O'Brien Glass Industries Ltd v Cool & Sons Pty Ltd trading as Wagga Windscreen Services [1983] FCA 191

unjunctions issue against ths agpellant and, under 5.932 of that

Act, that damages be paid bY 1t. The case of the applicant, the

present respondent, was based om secns. 45 (restrictive dealings), 47 (exclusive dealing), 48 (resale price maintenance) and 49 (price daiscrimination) of the Act. Section 46 (monopolization) was originally relied upon, but the applicant said at the hearing that if successful under secns. 47 and 49 it did not. wish to pursue this part of its case. Its possible

application has not been the subject of debate in this appeal.

The proceedings were instituted on 27 September 1979, and relate to conduct in 1978 and 1579. The hearing took place in 1980 and 1981, the principal judaqment was deliverad on 13 July 1981, and the form of the injunctions settled on 24 December

The appellant (which I shall for convenience call "O'Brien") was at the -time of the hearing iunvolved in three stages of the business of providing replacement windscreens for motor vehicles. It was not concerned with the installation of windscreens in vehicles at the time of manufacture of the latter. It manufactured windscreens, it sold those it had manufactured, and also others, by wholesale. In the Wagga district (which is relevant for present purposes) it also had a

business of supplying and f1tting what - have - seen - salled A?

The respondent (which I shail call "Cool") had a retail

business in the Waqga district of supplying s:milar replacemenr

windscreens and fitting them to motor vehicles. In October 1978 Cool opened a business of supplying windscreens on a wholesale

basis in the district but these operations "died off" in March

Q'Brien had the largest share of the wholesale market in New South Wales (up to forty per cent) with its two nearest competitors having about 30-35 per cent and 15-20 per cent respectively. O''Brien's main wholesale competitor in New South Wales, Bradley Bros. Pty. Gimited (which I shall call "Bradley"), was also its main wholesale competitor in the Wagga district. O'Brien had a significantly larger share of the Wagga district

market than Bradley and the few other wholesale suppliers had

Cool was a major retail supplier in and around Wagda but there were a larqe number of competitors (over one hundred), of which O'Brien was one, Mostly the retailers were service station proprietors; some others were what have been called smash repairers. There- are about 1,000 different types, sizes and shapes of replacement windscreens in more or less common use.

They are either made of laminated or of "Zone toughened" qlass.

Cool's matter of complaint, at a practical Isevel, is

that O'Brien, as a wholesale supplier, did not allow ir che same

discount (fifty per cent off th retail list orice) that it

allowed to a number of other rerailers. ILecounts were aliowad

to all retailers, although credit arrangements may have differed. The discounts allowed by O'Brien were at the time of initiation of proceedings forty per cent, forty-five per cent and fifty per cent, and at that time Cool was receiving forty per cent. The wholesale cost of a new replacement windscreen was generally in the range of twenty-five dollars to seventy dollars, after discount, with some exotic types much dearer.

It is convenient to consider first the application of 5.47 of the Act. On this matter there was a major contest at the hearing hefore Keely J. as to the basis upon which O'Brien made its choice of the discount it would allow. His Honour made the

"On the whole of the evidence. to some of which I have referred, I find that the respondent had a general practice of giving and offering to qive to retailers discounts of 45 per cent or 50 per cent in relation to the supply of windscreens on the condition that each such retailer would purchase all or the substantial majority ef its purchases of windscreens from the respondent (cf. answer to interrogatory C.17(d))."

By clear implication, a discount of forty per cent was in general the maximum for those not aqreeing to the condition. His Honour had earlier said:

Goff offered to aive the applicant a discount of 50 per cent - the same as that viven by the

applicant's then supplier, Gundagar Windscrean Service Prwv. Ltd. - as well as betrar availapiiiey' of windscreens. The offer was

conditional upon the applicant buying its windscreens from the respondent rather than 'from his competitors' - a statement which [I find meant, and was understood as meaning, that the applicant was required to buy most of its windscreens from the respondent."

His Honour said that he had made the finding "without regard to the provisions of s.47(13)(a) of the Act", which is in the following terms: "(13) In this section - (a) a reference to a condition shall be read as a reference to any condition, whether direct or indirect and whether having leqal or equitable force or not, and includes a reference to a condition the existence or nature of which is ascertainable only by inference from the

conduct of persons or from other relevant circumstances;".

I take his Honour's observation to mean that he was raferring to "condition" in the conventional sense, without the further enlarged meaning given hy this paragraph. The learned Judge made anumber of findings dealing with the credibility of particular witnesses and made adverse comments about principal witnesses far O'Brten. The finding I have set out as to the criterion upon which a choice of discount was made, has not been challended by

For there to be'an exclusive dealing, 5.47(2) requires

that the supoly (or offer to supoly) or the giving of a arscount

(or offering of one) be "on the condition" that the offeree "will not, or will not, except to a limited extent", acquire goods from a competitor. I think his Honour's findings of fact in this case involve the conclusion that there was a "condition" in the sense

referred to in s.47(2) and that it was related toa future

inhibition (see S.W.B. Family Credit Union Ltd. v. Parramatta Tourist Services Pty. Ltd. (1980) 32 A.L.R. 365). In any event,

the evidence which he accepted seems to me plainly to involve that result. The terms of sale were agreed before delivery; the discount was agreed on the condition that "all or the substantial majority" of the windscreens would be acquired from O'Brien. There has not been any argument concerning the words "except to a limited extent" in s.47(2). Comment was made on behalf of Q'Brien on the imprecision of the criterion which his Honour enunciated but indefiniteness of that degree does not in my view defeat the operation of the section, and the restraint imposed did not permit outside acquisition beyond a "limited extent". Bradley gave' to Cool a discount of fifty-seven and one half per cent off list price, based in its. case on a requirement that at least forty windscreens per month were purchased from it. Other discounts granted by it went down to forty per cent, but were based on the quantity, or value, of purchases, and were not

associated with a condition such as his Honour found to exist in

The retail list prices seem to have been the same, or

almost the same, as between the two wholesalers I have mentioned. Mr. Scott, of Bradley, described the wholesale market as "pretty

Alone among suppliers in the wholesale market, O'Brien was regularly open for business for twenty four hours on seven days a week. It was therefore often necessary to go to it to meet the frequently urgent demands of motorists. Whether or not it habitually held a wider range of windscreens than Bradley is not clear, but certainly there were not infrequent occasions when retailers, and Cool in particular, had to go to it for a windscreen for a particular vehicle. No point is made as toa difference in quality between the windscreens supplied by O'Brien and those supplied by any other wholesaler, although there were

The practical result, as claimed by Cool, was that it lost sales. Its competitive position and reputation suffered, wher, being forced to go to O'Brien, it could only purchase a windscreen at a price (after discount) which put its retail price for supplying and fitting appreciably above that of its competitors. For the two years November 1977 to November 1979 Cool, according to its records, supplied and fitted 3,324 windscreens, In 1979 the figures varred from seventy-six in February to 261 in May. In circumstances mentioned by his Honour, Cool did for two veriods, from January to August 1978 and

from December 1978 to April 1979, receive a discount of fifty ver

The discount given by O'Brien was raised in December

1978 after Cool, at O'Brien's request. had painted out the word "discount" om its "windscreer discount" sign, ceased advertising

that it gave discounts and raised its retail prices close to

O'Brien's retail prices. The reason for the discount heing lewered im or from April 1979 was dealt with in a telephone conversation between Mr. Peter Cool and Mr. Duncan of O'Brien in

"I accept the evidence of Mr. Peter Cool that im the mid-April telephone conversation Mr. Duncan asked him:

'... were my brothers, Raymond James and Sydney Paul Cool acquiring windscreens from any other glass supplier. He specifically mentioned Bradley Bros. and Guardian Glass. I advised him I understood they were doing so when necessary. He said in that case O'Brien's were not the major supplier of glass to R.J. Cool and I said was that the only problem. He said yes. I asked him would the 50 per cent discount he restored if they did purchase from O'Brten's, if the windscreens were purchased exclusively from Q'Brien's, and he said yes. I told him that if O'Brien's were not able to supply a particular screen and that particular screen had to he purchased elsewhere, would that viclate any agreement made in regard to this 50 per cent discount. He said no, not if they checked with O''Briens first. If O'Briens indicated they were not able to supply the particular sceeen, in that case the screen could be purchased elsewhere without affecting any adreement.'"

The prohibition in s.47(1) against exclusive dealing does not apply in a case such as that under consideration unless "the engaging by the corporation in that conduct has the purpose, or has ar is likely to have the effect, of substantially

lessening: competition" (sub-section (10)). By reason of s.4G, lessening of competition includes preventing or hindering

competition. On this matter 'his Honour expressed the following

"T also accept the applicant's submission (p.20) that the respondent's practice of exclusive dealing had the purpose of substantially lessening competition by making it substantially more difficult for oather wholesalers of windscreens to sell windscreens to retailers with whom the respondent had reached agreement on the additional discount, i.e. 45 per cent or 50 per cent discount."

