MARKET
45 It is convenient to deal with the Pt IV Trade Practices Act claims first as much of the evidence related to them, if established, has a profound influence upon other aspects of the case. Each of the breaches relied upon involves a consideration of the market, and it is useful to consider that issue first, although bearing in mind that it is only ultimately a means to an end.
46 The market contended for by the first and second respondents is:
7. At all material times there was and is a market within Australia for the supply to business organisations of corporate hospitality packages in conjunction with national representative level rugby matches organised by the Cross Respondent and to be played in NSW (the "Hospitality Market").
Particulars
(a) The services sold in the market were and are packages entitling the purchaser to
(i) beverages before and/or after the match;
(ii) food before and/or after the match;
(iii) entertainment before and/or after the match;
(iv) transportation in relation to the match; and
(v) the procurement of tickets to the match,
in each case for a group of persons.
(a) The geographic area of the market was
(i) within Australia; or alternatively
(ii) within New South Wales; or alternatively
(iii) within metropolitan Sydney
(b) Competitors in the market include the Cross Respondent, International Management Group of America Pty Limited ("IMG"), ASK Promotional Solutions Pty Limited ("ASK"), David Campese Management Group Limited ("DCM"), Corporate Hosts ("CH") (together the "Official Suppliers"), the Cross Claimants and Stirling House (Guildford) Pty Limited trading as Corporate Sports Australia ("CSA") (together the "Competitive Suppliers").
47 There is undoubtedly what may be described as a commercial market for corporate hospitality. The direct participants in that market from whom evidence was called were IMG and MBM, although the applicant did call representatives involved in other sports and Stadium Australia who are suppliers to that market. Four primary consumers (those actually purchasing a package) were called, and there was hearsay evidence given as to the attitude of other such consumers by various witnesses. No evidence was called from any ultimate (or secondary) consumer or guest. The evidence in relation to that category was given by survey, both designed for the purposes of the case and otherwise, and anecdotal hearsay accounts in the documentary and oral evidence, including the evidence of the primary consumers who invited guests.
48 As noted previously, corporate hospitality packages are not limited to rugby union test matches in Sydney, but include a wide variety of other sports and entertainment events. The brochures of THG, as well as a body of other evidence, establish that a retailer of packages is likely to offer a range of different events as the centrepiece of different hospitality packages. The events, in addition to being different in substance, are offered at different times and locations. There are a number of competing retailers offering similar, but not identical, portfolios of events. The ARU is not the only event organiser that confers "authorised" status upon a supplier or suppliers. The evidence is that this confers a marketing advantage. It is also clear that it is commercially desirable for a retailer to be able to offer packages to as wide a field of events as they may wish to include.
49 One feature of the "product" is that the price for the ticket to the event is only a relatively small proportion of the price paid for the whole package. Furthermore, I conclude from the evidence that the primary consumers are not particularly price sensitive. The purpose of purchasing a hospitality package is to achieve important commercial objectives by, for example, cementing relationships with existing customers, creating new customers or rewarding key staff. Whilst, of course, not oblivious to cost or value for money, the most important consideration is to have a successful outing. The prestige and quality of the event is an important factor, but the hospitality provided, and general smooth organisation, is also important. The primary consumers are, by and large, substantial commercial entities, with expenditure on corporate hospitality being part of much larger marketing budgets.
50 The evidence establishes that the primary consumer is interested in a prestige event, as that makes the client, or employee, feel special, and will endeavour to match the interests of those invited to the event in question. There is no doubt that international rugby tests in Sydney and elsewhere are presently regarded as prestige events for this purpose.
51 On the evidence, there is a good correlation between those who are likely to be invited to corporate hospitality and those with an interest in rugby. Indeed, it is fair to say that the evidence supports the conclusion that, whilst many people interested in rugby may also be interested in, say, horse racing, golf or opera, there is a substantial body of people with an interest in rugby to the exclusion of, or which is greater than, other sports and entertainment. In other words, there is a substantial hard core of fans of international rugby matches. The characteristics of many of them means that they are in the target audience for invitation to corporate hospitality. The "demographic" of the rugby fan (to use a marketing term) taking into account gender, age, education, occupation and the like, indicates a likely secondary consumer of (or invitee to) corporate hospitality. This conclusion is drawn from my consideration of much of the evidence, including the ARU internal material and the oral evidence of primary consumers, but I particularly found the results of a survey of persons attending the 1999 Bledisloe Cup commissioned by the ARU to be persuasive.
