Australian Competition & Consumer Commission v Pauls Ltd

THE RESPONDENTS' REACTIONS 89 The inquiries that were conducted by officers of the ACCC generate explanatory correspondence from some of the respondents or their solicitors. Those letters were included by the ACCC in its compilation of the Court Book. For example, Mr See of Malanda, the sixth respondent, wrote the ACCC on 10 March 1998 in answer to a letter of 3 March. Some of the information that he set out in his letter is, in my opinion, relevant to the issues in this matter and is corroborative of evidence that was contained in other documents. For example, he wrote that the Katherine "operation was unprofitable" and was, in Dairy Farmers' view, incapable of being turned around to make a profit. ("Dairy Farmers" was a registered business name under which ACF and some of its subsidiaries carried on business.) He wrote that Dairy Farmers had three options, the first two of which "were not practical options because they each involved losses". The three options were:

· that Dairy Farmers could arrange for Malanda to process and pack Dairy Farmers' Territory brands and then transport them from Malanda (near Cairns) to Dairy Farmers' depot in Darwin;

· that Dairy Farmers could allow the brands "to disappear" from the market; or

· Dairy Farmers could enter into the Agreement with Pauls (either through Malanda or directly).

90 Mr See also wrote that, upon Malanda securing the Contract with Pauls, Dairy Farmers ceased production of milk at Katherine and sold the farm and factory. This last mentioned statement could have been better expressed as it was ACF's subsidiary companies, QUD and Northchoice, who actually sold the farm and the dairy. There were some further inaccuracies in his letter such as a laymen might make but they do not impinge upon the quality of the information that he supplied to the ACCC. Thus he wrote that Malanda "was processing and packaging milk in Far North Queensland, and then transporting it to Darwin and selling it into the market in the Northern Territory". That assertion was at odds with the information that was contained in the affidavit of Mr Trevor Marslen about the involvement of Ascot Haulage. 91 On 27 August 1999, Mr Ray Hill, the Group General Manager of Pauls, wrote the ACCC in response to letters of enquiry that had been directed to his company. He wrote that in April 1996 Malanda approached Pauls, inquiring whether Pauls would be interested in taking over the processing and distribution of Malanda's branded product. At that time Malanda was only partly owned by ACF. Mr Hill said that ACF also "expressed an interest in our processing and distributing their 'Fitzgerald' and 'Rowlands' brands". He said that ACF had also proposed that it enter into a raw milk supply agreement with Pauls; ACF had contemplated that the milk that it would supply to Pauls would come from both Katherine and Malanda. Mr Hill wrote that, as a result of legal advice, Pauls responded saying that it would process and package milk under the brand names "Malanda", "Fitzgerald" and "Rowlands", but that it would not, under any circumstances, undertake distribution on their behalf. Mr Hill also explained that, as ACF had licensed their milk brands to Malanda, the Contract of 23 September 1996, which Mr Hill described as a "contract packing/milk supply agreement" was only executed by Pauls and Malanda. He added that, at about that time, ACF also negotiated the sale of the Katherine farm to Brigalow Farms and, as part of ACF's negotiations with Brigalow, ACF sought from Pauls a milk supply agreement (which was signed on 2 October 1996) for Pauls to acquire up to 4 million litres of milk per annum for 10 years. Mr Hill said of this agreement in his letter that it was: "… simply a local milk supply contract which we were able to negotiate on terms comparable with the milk supplied from Malanda." As was endemic to all correspondence and negotiations, no attempt was made to differentiate between ACF, Northchoice and QUD. In most cases a reference to "ACF" is to be interpreted as a reference to the appropriate company in the ACF Group. 92 Messrs Addisons, the solicitors for ACF, wrote to the ACCC on 29 November 1999. Among other things, they made several relevant submissions on behalf of their client with respect to the Contract and the alleged involvement of the client in the preparation and execution of the Contract. A summary of the points that they made with respect to the Contract is as follows:

· it does not prevent Pauls from obtaining milk from any other party;

· it does not prevent Malanda from supplying milk to any other party (other than for processing into Malanda's milk products in the Territory);

· Pauls and Malanda are free to continue to sell, distribute and market their milk in competition;

· ACF had no involvement in the negotiations and drafting of the Contract between Malanda and Pauls;

· the only profitable way for the ACF Group to sell milk in the Northern Territory was for the milk to be processed and packed by Pauls; and

· because of these factors, the Board of ACF made the decision to close the Katherine plant and sell the dairy.

