Market
90 Benchmark says that Global has a substantial degree of power in the Plumbing Certification Market. Until December 2003, Global was related to Standards Australia. Accordingly, pursuant to s 46(2)(a) of the Trade Practices Act, since Global had a substantial degree of power in the Plumbing Certification Market, Standards Australia would be taken, for the purposes of s 46, to have had a substantial degree of power in that market up to that time.
91 In the absence of some restraint, there would be nothing to prevent Benchmark setting up a certification scheme in relation to plumbing products, in competition with Standards Australia and Global. However, Benchmark points to the NCPDP Scheme and the requirements of the regulatory regimes of the States and Territories relating to the use of plumbing products as constituting such a restraint. Benchmark says that the effect of the NCPDP Scheme is that only products that have the WaterMark certification may be used in the respective areas to which the regimes relate. Plumbing products can be used in those areas only if they exhibit the WaterMark certification. Unless Benchmark is approved as a Certifying Body for the purposes of MP52, and is given the right to authorise the affixing of the WaterMark to plumbing products, it cannot compete with Global as a certifier in relation to plumbing products for use in the areas covered by those regimes. The effect, so Benchmark contends, is to create a monopoly in favour of Global in certifying plumbing products in the areas that are the subject of those regimes.
92 The failure by Standards Australia to approve Benchmark as a Certifying Body or to grant rights similar to the Certification Marks Agreement only has the effect of excluding Benchmark from certifying products in New South Wales, Queensland and ACT. Theoretically, Benchmark may be able to compete with Global in certifying compliance with MP52, in Victoria, South Australia and Western Australia.
93 However, Benchmark contends that the NCPDP Scheme is a national one and that Benchmark could not operate within such a scheme if it were excluded from certifying plumbing products in New south Wales, Queensland and ACT. It says that the Court should infer that manufacturers of plumbing products, or the importers of such products, would wish to market those fittings throughout Australia and would not be interested in having different certifiers for different parts of the country. Benchmark contends that the Court should infer that exclusion of Benchmark from some jurisdictions within Australia would result in exclusion from participation in the national scheme.
94 Thus, Benchmark says that there is a Plumbing Certification Market that is Australia wide and Global is in the position of a statutory monopolist. That was a matter of concern for the Kean Committee. That is to say, only Certifying Bodies that have been approved by Standards Australia can certify compliance with standards referred to in MP52 and authorise the affixing of the WaterMark certification trade mark. For the most part, because of the NCPDP Scheme, only products bearing that mark may be used in New South Wales and ACT. In practical terms, suppliers will not use a different certification process for different parts of Australia.
95 Benchmark relies on statements in the Prospectus, which Standards Australia must be taken to have endorsed, at least to some extent, by reason of its having consented to being named in the Prospectus. Thus, Benchmark says that the section of the Prospectus entitled 'Competition', at [75] above, is sufficient to constitute reasonable cause to believe that there may be a separate plumbing certification market, Global's share in which may decline with the introduction of the proposed new Plumbing Code of Australia.
96 Even so, there is a question of whether there is a separate market for the provisions of services consisting of certifying in relation to plumbing products as distinct from certifying in relation to the myriad of other products that are the subject of standards applicable in Australia. There may be cases where a particular service is so distinctive that no other service would be seen as a possible substitute. In such a case a market may be constituted by the provision of that service: Mark Lyons Pty Ltd v Bursill Sports Gear Pty Ltd (1987) 75 ALR 581 at 589. However, whether a single brand market exists will require consideration of the supply side as well as the demand side of the market: Regents Pty Ltd v Subaru (Aust) Pty Ltd (1998) 84 FCR 218.
97 Under s 4E of the Trade Practices Act, when the term 'market' is used in relation to services, it includes a market for those services and other services that are substitutable for, or otherwise competitive with, the first mentioned services. A supplier can adjust its business plan by substituting one service for another in its output mix. Whether such substitution is feasible or likely will depend on such matters as customer attitudes, technology, cost and pricing incentives: Re Queensland Cooperative Milling Association Ltd; Re Defiance Holdings Limited (1976) 25 FLR 169 at 190 and Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177.
98 The Prospectus refers to the fact that, in relation to its product certification activities, Global has 2000 licences covering a large number of products. That represents 20 per cent of Global's total revenue. That suggests that, from the supplier's point of view, the market for the provision of product certification services covers many fields and there is no specific market in relation to plumbing products.
99 In its annual review for the year ended 30 June 2002 (Exhibit 2A page 138) Standards Australia asserted that the building sector was the largest single area of standardisation in Australia (page 143). However, there is no evidence before the Court as to how much of the building sector consists of plumbing products or whether there is a specific identifiable market relating to certification of plumbing products. Nor was the Court directed to any material that suggests that certification in relation to plumbing products is a significant aspect of the supply of product certification services generally.
100 The barriers to entry into the market for the provision of product certification services are not particularly significant. Indeed, the Prospectus says that 'the barriers to entry for the provision of certification and consulting services are low'. In less than a year, Benchmark promoted its product certification services and increased its market share from having no presence in that activity to having approximately 40 clients. As I have indicated above, Benchmark claimed that it achieved what it described as a 'critical mass' of clients within four months of commencing operations. It appears that Benchmark is well able to compete with Global in providing product certification services other than certification of plumbing products.
101 The question of whether Standards Australia or Global has a substantial degree of power in a relevant market is a matter to be determined by objective evidence, which should be available to Benchmark on reasonable enquiry. If there is likely to be reasonable cause for believing that either Standards Australia or Global has a substantial degree of power in a relevant market, that would be capable of determination by reference to material that is in the public domain. However, on the material referred to above, there is not a strong case for believing that there may be a separate market consisting of the Plumbing Certification Market as defined above. If there is no such separate market, there is no basis for believing that Global has a substantial degree of power in the product certification market generally.
102 Benchmark also says that there is reasonable cause to believe that Standards Australia has a substantial degree of power in the Standards Market. That market is said to consist of the provision of standards and administrative services in relation to certification of compliance with such standards. While Standards Australia certainly provides standards, there is scant material before the Court as to any administrative services that might be provided by Standards Australia in relation to certification of compliance with such standards. Further, the Prospectus asserts that 'the market for standards, organisational, consulting and assurance services is competitive' and that there are a number of established global organisations in the sale of standards and provision of certification services. That does not suggest substantial power on the part of Standards Australia.
103 Standards Australia is of course in a favoured position by reason of the Memorandum of Understanding. It is recognised by the Commonwealth as 'the peak non-government standards development body in Australia'. However, it is difficult to see how that leads to a conclusion that Standards Australia has a substantial degree of power in any market. It does not give Standards Australia a monopoly of any kind. Market share is not determinative of power and there is no evidence that Standards Australia can raise prices for its standards, or the other services that it provides, without losing business. In any event a more important question will be whether any failure by Standards Australia to approve Benchmark as a Certifying Body or to grant a licence in respect of the WaterMark Certification Mark could involve a taking advantage of any power in the Standards Market, as defined.