52 It is contended for THG that these findings of fact as to the evidence and nature of the hard core fans establish that there is a market for the purposes of Pt IV for hospitality packages to international rugby matches in Sydney. It is contended for the ARU, whilst denying any obligation to assert or establish any market, that the market for Pt IV purposes encompasses a great range of sports and entertainments over a wide geographical area. It is said that the brochure of THG graphically makes this point. The response on behalf of THG is that offering different packages in the one brochure is similar to offering different products in a supermarket, and does not establish a market for relevant purposes.
53 This simplified summary of contentions requires particular attention to be paid to the principles that are to be applied. The law on the topic was authoritatively settled by the High Court in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd (1989) 167 CLR 177.
54 The starting point is s 4E of the Trade Practices Act:
"4E. Market
For the purposes of this Act, unless the contrary intention appears, "market" means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services."
55 In Queensland Wire (supra) Mason CJ and Wilson J said, at 188 (omitting citations):
"Section 4E directs that a market is to be described to include not just the defendant's product but also those which are "substitutable for, or otherwise competitive with", the defendant's product. This process of defining a market by substitution involves both including products which compete with the defendant's and excluding those which because of differentiating characteristics do not compete. In Hoffmann-La Roche v Commission ("Roche") the Court of Justice of the European Communities said:
"The concept of the relevant market … implies that there can be effective competition between the products which form part of it and this presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market in so far as a specific use of such products is concerned."
Conversely, in determining in United Brands v Commission ("United Brands") whether other fruits should be excluded from the market which bananas served, the European Court said:
"For the banana to be regarded as forming a market which is sufficiently differentiated from other fruit markets it must be possible for it to be singled out by such special features distinguishing it from other fruits that it is only to a limited extent interchangeable with them and is only exposed to their competition in a way that is hardly perceptible."
See also Re Queensland Co-operative Milling Association Ltd (explaining that the defining feature of a market in substitution).
Deane J said, at 195-6:
"The Act does not otherwise seek to define what is meant by the word "market". That is not surprising since the word is not susceptible of precise comprehensive definition when used as an abstract noun in an economic context. The most that can be said is that "market" should, in the context of the Act, be understood in the sense of an area of potential close competition in particular goods and/or services and their substitutes (cf Re G & M Stephens Cartage Contractors Pty Ltd).
The identification of relevant markets and the definition of market structures and boundaries for the purposes of determining whether BHP's refusal to supply Y-bar to QWI contravened s 46(1) involves value judgments about which there is some room for legitimate differences of opinion. The economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted. One overall market may overlap other markets and contain more narrowly defined markets which may, in their turn, overlap, the one with one or more others. The outer limits (including geographic confines) of a particular market are likely to be blurred: their definition will commonly involve assessment of the relative weight to be given to competing considerations in relation to questions such as the extent of product substitutability and the significance of competition between traders at different stages of distribution. While actual competition must exist and be assessed in the context of a market, a market can exist if there be the potential for close competition even though none in fact exists. A market will continue to exist even though dealings in it be temporarily dormant or suspended. Indeed, for the purposes of the Act, a market may exist for particular existing goods at a particular level if there exists a demand for (and the potential for competition between traders in) such goods at that level, notwithstanding that there is no supplier of, nor trade in, those goods at a given time - because, for example, one party is unwilling to enter any transaction at the price or on the conditions set by the other."
Dawson J said, at 199-200:
"A market is an area in which the exchange of goods or services between buyer and seller is negotiated. It is sometimes referred to as the sphere within which price is determined and that serves to focus attention upon the way in which the market facilitates exchange by employing price as the mechanism to reconcile competing demands for resources: see Stigler and Sherwin, "The Extent of the Market", Journal of Law and Economics, vol 28 (1985) 555, at p 555. In setting the limits of a market the emphasis has historically been placed upon what is referred to as the "demand side", but more recently the "supply side" has also come to be regarded as significant. The basic test involves the ascertainment of the cross-elasticities of both supply and demand, that is to say, the extent to which the supply of or demand for a product responds to a change in the price of another product. Cross-elasticities of supply and demand reveal the degree to which one product may be substituted for another, an important consideration in any definition of a market. This is reflected in s 4E of the Trade Practices Act which provides:
"For the purposes of this Act, 'market' means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services." (My emphasis.)