THE ACCC'S SUBMISSIONS 93 The ACCC submitted that the price of 52 cents per litre had the effect of controlling the price at which Pauls would supply its products for sale by wholesale in competition with Malanda. It further submitted, correctly in my opinion, that it was open to the Court to infer - and I do infer - that the cost to Pauls of processing and packaging its branded products was the same as the cost to Pauls of processing and packaging Malanda's branded products. 94 The ACCC made a two-pronged attack. It submitted that there was anti-competitive behaviour by Malanda and the ACF Group when they respectively agreed to deliver their raw milk to Pauls for 52 cents per litre. But it also submitted that there was anti-competitive behaviour involving Pauls and Malanda in their wholesale prices because, so it was alleged, Pauls acquisition cost of 52 cents per litre had a controlling effect on wholesale prices. 95 During the afternoon of the first day of the hearing, Mr Robertson applied on behalf of the ACCC, to tender the affidavit of Mr Marslen and the contents of the Court Book. The respondents objected to the admission of par 4 of Mr Marslen's affidavit and the annexures that were referred to in that paragraph. They were letters that were written in 1992 and 1997 and, in my opinion, they offered no assistance in assessing the validity of the allegations that have been levelled against any of the respondents. As they lacked relevance, the paragraph and the letters will not be admitted into evidence. Subject to him having the opportunity overnight to examine for relevance some documents that had come into his possession that day as a result of the service of some subpoenas and notices to produce, and subject to another notice to produce being answered, Mr Robertson intimated that the affidavit and the contents of the Court Book constituted the case for the applicant. Counsel for the respondents then indicated that there were some objections to some of the contents of the Court Book and that there was a need for the ACCC to identify which documents were being tendered against which respondents. There was general agreement that these matters would be attended to overnight. Mr Douglas then advised the Court that, upon the formal closing of the ACCC's case, his instructions were to submit that his clients, Malanda and ACF, had no case to answer. He added that his clients anticipated that it would be possible for the Court to rule on the no case submission without having, first, to rule on questions of admissibility of evidence. Not all counsel for the respondents were of that opinion but, ultimately, I ruled that I would hear the submissions of all respondents and the applicant on the no case submission and whether there was a need to elect and rule on questions of admissibility at a later stage should that become necessary. On the morning of the second day of the trial, Mr Robertson added some further documents to the Court Book and then formally closed the case for the ACCC. So that there is no misunderstanding, the evidentiary position is as follows:

· The affidavit of Mr Marslen, less par 4 and its annexures, has been received into evidence as Exhibit A1;

· The ACCC has intimated its proposal to apply to tender the Court Book; that application has yet to be considered. Should the issue arise at a later stage, the ACCC would be at liberty, without restriction, to pursue its application to tender the entire contents of the Court Book (including those inserted into the Court Book during the course of the trial);

· The respondents have intimated that they require the ACCC to identify which of the documents in the Court Book are to be the subject of tender against their respective clients;

· The respondents, with the cooperation of the ACCC, did not pursue (but did not withdraw) their objections to the contents of the Court Book. It was agreed that, for the purpose of deciding the no case submission, the Court could have regard to the entire contents of the Court Book;

· Should the need arise at a later stage, each of the respondents would be at liberty, without restriction, to pursue its or his objections to any part of the Court Book.