"In reaching the conclusion that the respondents practice of exclusive dealing had the- purpose of substantially lessening competition I have accepted the submission in the applicant's written final address."

"Tt should be explained that the parties put in extensive written submissions and to some extent his Honour's remarks have to be understood by reference to the written submissions of the present respondent, Cool. tts submission, commencing at p.2Z9o,

which was reterred to by his Honour, related, to nur it shortly,

to the auntrinsic nature of the condition, the fact thar iu:

applied over the whole range of windscreens supplied, the fact (as submitted) that it was a "tie" of retailers to a particular supplier (thereby Limiting competition between existing wholesalers and restricting potential new entrants, including one who might wish to market omly one type or range of windscreens)

and that it was not associated with legitimate considerations,

such as producing economies in production and distribution.

Before I discuss his Honour's conclusion it is necessary to identify the markets in the context of which competition was found to be substantially lessened. The product market was replacement windscreens generally. Section 47(13)(b) directs attention to any market in which O'Brien, or any person whose business dealings wers restricted, limited or otherwise circumscribed by O'Brien's conduct, supplied or acquired replacement windscreens. On this basis both a wholesale market and a retail market can be examined. It was aqreed by the parties. that the retail market for the windscreens could be taken

The area of the wholesale market was not so clearly defined. It was submitted. before us an "behalf of the appellant that this market was the whole of New South Wales. Before Keely J. the parties were content to argue the case substantially on the basis first suggested by the applicant Cool's answer toa

request for particulars, that there was a relevant wholesale

Market to be found in Waagqa and a vadius 9f about one hundred

Miles therefrom. A radial measurement is obviously crude and inevitably imprecise, but nothing turns on its more accurate

BK market is- usefully viewed as afield of rivalry or close competition between firms (see Re Queensland Co-operative

Milling Association Limited - Proposed Merger; Re Defiance

Holdings Limited ~- Proposed Mergers 1 and 2 (1976) 8 A.L.R. 481, at p.517). That both Bradley and O'Brien operated throughout New

South Wales (and heyond} does not imply that the State was the relevant market. Such a strict geographic definition ignores the view that the Wagga district was, in economic. terms, a particular area of close competition between wholesalers. The words of s.47(13)(b) do associate the market in which O'Brien operated with the market in which Cool operated (Cool being a corporation whose business dealings were restricted by O'Brien). The location of the retailers is relevant to the definition of the

wholesale market. The custom of those retailers was the target

for- the wholesalers. It seems to me, ama practical level, that the. Wagga district (taking a radius of one hundred miles) is

sufficiently integrated to be regarded as the relevant wholesale

In the present case the learned Judge found that there was a purpose within the meaning of sub-section (10); he also Tound that the conduct had the requisite likelv effect. It was

submitted that the interpretation he gave to "substantially" was

wrong. What he said was that the conduct "must be capable of heing fairly described as a lessening of competition that is real or of substance as distinct from a lessening that is insubstantial, insignificant or minimal, cp. Tillmann's Butcheries Pty. Ltd. v. Australian Meat Industry Employees' Union and Others (1979) 27 A.L.R. 367 at p.374-375 per Bowen C.d., and at p.38Z per Deane J." I do not think that his understanding of "substantially" was wrong, particularly when regard is had to his other observations on the case. It was argued that the word meant "large" or "of weight" but there is no justification for substituting these, or any other words. The legislature has chosen a word of intractably indefinite import, and much must be left to individual assessment. Consistently with what was said

on the subject in the joint judgment of Bowen C.J. and Fisher J.

in the recent decision of Outboard Marine (Australia) Pty. Limited v. Hecar Investments No. 6 Pty. Limited (1982) 44 A.L.R.

667, the tendency in the United States when considering the same word. in @ Closely similar context is to leave it undefined, and, commonly, to associate it with the subject-matter (see Néale and Goyder, The Antitrust Laws of the U.S.A. 3rd ed. (1980) at p.271; American Jurisprudence 2nd ed. Vol. 54 para. 116). Plainly, effects which are de minimis are excluded, but this would be the

position under the general law, without the necessity for the

considerations, which his Honour was in a much better positien to

assess than an appellate court. It is nevertheless necessary for us to be satisfied that his Honour had in mind the purpose to which the legislation is addressed; at least we have to he satisfied that his Honour was not in error in this regard. There being no express evidence of purpose it had to be implied, and in making the implication it is appropriate toa look at what was done and intended, and to see what the natural consequences were. The

His Honour was looking at the wholesale market, and it is accepted that this was correct, although reference to what was happening' in the retail market was not excluded (see s.47(13)(b)). He took the view that O'Brien's practice had the purpose of "lessening competition" in that market. The word "competition" is an indefinable abstraction. It relates to the "trading" position in a market. There is within that market what can be regarded as a state or condition of competition, a condition which is doubtless more dynamic than static. The legislation is mot directed at the position of particular competitors; what it looks to is the state or condition comstituting the market actually and. potentially. While it is not possible to define competition, it is possible, and necessary, to recognize features of 1t. This was done in general terms and from an economic viewpoint in Re ueensland

Co-onerative Milling Association Limited; Re Defiance Holdings

Limited (supra.). Subsequent decisions are referred to in

Qutboard Marine (Australia) Pty. Limited (supra.). The question

is whether the dynamic of competition, what might be called the competitive forces in the market, have been "substantially lessened". Although s.47(13)(b) does. not attempt a definition of competition, the reference there to "business dealings" being "yestricted limited or otherwise circumscribed" is helpful. The object is not to look for what is best for society or for the economy . The legislative assumption, presumably, is that competition is what is best, although, tronically success in competition by a trader may lessen it (see, for example, Corpus

His Honour, by reference largely to the written submissions of counsel, pointed to particular consequences of the conduct challenged. A great deal of evidence was given respecting the market, and operations within it. In my view there certainly was evidence to support his conclusion, and I see no reason for differing from it. ft is not possible to know in any detail what view his Honour took of particular pieces of evidence, and they might in his mind have heen affected by other evidence, but two passages, relevant to the present subject matter, caught my attention. Mr. Scott, of Bradley, was called by O'Brien, and his Honour thought him a witness of truth. He

Q. "And the more independent retailers that cease to be independent by virtue of some contract or arrangement or understanding made With wholesalers other than your company, the less opportunity you nave to trade?---That is correct, yes."

Counsel for the appellant submitted that what was done by his client was a manifestation of competitive behaviour, and was not anti-competitive. This is, I think, not quite the test, and it obscures the distinction between the notion of competition and that of the exercise of competitive power, which, as I have said, can tend against competition. It cannot be argued that because a trader is doing well in a competitive market that he is not or has not been guilty of conduct which lessens competition. Doubtless, he can, simply by trading, without being guilty of that conduct, arrive, alone, or with others, at a position of supremacy in that market. O'Brien was in a dominant position in the market, or the part of it which has been regarded as suffictent for the case. It not only sold more windscreens, it gave a better service, leading to the necessity for retailers to have recourse to it. The finding is that it required retailers who wanted the best price to purchase most of their supplies from 1t. There can be no doubt that there was a purpose in this

requirement. It was to coerce retailers into dealing witn it and

not, except to a limited extent, 1ts competitors. The tendency

was to lower the forces of competition in the market, by reducing . the capacity of retailers to choose between sources of supply, to weaken the trading position of competitors, and to inhibit the entry of other competitors. It is to give a false colour to the situation ta say that the purpose was simply to give preference to regular customers, as distinct from those who came to it only wher necessity drove. Similarly, it is incorrect to say that all that was done was in effect to favour retailers wao bought in

Ido not suggest that a distinction between a discount hased on percentage of total requirements and one based on quantity, or value, is necessarily critical. It all depends upon the circumstances. In the present case, O'Brien occupied in the market the position [I have described, and a requirement of the former nature has an effect relative to that position. In particular circumstances, another wholesaler who makes the same requirement might not offend. On the other hand, a discount related to value could offend, if, for example, the value did represent most of the likely purchases of a sufficient number of

In the language of some of the cases, substitution was to be, and was, restricted. It 1s not to the point to say, if it were the fact, that, as matters stood, O'Brien was providing a wide variety of the subject commodity, or seliing at low prices,

or providing good services. Tf ennancea dominance and a

resultant lessening of actual competition were to come about by reason of such considerations, it had to be by leaving

uninhibited the right of choice, or substitution, in the market.