Important as they are, elasticities and the notion of substitution provide no complete solution to the definition of a market. A question of degree is involved - at what point do different goods become closely enough linked in supply or demand to be included in the one market - which precludes any dogmatic answer: see Times-Picayune v United States. The process is an inexact one as may be illustrated by reference to the concept of a sub-market which has been employed from time to time. In Re Queensland Co-operative Milling Association Ltd, the Trade Practices Tribunal observed:
"The distinction between markets and sub-markets can be merely one of degree. Sub-markets are the more narrowly defined, typically registering some discontinuity in substitution possibilities. Where the defining feature of a market is the existence of close substitutes (whether in demand or supply), the defining feature of a sub-market is the existence of still closer and more immediate substitutes. Sub-markets may be especially useful in registering the short-run effects of change; but they may be misleading if used uncritically to assess long run competitive effects.""
Toohey J said at 210-211:
"The introduction of s 4E followed a recommendation of the Swanson Committee that the definition of "market" be extended so as to "require that, in the determination of a 'market' for particular purposes, regard shall be had to substitute products, being products which have a reasonable interchangeability of use and which have high cross-elasticity of demand, ie where a small decrease in the price of a particular product would cause a significant quantum of demand for a similar product to switch to the product in question"(Trade Practices Act Review Committee (Swanson Committee): Report to the Minister for Business and Consumer Affairs (1976), p 17, par 4.22). This test of interchangeability of products on the demand side has been widely recognized in other jurisdictions as relevant to market definition: see, for instance, United States v Du Pont & Co; L'Oreal v De Nieuwe AMCK. Indeed, in delineating the scope of the product market demand substitutability has often been emphasized at the expense of supply substitutability.
But this does not mean that supply substitutability is irrelevant to the task of market definition: see Europemballage Corp and Continental Can Co Inc v ED Commission. Rather, the definition of the relevant market requires a consideration of substitutability both on the demand and on the supply side. This has been recognized in Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd; Re Howard Smith Industries Pty Ltd, both decisions adopted in Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd; Re Tooth & Co Ltd and Tooheys Ltd; Trade Practices Commission v TNT Management Pty Ltd. See also BAK, "The Role of Supply Substitutability in Defining the Relevant Product Market", Virginia Law Review, vol 65 (1979), p 129; Hubbard, "Potential Production: A Supply Side Approach for Relevant Product Market Definitions", Fordham Law Review, vol 48 (1980), p 1199. And see generally Wyatt and Dashwood, The Substantive Law of the EEC, 2nd ed (1987), pp 400-405; Hawk, "European Economic Community and United States Antitrust Law: Contrasts and Convergences", Australian Business Law Review, vol 16 (1988) 282, at pp 297-299."
56 I have not, of course, reproduced all of relevance from the judgment. Among the points of interest to emerge are the following:
1. That United States and European decisions and concepts are relevant to market definition pursuant to the Act. This is not surprising, as market is essentially an economic concept. It is important, as, in each place, but particularly in the United States, there is a well developed jurisprudence on the topic which can be resorted to with profit.
2. That a series of early Trade Practices Tribunal decisions, starting with Re Queensland Co-operative Milling Association (1976) 8 ALR 481, 25 FLR 169 and ending with Re Tooth & Co Ltd (1979) 39 FLR 1, are referred to with apparent approval.
3. That s 4E (which was not in force until after Re Queensland Co-operative Milling Association) introduces economic concepts already recognised in the overseas and Trade Practices Tribunal decisions. The section was introduced as the result of a Swanson Committee recommendation which regarded the hallmark of substitutability to be:
"reasonable interchangeability of use and which have high cross-elasticity of demand, ie, where a small increase in the price of a particular product would cause a significant quantum of demand for a similar product to switch to the product in question." (emphasis added)
4. Where the products are not actually the same, differentiating characteristics and reasonable interchangeability are to be judged in relation to specific use of the products.