96 By arrangement between counsel for the respondents, Mr Douglas addressed first, submitting that the basis upon which his clients made their no case submission was that, on a consideration of the evidence that had been adduced by the applicant, taken at its highest from the applicant's point of view, the evidence could not support the causes of action that have been pleaded against the respondents. All other respondents supported Mr Douglas' submissions. 97 The ACCC has rested its case on s 45A and its deeming effect. No actual substantial lessening of competition at any level has been the subject of direct evidence. All that is relied upon is a per se contravention of s 45 because of the deemed effect of substantially lessening competition that arises under subs 45A(1). In this regard, Lockhart J stressed the care that the Court needs to take in characterising the conduct established by the evidence. In Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 44 ALR 557 at 566, his Honour held: "The court's task is to characterize the conduct before it in a given case. Care must be taken in performing that task because, by its very nature, the violation of s 45A is deemed, for the purposes of s 45, to substantially lessen competition per se. Such a finding may have far reaching consequences to the competitors concerned." 98 On this no case application, the function of the Court is to decide what inferences should be drawn from the evidence. It is no different from the function performed by a judge who has heard all the evidence of the parties in the ordinary way and who has to give final judgment: Rasomen at 228 and Amcor at [76]. 99 In determining what inferences are to be drawn from primary facts in this case, the Court must have regard to the seriousness of the allegations, the gravity of the consequences and the inherent unlikelihood of an occurrence of the given description: Amcor at [78]; Briginshaw v Briginshaw (1938) 60 CLR 336 at 362. The use of legal advisers by the corporate respondents and the concerns that were expressed about the application of the Act, point to a concerted attempt by the respondents to act within the parameters of the law. In the present case, as any conclusion of contravention would rest upon inferences from documentary records, it is not enough for the documents to give rise to conflicting inferences of equal degrees of probability: Amcor at [79]. Nor is it sufficient if the documents do no more than provide material for various guesses as to what actually occurred. As Dixon CJ said in Jones v Dunkel (1959) 101 CLR 298 at 305 the law: "does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied."