It. follows from what IT have been saying that in my view

• his Honour was not in error in his finding concerning "purpose".

For the reasons I have endeavoured to express, TI accept as correct his finding, also stated by reference to the written

submissions, that there was the requisite "likely effect".

It was submitted that in determining "effect" regard should be had te what has in fact happened as a result of the practice, rather than to more theoretical considerations. To this is added that there was a need for more evidence if Cool was to succeed, and particularly expert evidence to deal with economic considerations. I think each case must be looked at in its own circumstances. Certainly it is necessary to have a sufficient understanding of the market, and the operation of market forces. Evidence from economists can help jin this way, and. in indicating what effect particular forms of conduct can have om competition in the market. It is, however, plain from the cases that concepts of market and of competition, and of what may lessen competition, have been carried forward as a matter of legal knowledge. Some a4 priori reasoning is usually if not always involved, not least of all when it is a question of likely effect. Actual experience of what has so far nappened can be

misleading. In the United States che Clayton Act vorohibits

certain practices where the effect may be substantially to lessen competition. Black J. in Federal Trade Commission v. Morton Salt Co. (1948) 334 U.S. 37, at pp.46-47, found those words to involve

the prediction of effect if the practice were allowed to go on.

The evidence in this case, so far as concerns the market, and the various forces at work in it, was extensive. .The withdrawal of some wholesalers from the whdlesale market (including Cool itself) and the reasons therefore, -and the possible effect of particular activities on its future were dealt with at length. An economist was called by Cool, but he simply put in a schedule and some graphs, which were a summary of some of the evidence which had been given. One of the graphs invites attention, as illustrating the difficulty, if not impossibility,

The graph is based on information supplied by Mr. Scott of Bradley which was treated by the Court as confidential. It shows changes im the relationship between Bradley's sales and

O'Brien's sales for the period June 1978 to February 1980 which

are significant. I have also noted that in evidence Mr. Scott agreed that Bradley's sales in Wagga had been steadily declining since at least the middle of 1978. The figures, by themselves, lead to no relevant conclusion, but may, with other evidence, lead to inferences. In my view the nature of the restraint, as found, is clear and forms a sufficient basis for the conclusions

Although much of the evidence in the case dealt with the position of retailers, and the retail market, it is not necessary, or desirable, to consider this separately in relation

Iam of'the view that the appeal fails, so far as it

Following the sequence of the argument, I turn to 5.49. It is recagnised that there is between some of the sections of Part IV of the Act, a degree of overlapping, and the fact that a case is made out under s.47 does not mean that there may not'also be a breach of the section now under consideration. His Honour's

"On the evidence I find that the respondent had discriminated between purchasers of windscreens of like quality and grade in relation to discounts given or allowed in relation to the supply of those windscreens and that the discrimination has heen of such magnitude and of such a& recurring and systematic character that it has had and is likely to have the effect of substantially lessening competition in a market for windscreens, being a market im which the

purchasers (the resellers) supply those windscreens."

O'Brien did not plead as a defence either of the matters referred to in 5.49(2). Oniv one is relevant, that 1s para. (5): "the discrimination is constituted by the doing of an act in good

faith to meet a price or benefit offered by aA competitor of the

supplier". In relation to this his Honour said: "On all the evidence I am satisfied that the discrimination by the respondent was not "constituted by the doing of an act in good faith to meet a price or benefit offered by a competitor of the respondent". The onus. of establishing this matter lay upon the respondent in the proceedings, O'Brien, (sub-secn. (3)}) but the matter can be

Section 49 refers only to a market for goods, and the supply of goods and not, like 5.47, to goods or services. The word "goods" is. defined in s.4(1) to include, for example, ships, aircraft, gas and electricity. Section 4C(c) says that unless a contrary intention appears, "a reference to the supply or acquisition of goods includes a reference to the supply or acquisition of goods together with other property or services, or both". It is submitted that the section does not apply to services, simpliciter, and that what the retailers do is to provide services, i.e. ta fit windscreens. The operation is, it is submitted, essentially one of performing the service, to which the provision of the windscreen is incidental, and the analogy of the distinctiom drawn in Lee v. Griffin (1861) 1B. & S. 272 (see Robinson v. Graves (1935) 1 K.B. 579) was relied upon. I agree with the learned Judge that on the facts the submission cannot be maintained. I should explain that the arqument looked at what was done by the retailers, because Cool, in addition to relying upon the position in the wholesale market, relied upon that in

the retail market, and it could do the JLlatrer beacause of the

words "being a market in which the corporation supplies, or those

A key term used in s.49 is "discriminate". This can be taken, for present purposes at least, to mean "treat differently" those who are alike im a relevant sense. No conception of moral oblaquy or ill design is invoked by the word itself. The Supreme Court of the United States has defined the word "discriminate" in the way I have done, in the same context, in Federal Trade Commission v. Anheuser-Busch Inc. 363 U.S. 536, at p.549. Questions of course arise as to when those retailers concerned are the same, so that it is sensible to talk of discrimination between them, and when they are sufficiently different. No such question arises here. An argument, such as was submitted to us, that there is no discrimination if everyone in a class or category is treated the same, in the sense that a uniform rule that all fair-haired patrons are charged half the amount dark-haired patrons are charged is not discrimination, cannot

succeed. In this case the supplier plainly discriminated.

The remaining question under s.49(1) is whether the discrimination "is of such a recurring or systematic character that it has orais likely to have the effect of substantially lessening competition in aA market ...". In the circumstances of the present case, the orice discrimination was a matter of policy and was applied systematically. It seems clear enough that the

discrimination was likely to have the effect of lessening

competition in both the retail and the wholesale market.

In this case there is a considerable overlap between the analysis of how competition was effected by exclusive dealing and how it was. effected by price discrimination. The market power of O'Brien, and. the existence of the condition earlier referred to

Retailers who did not get the higher discount would be in a weaker position when it came to competing with other yetailers in the sale (and fitting) ef windscreens supplied by O'Brien. Those who got the higher discount would also be less free to compete. They were tied to O'Brien and would only be able to offer amore limited range of windscreens than would

otherwise be the case. Substitution was affected accordingly.

The likely end effect of the policy was to put retailers out of business (the business of supplying and fitting windscreens) if they did not obtain all, or nearly all, of their requirements from O'Brien. There is, in my view, no reason for disturbing his 'Honour's view that there was an infringement of s.49. His Honour did not deal with the wholesale market, but competition therein was lessened for reasons substantially the

Because of circumstances to wnicnh I will now refer, ic

is mot useful to consider also the application of 5.43 oar of

eee nee te ce PN A A ee a et Nt ee te ee Ae ee ne ee ee ey

5.45, After thé principal judgment had been delivered by his Honour but before debate took place as to the form of the injunctions, an affidavit was filed, the short effect of which was that Cool had sold its business in Wagga. So far as

appeared, it was not carrying om business there or in any other

part of the market area. The premises from which it had carried om business had been sold to a company called Rybit Pty. Limited, of wrich R.d. Cool was a director. That company had granted a licence to the purchaser of the business (one McIivray) to occupy the premises for five years, with an option for a further five years. There was a possibility that after five or ten years (the latter if the option was exercised by the purchaser) Cool might resume business under the business name it had been using - "Wagga Windscreen Service". In these circumstances, his Honour was asked by O'Brien not to grant any injunction. He pointed out that the sections of the Act against which O'Brien had offended were enacted in the public interest, and granted injunctions. [In a later affidavit which we allowed to be read 1t was deposed that Mcllvray had terminated his agreement, and Rybit had "recommencec" to trade as Wagga Windscreen Service. There was no suggestion that Cool would return, andno evidence as to the

continue. There are three reasons. So far as appears, Cool is

no longer in the market as a retailer, or in any other capacity.

There has been a double change in retailers of -yhich we know,

from Cool to McIlvray and then to Rybit. For this reason, and by reason of the lapse of time since evidence was given, the situation in the markets is now too wunmcertain. For those

There remains, hawever, the question of damages. -Cool remains entitled toa such damages as it can prove. It has succeeded in the cases based on secns. 47 and 49, and it would not add to the damages to bea awarded if it were also to succeed in reliance om 5.48. The Judge found that there was not a breach of s.45, but granted an injunction on the footing of an attempt to commit a breach of it. His finding that there was no breach

The damages awarded were for $4,670.00. It is submitted that this sum was excessive. Cool does not defend it as an accurate assessment. In its claim, as presented to the learned Judge, Cool said that it relied essentially on the fact that O'Brierr had engaged in exclusive dealing, and added that it relied alternatively on a contravention of secns. 49 and 46. The Measure of damages must be similar to that applied in cases of

tort, which involves, in general, a comparison between what the

position of the party was, or would have been, without the

contraventions, and what 1t was because of the contraventions. The claim is for loss of retail sales, loss of profits on sales of screens supplied by O'Brien and for general damages. The ioss of sales has been estimated ac two per week during the period in

question. Keely J. represented each lost sale asa fifteen dollar loss of profits. The loss of profits on actual sales of O'Brien screens was estimated at ten dollars per screen. The Claim, and the award, were based principally on two or three

"Mr. Masterman: It is common ground I think that from 13 April 1979 you have heen able to purchase windscreens from Windscreens 0'RBrien at only 40 percent off their recommended retail price?~--That is correct.