5. What is required is the existence of an area of actual or potential close competition between close substitutes in particular goods or services
57 I can, for the purposes of the present case, put aside supply side substitution in defining the product market (if it be relevant to that market), although the geographic market may be different. There is no suggestion that anyone else apart from the ARU can produce international rugby test matches in Australia in the foreseeable future. It also effectively controls the provincial unions.
58 The concept of market is well explained by the Trade Practices Tribunal in Re Queensland Co-operative Milling Association (supra) at 517:
"We take the concept of a market to be basically a very simple idea. A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them (if there is no close competition there is of course a monopolistic market). Within the bounds of a market there is substitution - substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm's product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives.
It is the possibilities of such substitution which set the limits upon a firm's ability to "give less and charge more". Accordingly, in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were to "give less and charge more" would there be, to put the matter colloquially, much of a reaction? And if so, from whom? In the language of economics the question is this: From which products and which activities could we expect a relatively high demand or supply response to price change, ie a relatively high cross-elasticity of demand or cross-elasticity of supply?"
59 Guiding myself by these principles, I first approach the product market without regard to geography or functional level. I use "product" to describe the services offered. It is relevant to note that hospitality packages to international rugby union matches are in fact different from hospitality packages to other sports or entertainments because rugby union is a distinct sport, not to be confused with any other sport or entertainment. It has, among other factors, distinct rules, organisation and history. It has not been suggested that even rugby league (which was a breakaway from rugby union) is regarded as the same as rugby union.
60 Are the differentiating characteristics of international rugby union hospitality packages such as to deny interchangeability of function with packages involving other sports or entertainment? I have little difficulty in concluding, as a matter of fact, that, generally speaking, there is no relevant interchangeability between different recognised sports. Each is distinct with a recognised identity precisely because it has its own special characteristics, appealing to its own audience of players and fans. A long line of United States authorities recognise the unique character of major organised professional sports for market purposes. The cases cited by THG of NCAA v Board of Regents of University of Oklahoma (1984) 468 US 85 and International Boxing Club of New York Inc v United States (1959) 358 US 242 are sufficient to note for present purposes. Whilst not, of course, automatically transferable in time and space to this case, this line of authority, in my opinion, provides a very sound foundation for consideration of the issues here. See also, in the EEC, the decision of the Commission of European Communities of 27 October 1992 in Pauwels Travel BVBA (EC Commission Decision 92/521) OJ L326 12.11.92 p 31 as to travel arrangements for the Soccer World Cup.
61 The fact that some players and some fans may, on occasion, play or follow other sports is beside the point. As the Full Court said in Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313 at 332:
"But the fact that, upon some occasions, some consumers select one product rather than another does not establish that the two products are "substitutable", so as to be within a single market. No doubt there are many people who sometimes drink tea and, at other times, coffee. But if, for example, a particular company dominated the sale of tea within Australia, it would thwart the objectives of provisions such as ss 46 and 50 of the Trade Practices Act to deny their application because that company did not dominate the "hot beverage market". The fact is that tea and coffee are distinct beverages, for each of which there is a distinct demand. To adopt the test applied in Re Queensland Co-op Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 (QCMA), a rise in the price of tea would probably cause few consumers to abandon tea for coffee. It is important to remember that the notion of substitutability adopted in s 4E is one which looks to the market itself, not to the habits of individual consumers. The section speaks of "goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services".
This point emerges clearly from United Brands. The applicant in that case was a major distributor of bananas. But it argued that it was not in a dominant position since the relevant market was not the banana market but the fresh fruit market. It submitted that bananas compete with other fresh fruit - in the same shops, on the same shelves - at prices that can be compared and to satisfy the same needs: consumption as a dessert or between meals. Moreover, statistics showed that consumer expenditure on the purchase of bananas dropped during that part of the year when there was a plentiful supply of other fresh fruit. Yet the European Court of Justice held that it was appropriate to speak of a banana market. This conclusion was partly based on the fact that bananas were available throughout the whole year, and therefore substitutability had to be considered on a year-round basis. But it was also based upon the fact that the banana is a distinct product with a distinct demand (483-484):
"The banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling, a constant level of production which enable it to satisfy the constant needs of an important section of the population consisting of the very young, the old and the sick. As far as prices are concerned two FAO studies show that the banana is only affected by the prices - falling prices - of other fruits (and only of peaches and table grapes) during the summer months and mainly in July and then by an amount not exceeding 20 per cent. Although it cannot be denied that during these months and some weeks at the end of the year this product is exposed to competition from other fruits, the flexible way in which the volume of imports and their marketing on the relevant geographic market is adjusted means that the conditions of competition are extremely limited and that its price adapts without any serious difficulties to this situation where supplies of fruit are plentiful. It follows from all these considerations that a very large number of consumers having a constant need for bananas are not noticeably or even appreciably enticed away from the consumption of this product by the arrival of fresh fruit on the market and that even the seasonal peak periods only affect it for a limited period of time and to a very limited extent from the point of view of substitutability. Consequently the banana market is a market which is sufficiently distinct from the other fresh fruit market.""