The Arrangement 100 In addition to the contents of the MOU, the ACCC, in supplying its further and better particulars of the alleged making of the Arrangement, also relied upon the letter of 1 April 1996 from Mr Whatley of Northchoice to Pauls (in which the price of 52 cents per litre first appeared) and the notes of the two meetings of 23 April and 20 May 1996 between representatives of Pauls, Malanda and ACF. 101 The concept of an arrangement or understanding involves something less than a binding contract but involves, nonetheless, a meeting of minds between the parties as a result of communication between them and a willingness to accept a restraint or obligation, albeit not contractually binding, to act in a certain way. Smithers J in Top Performance Motors Pty Limited v Ira Berk (Queensland) Pty Limited (1975) ATPR ¶40-004 held that: "An understanding must involve the meeting of two or more minds. Where the minds of the parties are at one that a proposed transaction between them proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct, it would seem that there would be an understanding within the meaning of the Act." 102 In Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (1999) 92 FCR 375 ("the CC Case"), Lindgren J, in a passage cited with approval by the Full Court in Rural Press Ltd v Australian Competition & Consumer Commission [2002] FCAFC 213 at [79], summarised the effect of the authorities as follows (at 408): "The cases require that at least one party 'assume an obligation' or give an 'assurance' or 'undertaking' that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party. In the present case, for example, each individual who attended the Meeting may have expected that as a matter of fact the others would return to their respective offices by car, or, to express the matter differently, each may have been expected by the others to act in that way. Each may even have 'aroused' that expectation by things he said at the meeting. But these factual expectations do not found an 'understanding' in the sense in which the word is used in ss 45 and 45A. The conjunction of the word 'understanding' with the words 'agreement' and 'arrangement' and the nature of the provisions show that something more is required." (Emphasis in original.) 103 The respondents submitted that the most that the evidence could possibly establish was that, at various times, some or all of the respondents reached some limited consensus as to a proposal that was to be considered or developed further and, in relation to which, approval to proceed might be sought from the Board of Directors by each party. At no time, so it was argued, was an arrangement or understanding made that involved Pauls, ACF or Malanda indicating a willingness to assume an obligation or to give an assurance or undertaking to behave in accordance with what is alleged in par 12 of the amended statement of claim. Putting forward and agreeing to consider a non-binding proposal that the parties should act in a certain manner was, so it was submitted, an entirely different matter from, and does not amount to, an arrangement or understanding within ss 45 and 45A. 104 Mr Douglas, during the course of his submissions on behalf of Malanda and ACF, submitted that there was no direct evidence that his clients pursued the effect - and thus had the purpose - that the Arrangement would fix, control or maintain the price for wholesale milk. Mr Robertson, for his part, invited the Court to reject any suggestion that s 45A of the Act could only operate if the Court were to be satisfied of the existence of such a subjective purpose. I believe that Mr Robertson must be correct. The very nature of s 45A and its deeming effect contradicts the presence of a subjective state of mind. The language of the section requires a dispassionate onlooker to stand back and make an objective assessment of all relevant facts and circumstances. If that assessment reveals a purpose or an effect, or a likely effect of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of prices then the provision shall be deemed to have the proscribed purpose, effect or likely effect. The words "likely to have the effect" can only mean, in my opinion, that one has regard, objectively, to what has happened or is likely to happen, ignoring the subjective state of mind of the relevant parties. 105 The ACCC's case must be that the Arrangement was made either at the meeting of 23 April 1996 or at the meeting of 20 May 1996. As this part of the ACCC's case is entirely documentary, its case must be based upon the contents of the MOU and the contents of the relevant documents that relate to those meetings and the inferences that can properly be drawn from that written material. In my opinion, that material is insufficient to support the case that was advanced by the ACCC. I have come to that conclusion because of the language of cl 10 of the MOU which stated that the parties agreed that a firm decision to proceed or not was to be made no later than 15 May 1996. The conduct of the parties at that time is best understood as constituting meetings to discuss a proposal. Many of the terms of the proposal were straightforward. Notable among them was the intended price of 52 cents per litre. But the MOU lacked that indication of commitment which, in my opinion, is necessary to tip a proposal over the line that divides it from an arrangement or understanding. Any one of the corporate respondents at Board level could have rejected the proposal and no intending participant could have complained that a party had reneged on an arrangement. 106 Malanda and ACF further submitted that there were several areas in the MOU where matters were incomplete. Examples were cl 2 and cl 3 where charges for certain products were yet to be finalised and agreed. I do not think that such uncertainties necessarily assist the respondents. In my opinion, an arrangement or an understanding, being something less than a contract, could be found to exist if it could be said that the parties had committed themselves to a particular course of action on terms, some of which were yet to be agreed. My decision is based firmly upon the presence of cl 10; it is the reason why I find that the discussions and documents in April and May 1996 amounted to no more than a proposal that was to be considered by the respective Boards of the corporate respondents. 107 A memorandum dated 29 April 1996 from Malanda to ACF supports this conclusion. It said in part: "At a meeting in Darwin on 22.4.96 attended by Messrs: Keevers, Whatley, See and Campbell, several alternative processing and distribution arrangements were discussed and costed. The decision now lies with ACF and I understand a submission was required by 29.4.96 (today)." There is no material before the Court that points to ACF having made any decision on or before 29 April. Furthermore, the minutes of the meeting of its Board of Directors of 9 May 1996 does not indicate that ACF had made any decision. It remains to mention Pauls. Mr Cohalan's Situation Report of 2 May 1996 to Mr Whatley of Northchoice was littered with entries with respect to matters that were yet to be finalised. The terms of that document indicated that Pauls did not consider that the negotiations and discussions to that date were anything more than a proposal that was yet to be considered by the relevant parties. 108 The meeting of 20 May 1996 does not help the ACCC's case as no representative of Malanda was recorded in the notes as being present. That absence, and the reference in the notes to the involvement of solicitors, lends some weight to the finding that an arrangement or understanding had not then been reached. The endorsement in the notes that "ACF to come back and clarify its intentions …" is, as counsel for Malanda and ACF submitted, inconsistent with the existence of an arrangement or an understanding at that time. 109 There are further examples in the Court Book that emphasise the tentative nature of the proposal in May 1996. They include two proposals that ACF received from a Darwin accountant on behalf of clients to purchase the assets of Northchoice and Mr See's memorandum to Malanda's Board of Directors dated 15 May where he wrote: "We understand that a decision on Northern Territory will be made at the ACF May Board Meeting. One option being looked at in depth is for the Northern Territory farm to continue operating, approximately 8 million litres being supplied by Malanda in bulk tanker, the Northern Territory packaging operation closing and the packaging of all Rowland and Malanda brands by [Pauls] Darwin, who will receive all the bulk milk from the farm and Malanda." That option did not, of course, eventuate as the farm and the dairy herd were ultimately sold to Brigalow. 110 These enquiries and these reports were, in my opinion, inconsistent with there being any arrangement or understanding of the type alleged in par 12 of the amended Statement of Claim. 111 As a result of the meeting of 20 May 1996, Mr Morgan of ACF had formed an opinion about the preferred course of action. As had already been noted, he wrote Mr McCray of Pauls on 24 May, informing him that ACF wished "to pursue a Tripartite Contract Packaging Agreement" that would include Pauls, Malanda and ACF. He also proposed that any such agreement would include the supply from ACF and Malanda to Pauls of "all fresh wholemilk requirements" for Pauls' Territory market. That proposal did not eventuate. ACF ultimately sold off QUD and Northchoice and did not become a party to the contract of 23 September 1996. As counsel for Malanda and ACF pointed out, there was no evidence that the ACF Board or its senior management decided to commit ACF to the proposal that was being developed at that stage. That submission holds good in my opinion, notwithstanding the preparation of draft contracts for a tripartite agreement at about that time. 112 During the course of submissions, an amount of time was devoted by counsel to the expressed and implied terms of the alleged Arrangement and to the allegation that ACF "procured" other parties to supply milk to Pauls. In view of my finding that the ACCC has failed to prove the existence of any such arrangement or understanding, it is not necessary to address those submissions. 113 It follows, as a consequence of my finding that the three corporate respondents did not enter into a proscribed arrangement or understanding, that s 45A of the Act has no part to play and that Messrs McCray, Jardine, See and Morgan could not have been "directly or indirectly knowingly concerned in or a party to" any contravening conduct. 114 I therefore hold that, in relation to the claims for relief that were based upon the alleged existence of an arrangement or understanding, as pleaded in par 12 of the amended statement of claim, none of the respondents have a case to answer and all those claims for relief should be dismissed with costs.