Can you indicate to the court in what way that has affected your business?---On the Windscreens that I have not got in stock or that I cannot _ purchase from Bradley Brothers that I must purchase from Q'Briens I am not

• competitive with QO' Briens or the other opposition in the town in the pricing of windscreens on those particular makes and models that only O'Briens have at that particular time. On some of the windscreens that Ido buy from O'Briens and sell on the retail side at discounts I do lose sometimes $2 or $3 or only make $2 or $3 per windscreen after the windscreen is fitted and after hours deals and during the dat at times."

"Ts it your experience that when you give such a quote on a windscreen to be obtained from Windscreens O'Brien you do not hear any more from the customer?~--Yes.

Taking a conservative estimate, how often on average does that happen per week?---That happens om different. occasions. It may vary three or four windscreens one week, none the next, two the next, five the next. It is an up and down situation.

Roughly what would you estimate?---I would say about two a week on an average."

The loss is of course soeculative but tnat does not mean

that damages cannot be awarded, 1f there 1s some icss which

occurs as a result of the wrongful conduct. His Honour accepted that some loss did occur, and he attempted a fairly precise quantification of it. His calculations related to the periods September 1978 to January 1979 (inclusive) and May 1979 to February 19891. The latter was the last month of the hearing. An amourtt. ($150) was allowed for additional "opening fees" (at $5 each) which Cool had to pay to O'Brien for emergency (out of ordinary hours) supplies, above what others paid. While we

should I believe be slow tao alter an award in a case such as the present, I am of the view that for the damage indicated by the evidence, a mare suitable amount in-.the circumstances would be of

the order of $3,500, and that an award for that amount should be

; Iam therefore of the view that the appeal should be dismissed, but that the injunctions ordered should be dissolved and the award of damages reduced to $3,500. The appellant has had limited success on this appeal, and in my view the

appropriate order for costs is that it pay one half of the costs

I certify that this and the fwenhy-fAve preceding pages are a true copy or the Reasons for Judgment herean of his Honour

IN THE FEDERAL. COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G94 of 1981,

Or appeal from 2 single Juddqe of the Federal Court of Australia

BETWEEN: O'BRIEN GLASS INDUSTRIES LIMITED Appellant AND: COOL & SONS PITY. LIMITED trading as Wagga

This is an appeal by O'Brien Glass Industries Limited. ("O'Brien") froma judgment of a single Judge of this Court. Proceedings were brought by Coal and Sons Pty. Limited, ("Cool") trading as Wagga Windscreen Service, and injunctions were granted under s.80 of the Trade Practices Act 1974 ("the Act") in respect of conduct alleged to be contrary to s.47 (exclusive dealing), s.49 (price discrimination), s.48 (resale price maintenance), and s.45 (arrangement or understanding affecting competition). Those

sections have been placed in the order of the relative importance

which the parties placed upon them. Damages under s.82 of the

Act were also awarded to Cool. At the time of the institution of the proceedings O'Briern carried on the business, inter alia, of supplying windscreens for mator vehicles on a wholesale basis and of supplying: and fitting windscreens on a retail basis in various places, including Wagga. Cool carried on the business of

supplying and fitting windscreens on a retail basis in Wagga.

O'Brien also manufactured certain windscreens and appeared to manufacture about 17 per cent of the laminated windscreens made in Australia. Two other manufacturers had a larger share of the market. The only other significant wholesaler of windscreens in or around Wagga was Bradley Bros

Limited ("Bradley"). The learned trial Judge found that the major wholesalers of windscreens in New South Wales had approximately the following shares of the wholesale market: O'Brien 30(sic)-40 per cent, its two nearest competitors 30-35 per cent and 15-20 per cent respectively. It seems probable that O'Brien was the largest. wholesaler of windscreens situated in Wagga with Bradley the next largest and selling 5 to 15 per cent

I turn first to s.47 of the Act, the relevant parts of

which are 47(1),(2)(c)(d), (10)(a), (13)(a)(b), which I set out:

"47. {1) Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing.

(2) A corporation engages in the practice of exclusive dealing if the corporation -

(c) gives or allows, or offers to give or allow, a. discount, allowance, rebate or credit in relation to the supply or

. proposed supply of goods or services by the corporation,

on the condition that the person to whom the corporation supplies, or offers or proposes ts supply, the goods or services or, if that person is a body corporate, a body corporate related to that body corporate -

(d) will not, or will not except to a limited extent, acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or froma competitor of a body corporate related to the corporation;

(10) Sub-section (1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in sub-sections (2), (3), (4) or (5) or paragraphs (8)(a) or (b) or (9) (a), (b) or (c) unless -

(a) the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition; or

{a} a reference to a condition shall be read as a reference to any condition, whether direct or indicect and whether having legal or equitable force or not, and includes a reference to a condition the existence or natuce ot which 1s ascertainable only by inference from the

conduct of persons or from other relevant circumstances;

(&) a reference to competition, in relation to conduct to which a provision of this section other than sub-sections (8) or (9) applies, shall be read as a reference to, competition in any market in which-

(i) the corporation engaging in the conduct or any hody corporate related to that corporation; or

(ii) any person whose business dealings are restricted, limited or otherwise circumscribed by the conduct or, if that person is a body corporate, any

supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the conduct, supply or

acquire, or be likely to supply or acquire, goods or services; and

A. Did O'Brien give or offer to give a discount in relation to

B. Was any discount given or offered ona "condition" referred

C. If a discount was given or offered ona "condition" was the condition one that Cool would "not except to a limited extent,

acquire" windscreens ""darectly or indirectly from a competitor"

D. If O'Brien did give or offer a discount on the condition that Cool would not, except to a limited extent, acquire windscreens from a competitor, did the engaging in this conduct have the purpose, or had it or was it likely to have the effect, of substantially lessening competition in any market in which O'Brien or Cool supplied or acquired or was likely to supply or

Questions A and C. Certainly so far as concerns the Wagga area O'Brien based its charges for windscreens to persons fitting windscreens by deducting either 50, 45 or 40 per cent from the

recommended retail price. Between January and August 1978 Cool received 50 per cent discount. In August 1978 the discount was reduced to 40 per cent, it was restored to 50 per cent in December 1978 and reduced to 40 per cent again in April 1979. Before the learned trial Judge it was contended that the choice of one or other of these percentage discounts depended upon the money value of windscreens purchased in a particular period. However, the learned. trial Judge, after considering the evidence

and rejecting the evidence of certain witnesses, held in relation

to the relevant area "... that the respondent (O'Brien) had a_

general practice of giving and offering to give to retailers discounts of 45 per cent or 50 per cent in relation to the supply of windscreens on the condition that each such retairler would

purchase all or the substantial maiority of its purchases of

windscreens from the respondent". He made it clear that this statement did not involve a finding that the discount was on a

"condition" which satisfied the meaning of that word in s.47.

Before us senior counsel for O'Brien did not seek to disturb this finding so I proceed upon the basis that, in the relevant area, in order to get a discount of 45 or 50 per cent a retailer had to purchase all or the substantial majority of his

Bradley allowed a discount of up to 57 anda half per cent of its recommended retail price for windscreens supplied by it. The entitlement to this discount depended not on whether a retailer purchased all, or substantial majority, of its requirements of windscreens from Bradley but whether it purchased in excess of a certain money value of windscreens in a relevant period. Senior counsel for Cool did not argue that this conduct of Bradley contravened s.47 of the Act because the determining factor, he submitted, was related to a money value and not to a

Question B. It is necessary to consider whether the word "will" in s.47(2)(d) introduced an element of futurity in that the condition must be one related to the future acquisition of goods. This was the interpretation given to similar words in s.47(6) in

S.W.B. Familv Credit Union Ltd. v. Parramatta Tourist Services

Pty. Ltd. (1980) 32 A.L.R. 365. In. that case Smithers and Northrop JJ. (Sheppard J. dissenting) held that there was a distinction between offering something on condition that the

offeree would acquire services from a third person and merely

promising a2 benefit if the offeree did acquire such services.

Senior counsel for O'Brien argued that in the subject case there was no element of any future arrangement or understanding which committed the customer to continue to bea regular customer of O'Brien.