62 A conclusion that sports are not interchangeable in function is relevant to, but does not decide, the question as to whether hospitality packages offering different sports are interchangeable. The purchaser or primary consumer is not necessarily a fan of the particular sport or entertainment, but rather is a corporation using the occasion for entertainment for business purposes. The event is only part of the product - the hospitality portion is also significant. Many guests will not particularly mind where they are taken for a day or a night out at someone else's expense, with food, drink and entertainment thrown in. However, as I have held, the primary consumer does endeavour to match the interests of the secondary consumer with the invitation offered. Furthermore, as I have held, there are many targets for corporate entertainment who are keen rugby followers for whom a night out at the ballet or a day out at the tennis would have little or no appeal.
63 Thus, the question of interchangeability is debateable. There is plainly some substitutability. The issue is whether it is sufficiently close to qualify. It is therefore prudent to look more closely than hitherto at the issue of cross-elasticity of demand.
64 It is relevant here to note that it was submitted for the ARU that on-site hospitality organised by IMG on behalf of the ARU, and corporate boxes hired on behalf of Stadium Australia, are in the same market as off-site hospitality packages. The differing form of the hospitality makes comparison difficult, and there was little evidence directly bearing upon cross-elasticity of demand. However, I agree that there is close enough substitutability between on-site and off-site corporate hospitality to conclude that they are part of the same market. It is not so clear that the hiring of corporate boxes is substitutable. I will return to this point later.
65 The witnesses called from the ARU said nothing directly as to the pricing of hospitality packages. Evidence given by IMG's Corporate Hospitality Manager for Australia and New Zealand included the following:
"Price sensitivity
15 When the top Rugby teams are playing in Australia, customers are more prepared to pay premium prices for their corporate hospitality. However, corporate hospitality is extremely price sensitive. For example, the Centenary Match played between Australia and England at Stadium Australia on 26 June 1999 did not sell out. Of the 400 packages which IMG was offering, each comprising 10 tickets to the match, 60 did not sell. In my opinion, one of the reasons for this was that the packages were too highly priced for the perceived quality of the games.
16 In my experience if a particular event package is too expensive then a client will opt for a less expensive corporate hospitality package involving a different Event or, may purchase tickets separately and organise their own hospitality.
…
21 In setting prices for corporate hospitality packages to the Rugby Tests, which is one of my duties as manager of corporate hospitality, I have regard to the popularity of the Wallabies, the market attractiveness of the opposing team, my competitors' prices, the relative prices of other corporate hospitality events and what the market can bear ie what price is too high so as to make the package unpopular.
…
25 Although Rugby is popular (an explanation for that popularity is set out above at paragraph 10), it is often only one of a number of Events that our clients are interested in as illustrated in the examples set out [in] annexure 'CONFIDENTIAL-L'.
26 If IMG were to receive an inquiry from a client in relation to a Rugby Event and the packages were already sold out that client would subsequently more often than not make inquiries about other events."
66 Evidence was tendered as to a number of other events which form the centrepiece of corporate hospitality packages offered by IMG. Consideration of the material tendered in relation to the other events shows quite a varied range of pricing for packages from which I find it hard to discern a pattern. The evidence I have quoted was not directly cross-examined upon. Previous evidence given by the witness was tendered, including the following:
"In relation to those types of hospitality packages would you regard IMG on behalf of ARU as competing with other people like The Hospitality Group? --- Anyone else who sells hospitality packages including the stadium, including the groups that you are referring to, we would compete for customers' business, correct.
For the purposes of providing hospitality in connection with the rugby union tests? --- Correct.