The Contract 115 The basic case for the ACCC was that Pauls and Malanda, by entering into the Contract and giving effect to it, had the purpose, and the terms of the Contract had the effect, of substantially lessening competition. If that argument (or one of its several permutations) is accepted and the Court resolves that those corporations have a case to answer, it would then be necessary to consider whether ACF and the remaining respondents aided, abetted, counselled or procured or was or were directly or indirectly knowingly concerned in the contravening conduct of Pauls and Malanda. If, on the other hand, it is found that Pauls and Malanda did not engage in any proscribed conduct it will not be necessary to consider the roles of the remaining respondents. 116 The first of the propositions that was advanced by the ACCC can be disposed of relatively quickly. It was pleaded that the provisions of the Contract had the purpose or the likely effect of fixing the price at which Malanda would supply raw milk to Pauls in competition, first, with Northchoice, and later with Brigalow. For s 45A to be of assistance to the ACCC, the applicant must prove the existence of the Contract (and that has not been challenged) and it must identify a particular provision in the contract which, irrespective of the intentions of the parties: "has the purpose, or has or is likely to have the effect, as the case may be, of fixing … the price for … goods … supplied … or to be supplied … by the parties to the contract … in competition with each other." There remains an evidentiary onus on the ACCC to prove the existence of such a purpose or such a likely effect and, in my opinion, this has not been achieved. But, in any event, there is a more compelling reason why the case for the ACCC must fail. Even if it could be said that the necessary purpose or the necessary likely effect has been established, that will amount to nought because the purpose or likely effect must relate to fixing the price for goods that are to be supplied by the parties to the Contract who are in competition with each other. Neither Northchoice nor Brigalow was a party to the Contract (and it has not been suggested that it should be implied that they were) but they were the parties who were in competition with Malanda in the supply of raw milk to Pauls. Pauls and Malanda were the only parties to the Contract, but Pauls did not supply itself with raw milk in competition with Malanda. This leg of the ACCC's argument must fail. 117 The second allegation that was advanced by the ACCC was to the effect that certain provisions of the Contract had the purpose or the likely effect of controlling or maintaining the price for wholesale milk which Pauls and Malanda sold in competition with one another. As to this, the respondents did not dispute that Pauls and Malanda were in competition with each other in relation to the wholesale supply of processed packaged milk in the Territory. The argument that the ACCC advanced in support of its case was based upon a two-pronged attack:

· the Contract established the price that Pauls would pay Malanda for raw milk; and

· the Contract established the price that Malanda would pay Pauls for processed packaged milk.

The prices thus established by those provisions were said to comprise a substantial proportion of:

· the costs to Pauls and Malanda of obtaining processed packaged milk; and

· the price at which Pauls and Malanda could sell processed packaged milk in the Territory in competition with each other.