Ido not think the trial Judge made any precise finding on this question although he did say that Mr. Goff, a supervisor of O'Brien, had conceded in relation to 50 percent discount:

"Yes, customers agreed to buy all the windscreens from us".

Counsel for both parties provided us with a schedule showing the evidence concerning this question and I have studied

Im my opinion this Court should not depart from the view expressed by the majority in S.W.B. Family Credit Union Ltd. v. Parramatta Tourist Services Pty. Ltd. (supra). The answer to the question therefore requires the Court to consider the evidence of the various witnesses having in mind the conclusions of the learned trial Judge as to veracity and reliability of each

Upon the basis that the words "will not" in s.47(2) have the meaning attributed to them in S.W.B. Family Credit Union Ltd. v. Parramatta Tourist Services Pty. Ltd., supra, I am satisfied

that it was the practice, at least with many customers, for the manager of O'Brien in Wagga to come ta an arrangement, which fell within s.47(13)(a), that O'Brien would allow a discount in relation to the future supply of windscreens to a customer if that customer would acquire all, or a substantial part, of its

Question D. This is the critical question in relation to s.47.

This question raises an issue of what is the relevant market or markets and a further issue of whether in any relevant market the conduct of which complaint is made had had either the purpose or has had or is likely to have the effect of substantially lessening competition. Before the trial Judge, the parties agreed that the relevant retail market was Wagga and the area within 50 miles around Wagga. However, the learned trial Judge did not. base his decision upon the retail market although Cool has filed a Notice of Contention in this appeal that the injunction under s.47 can be supported by a consideration of the retail market. The learned trial Judge based his decision upon the wholesale market, the extent of which was not the subject of any agreement. O'Brien argued that the whole of New South Wales constituted the most relevant wholesale market. Cool arqued that there were in fact three markets. The first of these markets was

the wholesale market to which the learned trial Judge has

referred. This was apparently the area within 100 miles of Wagga, the area to which his Honour's first order extended. Secondiy, the wholesale market looked at from the point of view of the retailer acquiring goods. and, thirdly, the retail market. It seems to me that the first two markets referred to by senior counsel for Cool are the same wholesale market looked at from two different aspects. Im my opinion it is only necessary to consider two markets in this case. Firstly the wholesale market chosen by the trial Judge being the area included in the first order, and secondly the retail market, being the market in which retailers in the Wagga District, agreed by the parties to be Wagga and S50 miles around, supplied windscreens to persons wishing to either purchase a windscreen retail or to have a

The evidence was that the charges for replacing a windscreen by retailers varied considerably, in particular for replacements performed outside ordinary working hours. An invoice of Cool for fitting a windscreen in July 1979 was in evidence and it showed that the charge for fitting this windscreen ta a Falcorr Stationwagon was $95.65 made up of $45.15 for the glass. windscreen, $32.00 for fitting, $3.50 for freight

and insurance and a charge of $15 because the work was performed

The discount involved was 10 per cent of $45.15, or

about 5 per cent of the total fitting charge if the work was

performed after hours. A question then arises whether the difference in the price charged to the retailer was such as had the purpose, or has or is likely to have the effect, of substantially lessening competition in the wholesale market or retail market. Bradley apparently offered a greater discount if the windscreens purchased from it in a given period amounted toa certain value and no complaint was made of this. Section 47 does not prcnibit discounts being offered or allowed; it is only concerned with discounts being offered or allowed on a condition relating to the extent to which the purchaser will not acquire

I regard the distinction sought to be drawn between a limitation upon a percentage basis and a limitation on the basis of an amount as not being a satisfactory distinction in the circumstances of the case under consideration. I agree with the argument presented for O'Brien that where one has a course of conduct operating for some time it is appropriate first of all to test whether that conduct has had the effect of substantially

reducing the competitiom rather than to argue from theoretical grounds whether it is likely to have the effect.

There- was some evidence that a wholesaler called Gundagai Windscreens had gone out of business ina relevant period but there is no convincing evidence about the reason for this. The learned trial Judge did not deal with the "effect" of

O'Brien's conduct of which complaint was made except to say that

There is no evidence that windscreens supplied by one wholesaler are of better quality or more desirable than those supplied by another wholesaler. There is evidence that O'Brien's carried a wider'range of windscreens than other wholesalers in

Wagga and that it provided a very useful 24 hour service. These

The learned trial Judge held that O'Brien's conduct had the purpose- of substantially lessening competition by making it substantially more difficult for other wholesalers of windscreens to sell windscreens to retailers with whom the respondent had reached an agreement on adiscount of 45-50 per cent. The precise finding on that point did not specifically identify the area of the market except in so far as this can be ascertained

Im my opinion in the circumstances of this case, 0' Brien was seeking: to give favourable treatment to retailers who were good. customers. As. IT have said, no attack is made upon the conduct of Bradley and, indeed, if O'Brien chose to allow 50 percent discount only to customers who bought more than a certain value of windscreens in a period no complaint would be made by Cool. In my opinion each case must be looked at in the light of

We have the advantage of a judgment of the Full Court of

this Court delivered since the judgment of the trial Judge was

given. In that case, Qutboard Marine Australia Pty. Ltd. v.

Hecar Investments (No. 6) Pty. Ltd. (1983) A.T.P.R. 40-327, Bowen C.c. and Fisher J. ima joint judgment said at p.43,983:

"It would seem that 'competition' for the ' purposes of sec. 47(10) must be read as : referring to a process or state of affairs in ' the market. In considering the state of

"competition a detailed evaluation of the market structure seems to be required."

At p.43,984 their Honours considered what was called "farming", a method by which articles which were being denied to Hecar by Outboard Marine could be obtained by Hecar from a dealer supplied by Outboard Marine but at less advantageous prices. In the circumstances of that case this was held not to be sufficient to entitle the applicant to succeed although it was acknowledged that its competitive position as an individual retailer might be affected. The view. was taken that this was not sufficient in the circumstances to satisfy the test of "substantially lessening

Pitzgerald J. at p.43,989 noted that the applicant could oniy obtain the goods it required ina way which was less satisfactory to it commercially than obtaining its supplies on a wholesale basis directly from the respondent. The determination

of whether conduct has the purpose or effect of substantially

lessening competition in a relevant market is a matter of great daifficulty- Indeed I respectfully adopt the following view

"Indeed, im the end, the answer in this case really depends on little more than one's own instinctive impressions formed by weighing the various considerations in this particular market which favour one view or another."

It is also to be noted that, although the standard of proof is the civil one, it is necessary to bear in mind that the

sanctions which may be imposed for breach of sec. 47(1) may be

severe. The standard of proof has been dealt with in a number of cases in this Court and it was dealt with in the joint judgment of Bowen C.J. and Fisher J. to which I have referred, at

In the Full Court Bowen C.J. and Fisher J. at p.43,984 accepted that the conduct of Outboard Marine resulted in Hecar omly being able to obtain articles at "Iess advantageous prices" than persons who had been appointed dealers. It was held that the effect on Hecar was: unlikely to "have such a dramatic effect

as to substantially lessen competitiom in the retail market"

In the case-before us the learned trial Judge's order extended to sales by O'Brien to retailers within 100 miles of

Wagga. In Qutboard Marine Australia Bowen C.J. and Fisher J.

{ame ep meen ease a ee care ec et a nc a a a ee te et ee a

"We are not persuaded that the primary Judge could properly he satisfied that Hecar established that the likely effect of OMA's refusal to supply was a substantial lessening of competition in the market."

In the same way, I do not think that the learned trial Judge in the case before us could properly be satisfied that O'Brien's conduct was contrary to s.47. A finding that conduct made it substantially more difficult for the wholesaler to sell windscreens to retailers who enjoyed an additional discount is

So far as the evidence goes, any relevant market appears to me to have been as competitive as it was at any time in the few years preceding the filing of the application. From this [I draw the conclusion that 0O'Brien's conduct has not resulted in a

substantial lessening of competition in the relevant market.

Apart from the effect of a windscreen costing about $5.00 less if bought from O'Brien's by a retailer who obtained 50 percent discount than if bought by a retailer who obtained 40

per cent discount, there is no persuasive evidence to show that

competition amongst retailers in the Wagga reta1rl market was diminished by any conduct of O'Brien. Although the precise starting point from which a 57 and a half over cent discount can

be obtained from Bradley is not clear, it appears probable that a

retailer getting 57 and a half per cent from Bradley would acquire a windscreen at a cheaper price than getting an

equivalent windscreen from O'Brien with 50 per cent discount.