It would be fair to say that if you lowered your price significantly or enough, but maintained your quality you might expect to attract more custom to you, assuming that your competitors maintain their price? --- That would stand to reason.
…
Do you agree according to your understanding that the ARU wants to increase it's profit share from the provision of hospitality packages to ARU tests. Do you agree with that? --- We're always looking at ways of increasing profitability.
And including through the provision of hospitality packages? --- That would be one way, yes."
67 The evidence of Mr Mannion of MBM Corporate Event Management included the following:
"Pricing
19 As noted above, I am responsible for setting prices for MBM's corporate hospitality products.
20 I note that the brochures which now form exhibit MBM2 show prices for some of the events described, including:
(a) Showboat: from $195 per person to $445 per person;
(b) Australian Open Tennis: from $145 per person to $1,595 per person;
(c) Australiana Rules Football: from $1,980 for a table of 8 guests to $49,450 for a 15 game package; and
(d) Australian Grand Prix: from $6,780 for four guests for four days to $16,950 for 10 guests for four days.
21 Setting ticket prices is not exact or scientific, but I am assisted by my 12 years' experience in the industry, and by reviewing prices charged by MBM for other events, and prices charged by other hospitality providers for other events and for the event in question.
22 In setting the prices for a corporate hospitality package I also consider:
(a) event ticket price (that is, the price at which MBM obtains tickets from the event organiser);
(b) catering costs;
(c) incidentals such as car parking and program;
(d) marketing costs such as brochures, mailing and phone calls;
(e) labour;
(f) the inherent value of the event. By this I mean I consider whether tickets are hard to get, the event is high profile and whether clients are limited in how they can obtain tickets.
23 As noted above, I also consider comparable prices of:
(a) other events marketed by MBM; and
(b) the prices charged by other corporate hospitality firms for the event I am considering and for other events they market.
24 From my 12 years in the corporate hospitality industry, either as an employee or company director, it is my experience that corporate hospitality providers compete in a range of ways, but most particularly, on quality of event and on price. That is, corporate hospitality providers try to present events with higher quality (that is, better food and beverages, more entertaining guest speaker, higher quality momentos, better quality seats) at a price equal to or lower than the competitors.
25 MBM strives to present premium quality events, with excellent catering, first class guest speakers, premium match or event tickets and quality momentos. MBM prides itself on the high quality of its products.
26 MBM also attempts to compete on price. MBM is not a discount business. We strive to keep our prices consistent with or below those of companies MBM considers to be its competitors, being The Hospitality Group, Image Events, International Hospitality Management, IMG, Octagon, BTTB, to name a few.
27 When setting prices for corporate hospitality, MBM is aware of the need to price a package that will be seen as competitive in the marketplace. Whether it is rugby, an AFL Grand Final or the Melbourne Cup, in setting price, I attempt to account for what a client will pay.
28 In my experience, corporate clients go to a range of events, not just rugby, and depending on circumstance, each event can be interchangeable with the other. It is in my experience therefore necessary to set competitive prices for corporate hospitality events, or clients will go to other events we promote, or to events promoted by other hospitality providers."
He was not directly cross-examined about this evidence.
68 Evidence was called from Mr Rodney Read, Chief Executive of Sports Marketing and Management Pty Ltd ("SMAM"). That company represents PGA Tour Enterprises Pty Ltd, which organises two professional golf tournaments in Australia annually - the ANZ Tour Championship (currently played in Brisbane) and the ANZ Player Championship (currently played in Canberra). His evidence included the following:
"9 In setting ticket prices for golf events, I thoroughly review prices charged by other sports and events, including:
(a) other golf tournaments;
(b) international rugby union tests;
(c) AFL Grand Finals;
(d) Australian Tennis Open; and
(e) Australian Grand Prix.
…
15 In setting prices for corporate hospitality at golf events, I review prices charged for corporate hospitality at other events, including those listed in paragraph 9 and Annexure B.
16 I attempt to set prices for corporate hospitality at golf events at a level competitive with that charged by other entities for events which I believe clients consider to be of a similar standard (such as international rugby union tests, AFL Grand Finals and other golf tournaments)."