118 The next step in the chain was the argument that the provisions in the Contract that established the prices for raw milk and processed packaged milk had the purpose or the likely effect of controlling the price at which Pauls and Malanda could supply processed packaged milk in the Territory in competition with each other. Upon that premise, the provisions of the Contract would fall within subs 45A(1) and would be deemed to have the purpose or likely effect of substantially lessening competition. 119 The issue most strongly favouring the respondents is that Pauls and Malanda made no overt attempt to fix the wholesale price of milk. The evidence points to them being free to charge what price they liked and to under-cut each other in an attempt to increase their share of the market. However, the question remains whether some aspect of "control" can be inferred. The cost of raw milk was fixed at 52 cents per litre; the cost to Pauls of processing and packaging the raw milk was constant and had equal application to Pauls and Malanda. Those two factors being a substantial proportion of the costs of producing the milk for wholesale and its subsequent distribution, the argument was that the effect, and thus the purpose, was to control or maintain the wholesale price of processed packaged milk. 120 Lindgren J considered the meaning of the word "control" in the CC case. In that case the ACCC had alleged that certain major construction companies and their association, the AFCC, had engaged in price fixing in connection with the tenders for a project that was known as the "Commonwealth Offices - Haymarket" ("the project"). It was alleged that, at a meeting of the tenderers, an arrangement or an understanding was reached whereby each tenderer would take into account, in the preparation of its tender, matters to be agreed at the meeting including matters such as special fees and an unsuccessful tenderer's fee ("UTF"). There was a proposal that the special fee, which would be paid to the AFCC, would be $1,000,000. The pleadings then alleged: "23 At the meeting it was then proposed that the successful tenderer should pay to each of the unsuccessful tenderers [a UTF] in the sum of $750,000." In the result, the successful tenderer paid the special fee of $1,000,000 to the AFCC and UTFs totalling $2,250,000 to the three unsuccessful tenderers. 121 Lindgren J pointed out at [20] that the ACCC's "evidence was largely documentary and circumstantial. It led no testimonial evidence at all from any of the four Tenderers' representatives who were the only persons allegedly present at the … Meeting …". Nevertheless, his Honour was of the opinion that the evidence was sufficient to establish that there had been an arrangement between the tenderers to pay the special fee and the three UTFs. Although his Honour did not find that each tenderer undertook that it would take its obligation to pay the special fee and the UTFs into account in calculating its tender price, he was of the view that that still remained a matter of interest to the tenderers. On the other hand, he was of the opinion at [160]: "… that each Tenderer had an independent expectation that as a matter of fact each of the others would, if successful, pay the UTFs (and, for that matter, the Special Fee) out of the proceeds of the job and would take its commitment to do so into account in the calculation of its tender price." 122 These findings led his Honour to conclude at [160] that the understanding "was likely to have an effect on price". 123 In discussing the subject of "control" Lindgren J said at [168 - 169]: "The word 'control' is not defined in the Act. Its natural or ordinary meaning is 'to exercise restraint or direction over' (the Macquarie Dictionary) or 'to exercise restraint or direction upon the free action of' (the Oxford English Dictionary) a person or thing. There are degrees of control and there may be control although the 'restraint' or 'direction' is not total. An arrangement or understanding has the effect of 'controlling price' if it restrains a freedom that would otherwise exist as to a price to be charged. [The respondent] submits that the notion of 'fixing, controlling or maintaining' price involves a degree of 'specificity' as to price and a degree of 'proximity' between the arrangement or understanding and price. I accept that an arrangement or understanding which no one intends, and is not objectively likely, to have any effect on price, but which, by reason of unforeseeable supervening circumstances has had that effect, is not caught. But with respect, I do not find the general proposition relied on by [the respondent] determinative of the present case. Of course, I accept that 'likelihood' is to be assessed as at the time when the arrangement is made or the understanding is arrived at." I respectfully agree with what his Honour said and I apply the principle espoused in these remarks to the facts of this case. 124 Lindgren J at [178] concluded that the degree of control was not relevant to the issue of contravention and that, on the facts that were before him, the UTF understanding was likely to have the effect of controlling the price in that the successful tenderer was likely to pay the UTFs out of the proceeds of the job and to take them into account in calculating its tender price (at [183]). 125 However, I accept the submissions of the respondents that the facts of this case are different, to a material degree, to the facts that Lindgren J was required to consider. In the CC case, Lindgren J had said at [168] (and I agree) that: "An arrangement or understanding has the effect of 'controlling price' if it restrains a freedom that would otherwise exist as to a price to be charged." The commercial necessity of covering the costs of the three UTFs in the successful tender price can be seen as a severe restraint on the freedom that would otherwise exist in the calculation of the tender price. No such restraint applies in the case that is now under consideration. In the present case the payment that is said to give rise to the restraint on pricing freedom is the cost of raw milk to Pauls. Unlike the UTFs, however, this cost would exist whether there was an arrangement or not. Pauls always had to buy raw milk from someone if it were to process and sell wholesale milk. Thus, it cannot, in my opinion, be concluded that this cost operated to restrain a freedom that would otherwise exist as to a price to be charged for wholesale milk. The raw milk cost would always have existed as a restraint on the wholesale packaged milk selling price whether or not there had been any contract. 126 There is, in my opinion, a further flaw in the proposition that Pauls and Malanda engaged in some form of price fixing with respect to the sale and distribution of wholesale milk. The flaw exists because the two parties do not have the same cost base. There was no evidence that would enable the Court to find the cost to Malanda of the milk that it supplied to Pauls, but it is reasonable to infer that it would probably have been a figure that was less than 52 cents per litre. Thus there would have been an element of profit at the stage when Malanda sold its raw milk that was not available to Pauls. Pauls was not a producer of raw milk: it was a processor. Malanda was not a processor of raw milk: it was a producer. The different roles of the two companies coupled with Malanda's opportunity to enjoy a profit on its sale of raw milk meant that when the companies competed at the wholesale level, Malanda had the opportunity to undercut Pauls to the extent of some (or all) of the profit that it enjoyed when it sold its raw milk. That background, combined with the fact that there was no evidence that the parties agreed to fix the wholesale price of milk, destroys the proposition that Pauls and Malanda engaged in some form of fixing the wholesale price of milk. It likewise destroys the proposition that one or other of them was controlling, or might be able to control, the wholesale price. 127 The conclusion that I have reached is that the evidence adduced by the ACCC, taken at its highest, has failed to establish that the Contract had a proscribed purpose or a proscribed likely effect. There being no case to answer by the parties to the Contract, Pauls and Malanda, it follows that their alleged accessories likewise have no case to answer. 128 I therefore hold that, in relation to the claims for relief that were based upon the Contract, none of the respondents have a case to answer and all claims for relief should be dismissed with costs.