I consider that the learned triaI Judge paid insufficient regard to the details of the relevant market and in particular to the fact that, apparently, most windscreens could be obtained during ordinary business hours just as cheaply from Bradley as from O'Brien. This would appear to be so even in the

' case of O'Brien's most favoured customers. What was not available at as favourable a price to persons other than O'Brien's favoured customers were windscreens of an unusual type or size and windscreens of any type or size required during hours when Bradiey's business premises were not open. Any person requiring a windscreen of an unusual type or size or at a time outside ordinary business hours could still obtain those windscreens from O'Brien although at a somewhat less favourable

price than persons being allowed the maximum discount by 0' Brien.

As I have said, the difference in price was not great in relation to the amount received for fitting a windscreen, particularly if fitted outside ordinary working hours. I do not think any difference was sufficient to constitute a greater price

disadvantage than that considered by the Full Court in Outboard

Marine Australia Pty. Ltd. v. Hecar Investments (No. 6) Ptv. Ltd., supra. If O'Brien withdrew from the market, the market

would presumably be less competitive and retailers would not be

able easily to get the same range of windscreens during such a

I have accepted the findings of the trial Judge concerning the reliability of the evidence of the various witnesses. LI consider that it is open to this Court to examine a finding concerning O'Brien's purpose. There is authority in support of this view, in a different context, in, for example, Bartlett Estates Pty. Ltd. v. Federal Commissioner of Taxation (1979) 25 A.L-R. 119 at 127, a decision of the Full Court of this Court. _This question was considered by the Full Court of this Court in Federal Commissioner of Taxation v. Nixon (1980) 30 A.L.R. 400 at pp.405-406. There the Court expressed a view which turned upon whether or not the trial Judge's conclusion had been affected by any error of principle or mistake or misapprehension of fact. I consider that the conclusions that the trial Judge reached with respect to the result of O'Brien's conduct in so far as 1t was relevant to determine "purpose", are based on a mistaken approach to the determination of O'Brien's purpose. The conclusion was. based upon a view which gave insufficient weight ta the need to examine "the state of affairs in the market" under

I pass now te consider the position under s.49. This

"49.(1) A corporation shall not, in trade or commerce, discriminate between purchasers of goods) of like grade and quality in relation to- ~

(b) any discounts, allowances, rebates or credits given or allowed in relation to the supply of the goods;

(c) the provision of services in respect of the goods; or

{d) the making of payments for services provided in respect of the goods,

if the discrimination is of such magnitude or is of such a recurring or systematic character that it has or is likely to have the effect of substantially lessening competition in a market for goods, being a market in which the corporation supplies, or those persons supply, goods.

(2) Sub-section (1) does not apply in relation to a discrimination if -

(a) - the discrimination makes only reasonable allowance for differences in the cost or likely cost of manufacture, distribution, sale ar delivery resulting from the differing places to which, methods by which or quantities in which the goods are supplied to the purchasers; or

(b) the discrimination is constituted by the doing of an act in good faith to meet a price or benefit offered by a competitor of the supplier.

(3) In any proceeding for a contravention of sub-section (1), the onus of establishing that that sub-section does not appiy in relation to a discrimination Dy reason of sub-section (2) is on the party asserting that sub-section (1)

(a) knowingly induce or attempt to induce a corporation to discriminate in a manner prohibited by sub-section (1); or

(b) enter into any transaction that to his knowledge would result in his receiving the benefit of a discrimination that is prohibited by that sub-section.

reasonably believed that, by reason of sub-section (2), the discrimination concerned was not prohibited by sub-section (1)."

Neither counsel was aware of any previous decision of an Australian court upon this section. The discrimination

prohibited by s.49 is a discrimination between purchasers of

goods of like grade and quality. It appears that "discriminate" means no more than differentiate. Although the case has been conducted upon a basis of difference of discount allowed by O'Brien, since this discount was allowed in relation to the recommended retail price, it is sufficient to consider whether O'Brien discriminated between purchasers of windscreens of a like grade and quality in relation to the prices charged for those

Section 49(1) makes it clear that the discrimination must not only be such as has or is likely to have the effect of substantially lessening competition in a relevant market but must

be such that this result flows from the magnitude of the

discrimination or the recurring or systematic character of the

discrimination. It appears that the word "or" is to be read disjunctively. It seems that factors other than the magnitude or

the recurring or systematic character of the discrimination are

The market is defined as "a" market and not "any" market, which is the word used in s.47(13)(b), but this may not be significant. Only two markets are relevant namely, the market in which O'Brien supplies goods or in which Cool supplies goods. One may be referred to as the wholesale market and the other as the retail market. The wholesale market appears to be looked at only through the eyes of the wholesaler and not, as in' s.47(13)(b), as including a market in which the wholesaler either supplies or acquires or the retailer supplies or acquires goods. Although these markets are differently defined in the two sections I consider that in each case one is required only to look at what is properly called a relevant wholesale market and a relevant. retail market. It is also_to be noted that the purpose

of the discrimination in s.49(1) is irrelevant and this may be

The learned trial Judge found that there had been and/or was likely to be a substantial lessening of competition in the retail market. The Notice of Contention in this appeal by Cool seeks to support the order under s.49 in relation to the wholesale market in which Cool acquired goods which I have said I

consider to be the same wholesale market as that in which O'Brien

rectal teeta, all Nia oan c,h ly "A ND Te il et i RE ON a I ee

Senior counsel for O'Brien argued that Cool did not supply goods but supplied the service of fitting windscreens and therefore s.49(L) had no application to the retail market. In ny opinion this submission fails. Section 49(1) refers to a market in which the purchasers "supply goods". Supply, when used as a verb, is defined by" s-4 as including, in relation to goods, supply by way of sale and s.4C(c) provides that a reference to supply includes a reference to the supply of goods together with services. The word "services" is defined very broadly in s.4 and would include any of the activities of a retailer involved in

Section 49(2) is not relevant in this case since s.49(2)(a) relates only to discrimination which makes reasonable allowance for differences in the cost or likely cost of manufacture, distribution, sale or delivery which results from

The question then arises whether a discrimination resulting from charging different prices to retailers depending

upon whether or not they purchase all or the substantial Majority of their windscreens from O'Brien 1s of such magnitude or of such a recurring or systematic character that it 1s or is likely to have the effect of substantially lessening competition in a

relevant market. I do not accept the argument that there is no

hike Nemccte i cemecaa ls CN Se a Sh el a AP tt a A a et et I a a a et te wn ne

relevant discrimination if all retailers who purchase all or the

substantial majority of their windscreens are treated equally.

L have already dealt with the question of competition to some extent im considering the facts) in relation to s.47. "Competition ima market" is a.difficult phrase to construe. It seems that the Court is concerned with competition in a market

and not the effect upon competitors in that market.

As in considering the position in relation to s.47, it is necessary to look at each factual situation individually. The two major suppliers of windscreens in the Wagga area were Bradley and O'Brien. The case was not conducted upon the basis that Bradley's conduct in charging a lesser price to a retailer who purchased more than a particular numher of windscreens was a contravention of s.49.. Bradley was not a party to the proceedings although its Managing Director gave evidence. The distinction which senior counsel for Cool sought to draw in relation ta s.47 between a discaunt based ona percentage of articles purchased anda discount based on a number of articles purchased does. not appear tame to.be applicable to s.49(1)

Section 49 is one of great width and one which I find very difficult to interpret. There is no provision in the Act

for obtaining any form of approval of conduct which is of benefit

to the public as is provided by s.93 in relation to s.47. Unless

i le ae a et te te ee ne at a ee a a ee ee ee we a ee 22. s.49(2) is applicable, it appears to be a discrimination within s.49{1) to charge a greater price for one article then one half of the price for two articles. It may well be that, if a discrimination is of sucha recurring or systematic character that it is likely to have the effect of substantially lessening competition in a relevant market, s.49(1) would prohibit a special discount being allowed to purchasers of goods by virtue of membership of an association or being, for example, a government instrumentality unless such discrimination was protected by s.49(2). In my opinion there has been and 1s likely to be a very competitive retail market in the Wagga area for the fitting of windscreens. The evidence shows that there area substantial number of such retailers who appear to compete actively with one another and that this position is likely to continue. It was said that Cool became more aggressive when

In my opinion, certainly so long as Bradley continues to trade in Wagga, the conduct of O'Brien has not, nor is it likely to have, the effect of substantially lessening competition in either the retail or the: wholesale market in the Wagga area. I do not consider it would be appropriate to endeavour to consider the position if Bradley went out of business, or changed its policy, nor to express any view on what appears to be Bradley's method of conducting business so far as 1s disclosed in the evidence in these proceedings. So far as the wholesale market is

concerned any reduction in orice by O'Brien to particular

consumers because they are good customers does not necessarily, in my opinion, have the effect of substantially lessening competition in that market. If O'Brien were to change its practice it might do one of several things. Included in the possibilities are that it might reduce its maximum discount to say- 40 per cent or less or fix some other discount betweer 40-50 per cent or, possibly, if it could do so and still remain in business, gzant alli purchasers 50 per cent discount. It might restrict its business hours or reduce the range of windscreens which it carries. I consider that there is no evidence before the Court as to likely future conduct of either O'Brien or

