spread inconvenience or injustice caused by the established approach. The decision in Monroe Topple 122 FCR 110 has stood since 2002. News's submissions do not cause us to doubt its correctness.
243 We are of the same view. Strong arguments, based on the statutory text, can be made for construing the word "likely" to mean "probable". However, the word "likely" has been construed to mean a likelihood that is less than probable for 40 years (from Tillmanns) and there is no evidence of widespread inconvenience in the application of the law. To the contrary, the law has been amended on numerous occasions without any suggestion that the dual legal standard should be changed. In an analogous context in News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563, coincidentally involving the interpretation of a provision of the Act, McHugh J observed (at [42]) that questions of statutory construction are notorious for generating opposing answers, none of which can be said to be either clearly right or clearly wrong. His Honour concluded that he would not overrule the subjective interpretation of the word "purpose" in s 4D, reasoning (at [41]):
If the interpretation of s 4D was being considered for the first time, I would prefer the view that, for the purposes of s 4D, the purpose of an alleged exclusionary provision is to be determined objectively without regard to the mental state of the parties who made the provision. But the subjective interpretation has stood for seventeen years, been approved by the Full Court of the Federal Court and been followed on numerous occasions. Given the terms of s 4F, s 4D is clearly open to the construction that "purpose" in both sections means the subjective purpose of the makers of the provision. Certainly, it is impossible to hold that the subjective interpretation is plainly wrong.
244 Similarly, if the meaning of the word "likely" was being considered for the first time, we would have been inclined to adopt the meaning probable, but there is insufficient reason to change course at this point in time. For those reasons, we reject ground 4 of Aurizon's amended notice of cross-appeal.
245 Nevertheless, substituting a synonym such as "real chance" for the statutory word "likely" creates the risk that the synonym may convey a different standard to the statutory language and may introduce a further element of uncertainty. As already noted, in Tillmanns Deane J observed that likelihood ought to be determined by reference to well-established standards of what could reasonably be expected to be the consequence of the relevant conduct in the circumstances. Similarly, in AGL No 3, French J observed (at [348]) that:
The meaning of "likely" reflecting a "real chance or possibility" does not encompass a mere possibility. The word can offer no quantitative guidance but requires a qualitative judgment about the effects of an acquisition or proposed acquisition. The judgment it requires must not set the bar so high as effectively to expose acquiring corporations to a finding of contravention simply on the basis of possibilities, however plausible they may seem, generated by economic theory alone. On the other hand it must not set the bar so low as effectively to allow all acquisitions to proceed save those with the most obvious, direct and dramatic effects upon competition. By the language it adopts and the function thereby cast upon the Court and the regulator in their consideration of acquisitions s 50 gives effect to a kind of competition risk management policy. The application of that policy, reflected in judgments about the application of the section, must operate in the real world. The assessment of the risk or real chance of a substantial lessening of competition cannot rest upon speculation or theory. To borrow the words of the Tribunal in the Howard Smith case, the Court is concerned with "commercial likelihoods relevant to the proposed merger". The word "likely" has to be applied at a level which is commercially relevant or meaningful as must be the assessment of the substantial lessening of competition under consideration - Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [41].
246 In the present case, the primary judge followed the authorities referred to above in construing the word "likely" as meaning "real commercial likelihood" (at [1275]), as explained by French J in AGL No 3. In our view, there is no error in his Honour's interpretation of the statutory language. We also respectfully agree with his Honour's statement of the proper approach to the application of s 50, namely:
(a) the application of s 50 requires a single evaluative judgment (at [1276]);
(b) it is a distraction (and, we would add, wrong) to ask what standards of proof apply to the primary facts which will involve predictions about the future (at [1278]);
(c) however, the degree of likelihood of any particular future fact existing or arising will be relevant to the assessment of the likely effect on competition of the acquisition (at [1279]).