COSTS 129 It was submitted that dismissal of these proceedings at this premature stage would justify an order for costs against the ACCC on an indemnity basis. I do not consider that an order in those terms would be appropriate. The history of this matter was complex; the proposals that passed between the corporate respondents were subject to numerous variations; the complexity was compounded by the involvement of third parties such as Brigalow and Ascot Haulage. In my opinion, the ACCC was, notwithstanding that the Court has found no case to answer, justified in making the enquiries and taking the action that it took. Perhaps it might be argued that there would have come a time when the completed enquiries should have satisfied the ACCC that the respondents had not breached the Act, but that is arguable and does not justify an order for indemnity costs. I certify that the preceding one hundred and twenty-nine (129) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin.

Counsel for the Applicant: Mr A Robertson SC and Mr A I Tonking

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the First, Fourth and Fifth Respondents: Mr G Gibson QC and Mr R Wilson

Solicitors for the First, Fourth and Fifth Respondents: Messrs Biggs & Biggs

Counsel for the Second and Third Respondents: Mr F Douglas QC and Mr R J Wright

Solicitors for the Second and Third Respondents: Messrs Blake Dawson Waldron

Counsel for the Sixth Respondent: Mr J Bell QC and Mr M Martin

Solicitors for the Sixth Respondent:: Messrs McCullough Robertson

Counsel for the Seventh Respondent: Mr M Speakman

Solicitors for the Seventh Respondent:: Messrs Clayton Utz

Date of Hearing: 12 August - 14 August 2002

Date of Judgment: 19 December 2002