I pass now to consider the question of resale price

maintenance, a. practice which is prohibited by s.48 and defined

O'Brier did - not contest findings of fact of the trial

. Judge but argued that s.96 was concerned with attempts to maintain the price at which a retailer, such as Cool, sold goods and nowhere in the section was there any reference to the supply

of goods by the retailer. There 1s no doubt that 5.96 refers to

the supply of goods by a supplier and to the sale of goods by the

person to whom the goods have heen supplied. There is no definition of "sell" in the Act and, where a the word "supply" is chosen in some instances and "sell" in others, in the same section, I consider that. it is not appropriate to equate one word to the other unless it is clear that this was intended. Whilst, as I have said, im relation to s.49, the word "supply" is defined ta include sell and, because of the provisions of s.4C, to include services in certain instances I do not see anything in the Act to indicate that the sale of goods embraces the sale of

The relevant question in relation to resale price maintenance is therefore whether the evidence justifies a finding that any action within s.96 was directed not only to the sale of goods by Cool but to the sale of goods and the provision of

Counsel for O'Brien pointed out that the only evidence im relation to the sale of goods which might be distinguished from the sale of goods and the provision of services was very Limited. The trial Judge found that "... I accept the evidence of Mr. Peter Cool that the respondent (O'Briem) tried to induce the- applicant to supply their glass to the public at the same

unsatisfactory and I consider that 1t is insufficient to support

ener ar em wens ne ee lh a nll a es ee a nt we eee, - ee

a finding of a breach of s.48. I would uphold the appeal in

Section 45 - Arrangement or understanding affecting competition

I pass. now to consider the claim under s.45. The trial Judge found that there had been an attempt by the applicant to enter into an arrangement or understanding with respect to the

prices of windscreens contrary to s.45 but that such attempt did

It is next necessary to consider whether transactions which took place in relation to Cool's business alter the

Judgment was given by the trial Judge on 13 July 1981

and the matter was adjourned for the parties to address on the appropriate form of any injunctions. On 3 August 1981 an appeal was filed. On 23 October 1981 an affidavit of Raymond James Cool, a director of Cool, was filed concerning the business of the applicant. This affidavit showed that in April 1981 the stock and goodwill of the applicant and its trading name "Wagga Windscreen Service" had been sold to one David McIlvray. In October 1980 the premises from which Cool conducted its business

had been sold by R.J. Cool to a company called Rybit Pty. Ltd.

ee ee ea te Ca ne nt te a Ot en ce Sa eRe ae rt mt a me a

which subsequently granted a licence to David McIlvray to occupy the premises for 5 years. The sale of the business name was apparently for 5 years with an option of renewal for 5 years after which it was to revert ta Cool. The directors of Rybit Pty. Ltd. were R.J. Cool and one J.L. McNickle. It seems clear that in April I981 Cool ceased to carry on any relevant business

On 24 December 1981 injunctions were granted in respect

of conduct alleged to be contrary to ss.47, 49, 48, and 45.

I have already said that I would uphold the appeal in

"The respondent, O'Brien Glass Industries Limited, by itself, its servants and agents, be restrained until further order from attempting to induce the applicant to enter into any agreement, arrangement or understanding with respect to the prices at which the applicant should sell windscreens to the public being an arrangement. or understanding contrary to s.45 of the Trade Practices Act 1974."

On 7 July 1982 R.J. Cool filed a further affidavit which

this Court allowed to be read. It set out that on 5 March 1982 David McIlvray terminated his agreement with R.A. Cool alleging

that he could operate his business at other premises for which he

would pay a lower rental. The affidavit also set out that, on the same date, Rybit Pty. Limited had recommenced to trade as

Wagga Windscreen Service with R.J. Cool as it working manager.

The injunction in relation to s.45 of the Act is directed only ta conduct in relation to Cool. Cool had ceased to carry om business in any relevant sense at the date the injunction was granted and so far as is relevant it is not now carrying on business nor is it clear whether it will do so again. If for no other reason than that, I consider that the appeal should succeed in relation to the injunction directed to s.45 of

I pass now to the question of damages. In view of the conclusions I have reached in relation to ss.47, 49, 48 and 45,

I would allow the appeal, set aside the orders of the trial Judge of 13 July 1981 and 24 December 1981 and order Cool and Sons: Pty. Limited to pay O'Brien Glass Industries Limited's costs. of the proceedings before the trial Judge and of the

Teartify that this and the *wemty -cix C28 preceding nages are a true copy of the Reacons for Judgment herein of his Honour

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G 96 of 1981 GENERAL DIVISION )

On Appeal from a single jucse of the Federal Court of

BETWEEN O'BRIEN GLASS INDUSTRIES LIMITED Appellant AND

COOL _& SONS PTY. LIMITED trading as Wagga Windscreen Service

In this matter I am in agreement with the reasons and conclusions of Fox J. whose judgment I have had the advantage of reading. The only question upon which I wish to add something for myself 1s that con - cerning the proper construction of s.49 of the Trade Practices Act 1974 ("the Act"). This 1S a matter which has caused ne much concern principally because

of the impact I believe our view of 1ts meaning may

have upon many areas of commerce and upon the public generally. Although I cannot be sure, it seems to me to be not unlikely that the section, so construed, will, on balance, tend to disadvantage rather than advantage the public.

The question to which I wish to address myself is whether a corporation will "discriminate between purchasers of goods of like grade and quality" simply because such goods are sold for a lower unit price to a@ purchaser who buys a minimum quantity than is the case where a purchaser does not. The relevance of the question 1s of course that the essential basis upon which O'Brien was prepared to deal, and did deal, was that 1t would give a higher discount if a pur- chaser acquired from it all, or substantially all, his requirements of windscreens. Thus a purchaser such as Cool who did not agree to such terms was charged. more. In substance he was charged a higher unit price; in form that came about because he received a lower discount.

Section 49 of the Act undoubtedly derives from s.2 of the Robinson-Patman Act vassed by the Unitea

States Congress in 1936 (49 Stat.1526). The section

in 1914 (38 Stat.730). Its prancipal purpose appears to have been to protect individual businesses from what were perceived to be the evils of large chain stores. Commentators upon the legislation are not neutral and there are no doubt many points

of view. But it is not unhelpful to quote the following passage from Trade Practices Law (1978), Donald and Heydon, Volume 1, pp.429-430:

in 1914 in response to geographic prive cutting by major sellers directed against their smaller competitors. Thus in terms

of the preceding analysis it was concerned principally with seller level injury. The exemptiors for quantity discounts left it impotent to deal with the problem arising soon after its enactment, namely the greater power of the buyer. We have seen how in the United States the courts have required vir- tually predatory behaviour at the seller level before there can be a violation of s.2, and so in that respect it could not be said to impede competitive behaviour in a dramatic way.

In 1936 the mood was quite different. Thére was. a Populist movement against the evils of large corporations, particularly the develop- ing chains of retail food stores which were making life difficult for the 'Mom and Pop! grocery stores - our 'corner shop'. Consistent with traditional Jeffersonian concepts of individual business as a bulwark of democracy, the Populist movement was able to generate substantial commercial, social and political support against mass distribution techniques and particularly the chain stores. The polemie of the movement drew upon all the traditional

"Diases and prejudices against business methods which were simply more efficient. The invective and confusion and the ultimate compromise amendment to s.2 are well recorded by Rowe (1962, ch.1). The record makes one thing certain; the

1936 amendments to s.2 which became known as the Robinson-Patman Act were neither dispassionately developea nor justified in economic terms."

The reference to Rowe is a reference to a work, Price Discrimination under the Robinson-Patman Act (1962) by Frederick M. Rowe. Views pro and con the legislation are expounded in two consecutive writings published in The Antitrust Bulletin, Vol.XXI (1976), the first entitled Reform of the Robinson-Patman, Act: A Second Look by E. W. Kintner and ors. (p.203 et seq.) and the second, Reform or Repeal of the Robinson- Patman Act - Another View by Edward Wolfe (p.237).

The Bill which led to the Australian Act was introduced unto the Senate on 27 September, 1973, (Hansard p.1013) and into the House of Representatives on 25 October, 1973, (Hansard p.2733). Nothing of assistance is to. be found 1n the second reaaing speeches except a clear intention to have enacted a number of provisions, including s.49, which derive from the

Consumer Affairs made in August 1976, the Trade Practices Act Review Committee (the Swanson Committee) recommended the repeal of the section. Its views appear in Chapter 7 (pp.43-46). The concluding paragraphs of the chapter were (pp.45- 46):

"The Committee considers that in the Australian context the conduct of a large buyer who is endeavouring to secure price cutting in his favour, whether it be dis- criminatory or not, may be more pro- competitive than anti-competitive. Indeed such price cuts as a large buyer is able to obtain can trigger off competition from rival suppliers or can trigger off competition in a market where other forces are unlikely to produce active competition.