He produced the content summary from the Event Business Plan prepared in relation to the ANZ Players Championship 1999 and the Tour Championship 2000. In relation to hospitality, one of the items was:
"4.2.3 COMPETITIVE PRICING REVIEW
Other Golf - Ericsson Masters
- Greg Norman Holden International
Other Sports - AFL Grand Final
- Bledisloe Cup
- Australian Open Tennis
- Australian Grand Prix"
He did not produce the Business Plan itself, nor the actual recommendation made. Mr Read was not cross-examined on this material.
69 Evidence was called from Mr Kris Donaldson, the General Manager, Marketing - Assets Sales for the Sydney Organising Committee for the Olympic Games (SOCOG). His evidence included the following:
"Hospitality
13 SOCOG is producing its own corporate hospitality in relation to the Sydney Olympics. SOCOG is offering a substantial range of different hospitality packages and options for its sponsors and for others at Sydney Olympic events.
14 As noted above, my responsibilities at SOCOG include hospitality.
15 In considering prices for its hospitality packages, I am aware from attending meetings to discuss hospitality, and from conversations as part of my duties, that SOCOG considered prices for hospitality at other major events, both nationally and internationally, including previous Olympiads, the rugby and soccer World Cups, the America's Cup, NRL and AFL Grand Finals, Bledisloe Cup rugby union matches, and the Superbowl. SOCOG also considered comparative prices of hospitality packages attached to non-sports events, including, for example, significant concert events such as the Three Tenors and Barbra Streisand.
16 Exhibited to me at the time of swearing my affidavit and marked "Confidential Exhibit KD3" are copies of extracts from documents which I am aware from my role at SOCOG were used by SOCOG in comparing the pricing of its hospitality packages for the Sydney Olympics with other hospitality packages for the Sydney Olympics and hospitality packages for other international or significant sporting events.
17 SOCOG formed the view that its hospitality packages (and its sponsorship arrangements more generally) would be competing both nationally and internationally with hospitality packages at other major events in Australia and overseas, including those set out above. In my role at SOCOG, I participated in meetings at which this view was discussed.
18 In setting prices for hospitality events, SOCOG formed the view that the corporate hospitality market is competitive and, on that basis, attempted to price its corporate hospitality packages competitively with other national and international events, bearing in mind the additional attraction of an event the size and reputation of an Olympiad. In my role at SOCOG, I attended meetings at which SOCOG's view was discussed."
70 The exhibit "Confidential KD3" is an illuminating document which I set out, omitting prices for the Olympic packages as they may still retain some commercial confidentiality:
"Comparison of Pricing
1 Competing Sydney 2000 Hospitality Products
There are currently six other hospitality programs offered in the marketplace. Four of these are run by sponsors (2UE, Channel 7, Fairfax & Holden) and two are rogue operations, but all give us an indication as to prices and market expectations.
The four sponsor packages all include accommodation and some are tied in with advertising packages for television or radio. All must be bought in blocks with the price ranging from $** per person per day to $** per person per day on premium finals days.
Of the rogue hospitality programs which are actively selling, IHM has not yet secured a venue (although has stated that it may use Centennial Park and bus its patrons to the venue) and THG Worldwide states that its venue is "located outside of the official sponsor village". THG also states that it cannot guarantee ticketing availability.
The rogue hospitality packages could be seen as our biggest competitor as, to the general purchaser, they are similar - even though their tickets or location are not a certainty. For example IHM is marketing an Opening Ceremony Package, which like ours offers a meal, drinks, guest speakers and commemorative gift for $** per person. We are looking at offering two Opening Ceremony Packages, the Millennium Room at $** per person and Club 27 at $** THG has on offer a Closing Ceremony Package, with the same inclusions - meal, ticket, drinks etc - for $** per person, where our top price in the Millennium Room within the Olympic Stadium is $. The Opening and Closing Ceremonies are also included in the Superbox and Suite packages.
The biggest difference in all of the packages is that SOCOG's packages are the only ones with guaranteed tickets, are within and have ready access to the Sydney Olympic Park precinct. Given the uncertainty of the rogue competitors to deliver and the location of SOCOG's packages, either in the Olympic Stadium or next door at Club 27, our pricing seems to be good value.
Product IHM Millennium Room Club 27
Opening Ceremony $ $** $**
Closing Ceremony $** $** $**
Athletics 23/9 $** $** $**
Athletics 24/9 $** $** $**
Athletics 30/9 $** $** $**