As discussed above, the prohibition on price discrimination in section 49 has, in our view, operated substantially to limit price flexib- ility. The Committee believes that in the Australian context, section 49 has produced such price inflexibility that the detriment to the economy as a whole from the operation of the section outweighs assistance which small business may have derived from it. It is price flexibility which is at the very heart of competitive behaviour. The Committee thus recommends that section 49 should be repealed."

Substantial amendments were made to the Act in 1977 (Act No.81 of 1977). These included minor amendments of s.49. The amendments were introduced into the Senate on 31 May, 1977 (Hansard p.1708). Amongst other things the Minister in charge of tre Bill (Senator Durack)

the section which prohibits anti-competitive price discrimination - should be abolished.

The Government has decided that section 49 should be retained - in the interests of assisting the competitive position of small businesses. The Government recognises,

however, that difficulties with the interp- retation of section 49 will remain. Accordingly, over the next few months, the Government will be looking at the operation of the section to determine whether there 1s any way in which those difficulties can be removed while still preserving the benefits of the section."

As the Minister's second reading speech implied, there are difficulties about the interpretation of the section. The fact that there are may provide the reason why it has taken some seven years for a case to arise in which the section must be construed and why the Trade Practices Commission has not, so far as I can ascertain, instituted proceedings against any corporation for a breach of it.

Not the least of the difficulties in construction is the determination of wnat 1s meant by the phrase, "discriminate between purchasers of goods" in sub- sec.49(1). "Whatever the difficulties in interpretation

of the American provision have been, that was one which

was put to rest many years ago by the Supreme Court

Federal Trade Commission v. Anheuser-Busch, Inc, (1960) 363 U.S. 536. In that case one of the

unsuccessful respondents' submissions was that more was involved in price discrimination than a price difference. In rejecting this submission the

"Respondent asserts that its view 1s supported by legislative history, court decisions, and reason. Respondmt relies heavily, as did the Court of Appeals,

upon a statement made during Congress' consideration of the Robinson-Patman legislation by Representative Utterback, a manager of the conference bill which became s.2(a). In this rather widely quoted exegesis of the section, Representative Utterback declared that 'a discrimination

is more than a mere difference,' and exists only when there is 'some relationship .... between the parties to the discrimination which entitles them to equal treatment.'

Such a relationship would prevail among com- peting purchasers, according to the Congressman, and also 'where .... the price to one is so low as to involve a sacrifice of some part of the seller's necessary costs and profit,' so that 'it leaves that deficit inevitably to be made up in higher prices to his other customers.' 80 Cong. Rec. 9416. Respondent also cites expressions in the legislative history of the Clayton Act which reflect Congress' concern over classic examples of predatory business practices,

"The trouble with respondent's arguments is not that they are necessarily irrelevant in a s.2(a) proceeding, but that they are mis- directed when the issue under consideration is solely whether there has been a price discrimination. We are convinced that what- ever may be said with respect to the rest of ss.2(a) and 2(b) - and we say nothing here - there are no overtones of business buccaneering in the s.2(a) phrase "discriminate in price.' Rather, a price discrimination within the meaning of that provision is merely a price difference."

certain authorities referred to in the Judgment), we now conclude, were firmly

for it is only by equating price discrimin- ation with price differentiation that s.2(a)

price differences, subject to certain defined defenses, where the effect of the differences 'may be substantially to lessen competition

or tend to create a monopoly in any line of commerce, or to ingure, destroy, or prevent competition with any person who either grants

price differential, !or with customers of either of them.' See Federal Trade Commission v. Morton Salt Co. 534 U.S. 37, 45-47. In other words, the statute itself spells out the con- - ditions which make a price difference illegal

or legal, and we would derange this integrated statutory scheme were we to read other con- ditions into the law by means of the nondirective phrase, 'discriminate in price,' Not only would such action be contrary to what we conceive to be the meaning of the statute, but, perhaps because of this, it would be thorougnly undesir- able. As one commentator has succinctly put ut,

any price difference would shift from the detailed governing provisions - 'ingury,'

cost justification, 'meeting competition,' etc. - over into the 'discrimination' concept for ad hoc resolution divorced from specif- ically pertinent statutory text.' Rowe, Price Differentials and Product Differentiation:

The Anheuser-Busch decision stood as the law on the subject in the United States when the Australian . Act was passed in 1974. The fact that it did does not itself warrant the conclusion that the similar words in the Australian section should be given the same Meaning as they have been given in the United States. But the obvious resort by the legislature to the American model provides a persuasive reason why they should, On the other hand, one must bear very much in mind that the Australian Act was introduced to cope with Austral1an conditions and to prohibit what the legislature saw as undesirable restrictive trade practices operating in this country, not somewhere

For much longer than trade practices legislation has been in force in Australia the practice of offering lower prices or discounts for quantity has been well

recognised and understood by those engaged in dealing

In commercial dealings it applies in many fields - fleet owners' 'discounts for the purchase of particular quantities of motor vehicles provide an example.

In the wholesale grocery area and also those of clothing and textiles, manufacturers will accept

lower prices or give greater discounts to those retailers wno buy in quantity. Indeed it is not unusually the case that the very size of the purchaser and the share it has of a retail or other market gives it the buying power to compel the lower price or higher discount. Often it will be the dominant party in the transaction. Not infrequently it will be a government or a statutory authority which may also be a financial or trading corporation. I do not gainsay that these practices have not become more highly

developed in the last decade or so since the Act has been in force, But they were well known at the time the Act was passed.

There would be a variety of views as to the desirability of these provisions from tne public

years, have had the effect of keeping prices for many goods at a lower level than would otherwise have been the case.

The question is whether it was the intention of the legislature to affect these practices in every case where 1t was shown that the discrimin- ation (using that word to mean no more than a price difference) was of such magnitude or of such a recurring or systematic character that it had or was likely to have the effect of substantially lessening competition in a relevant market. The market is a market in which the discriminator corporation supplies goods or a market in which purchasers from 1t supply them.

If, as in the present case, a wholesaler cor- poration supplies goods at a lower unit price, if a minimum. quantity is purchased, 1t will enable a purchaser whose requirements are large, e.g. a grocery chain, to compete more advantageously with a purchaser whose requirements are small, e.g. a corner grocery

the section only because lower unit prices are charged for greater quantities, there will almost always be a substantial lessening of competition in a relevant market, i.e. the market in which the two purchasers themselves supply goods. That is so subject to such application as sub-sec.49(2) may have in a given case. But that aside, the section will, in the circumstances I have postulated, be infringed notwithstanding that the public generally will benefit because of the lower retail price the purchaser with the larger requirements (the chain store) will be able to offer its customers. Notwithstanding that consideration, I have reached the conclusion that the section was intended to apply in such a case for the following reasons: (a) There are clear indications in the legislation 1tself and in the second reading speeches that Parliament did intend to pick up the American legislation. That included the interpretation of it by the United States Supreme Court in the Anheuser-Busch case. (b) As a matter of ordinary use of lensuage, the

more than a price difference; cf. Melbourne Corporation v. The Commonwealth (1947) 74 C.L.R. 31 per Latham C.J. at p.60.

The legislature may well have thought that the section would operate so as to bring the prices of a wholesaler to all customers down to the same level so that the corner store could purchase for the same price as the chain. The fact that some may take the view that the price to all will go up rather than down or that the section may tend to rigidify pricing is not to the point. It is what the legis- lature may be thought to have intended that is important.

Colour to the view that it thought the effect of the section would be to compel wholesalers to make lower unit prices available to all purchasers is added by a consideration of sub= sec.49(4), That sub-section prohibits a person knowingly inducing or attempting to induce a corporation "to discriminate in a manner pro-

prohibited discrimination. The sub-section was obviously intended to counter the buying power of large undertakings such as the chain stores. It has its counterpart in s.2(f) of

Notwithstanding a number of misgivings, I have thus reached the conclusion that, subject to the need for a person alleging a breach of the section to establish the anti-competitive effects for which it provides and

to a person against whom a breach is alleged being able

to rely upon the defences provided for in sub-sec.49(2@), a breach of the section 1s committed merely by the sale of goods at lower unit prices where minimum quantities are taken or by the giving of discounts for the taking of such quantities. I have nothing further to add. As earlier mentioned L agree in the judgment of Fox J. I also agree with the

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