Visy Paper Pty Limited v Australian Competition and Consumer Commission

Visy Paper Pty Limited v Australian Competition and Consumer Commission - [2003] HCA 59 - HCA 2003 case summary — Zoe

[18]

In this Court, the parties accepted that collecting waste paper could be identified as providing a service to the person from whom it was collected (the service of waste collection) and as an acquisition of goods (the acquisition of title to the goods collected). This double characterisation reflected the market for waste paper. Sometimes, a collector paid to acquire the waste paper; sometimes a collector was paid to take it away. Sometimes no payment was made - the collector simply took it away. Sometimes the collector provided bins or other receptacles in which the waste paper was held pending its collection. In every case the collector took title to the waste paper, but in some circumstances it could be said that the collector provided a service to the person from whom it was collected.
Who paid whom, and how much, was, at the relevant times, affected by the price obtainable for exporting waste paper. If export prices were high, Visy Paper sometimes found it difficult to acquire waste at a suitable price; if export prices were low, it might have lowered its price or even charged for its collection.
Visy Paper conducts a vertically integrated business involving the collection of waste paper and cardboard, and the recycling of this material to produce paper and cardboard. At the relevant times, NPP conducted a business collecting waste paper which it sold to recycling companies, including Visy Paper. Visy Paper and NPP competed in collecting and acquiring waste paper; they dealt with each other as acquirer and supplier of goods when NPP supplied paper to Visy Paper.
Visy Paper sought to make an agreement with NPP which would not only provide for NPP to supply waste to it, but would also preclude NPP from acquiring waste from actual, or certain prospective, suppliers of waste to Visy Paper. It proposed that the contracts contain both a provision restricting the supplier from acquiring goods (waste paper) from particular persons (Visy Paper's customers and those with whom it had entered discussions or negotiations to become a customer) and a provision restricting the supplier from supplying services to those persons (the service of waste collection).
There were six separate proposals in issue in the proceedings below, four relating to agreements described as "Exclusive Collection Agreements" and two relating to "Supply Agreements". In fact, no concluded agreement was reached, but the respondent alleged that Visy Paper and certain of its employees (the second and third appellants) had attempted to contravene s 45(2) of the Act. It was alleged that on each of the occasions that Visy Paper, or its employees, tendered a form of agreement to NPP containing provisions of the kind earlier described, it, or they, attempted to make, or attempted to induce NPP to make, a contract in contravention of s 45(2).
Section 45(2) stated, among other prohibitions, that a corporation shall not make a contract, arrangement or understanding containing an exclusionary provision (s 45(2)(a)(i)). Nor shall a corporation "give effect to" an exclusionary provision (s 45(2)(b)(i)). Here and in s 45(6), the expression "give effect to" included the doing of "an act or thing in pursuance of or in accordance with" a provision of a contract, arrangement or understanding, and the enforcement or purported enforcement thereof (s 4(1)).
The appellants described the issue thus presented in the appeal as being how did s 45(6) apply to the attempted making of a contract containing an express provision, where giving effect to that provision would fall within both s 45(2)(a)(i) and s 47(4)?

[19]

The primary judge (Sackville J) dismissed the proceedings brought by the ACCC, holding that, had any of the proposed agreements been made, s 45(6) would have applied to remove the making of the contract from the prohibition in s 45(2)(a)(i)[3]. It is desirable to say something about the reasons the primary judge gave for reaching that conclusion for they are reasons that closely reflect the way in which the ACCC put its case at trial.
The ACCC conceded at trial (and it has not since been in issue) that Visy Paper's conduct could not be shown to have had a purpose, or the effect, of substantially lessening competition in a relevant market. No doubt that concession reflected the importance of the presence of one other large participant in the market - Amcor Ltd. It followed, therefore, that the making of any of the proposed agreements would not have constituted a contravention of s 47. Section 47(10) would have operated to take outside the prohibition of s 47(1) the conduct of making or giving effect to any of the agreements which it was proposed should be made with NPP.
The ACCC contended that to make an agreement containing non‑competition provisions of the kind proposed would have contravened s 45(2). It submitted that the non‑competition provisions not only prohibited NPP from acquiring goods, but also prohibited it from supplying services. The ACCC submitted that, having regard to this so‑called "dual operation" of the proposed non‑competition provisions, s 45(6) applied neither to the making of the agreements, nor to any conduct by Visy Paper constituted by its giving effect to them, "in so far as the [non‑competition provisions] prevented NPP from acquiring goods from third parties"[4]. That is, the submissions of the ACCC sought to take the proposed non‑competition provisions and break them up into what were described as "discrete legal obligations"[5]: separate obligations not to supply services to, and not to acquire goods from, actual or prospective customers of Visy Paper.
The primary judge did not accept that the non‑competition provisions could be divided into discrete components without doing violence to the language in which they were couched[6]. That being so, he rejected the contention that the words "by reason that", when used in s 45(6), were to be understood, as the ACCC had contended, as equivalent to "if and in so far as". Support for that rejection was found[7] in the apparently deliberate choice of different words in ss 45(5) and 45(7) ("in so far as") from those used in s 45(6) ("by reason that"). Further support was found[8] in the explanatory memorandum for amendments to the Act made in 1986[9]. That explanatory memorandum suggested that the purpose of changes to be made to the Act at that time was to prevent the prohibition, imposed by s 45(2), on making agreements containing exclusionary provisions, from applying to arrangements of the kind dealt with by s 47. This would leave the latter section to operate according to its terms, and thus import the competition test provided for by s 47(10).
An appeal by the ACCC to the Full Court of the Federal Court was allowed[10]. The majority of the Court (Hill and North JJ) concluded that "by reason that" should be read as equivalent to "if and in so far as"[11]. In their Honours' opinion[12] this was not inconsistent with the substitution in 1977[13], in s 45(6), of the expression "by reason that" for the expression "in so far as". Further, they considered that to read the sub‑section in this way avoided what otherwise would be the unintended results that would follow from attaching significance to whether particular contractual stipulations found expression in one or two clauses of a written agreement[14]. The third member of the Court (Conti J) would have dismissed the appeal, essentially for the reasons given by the primary judge[15].

[20]

In order to construe s 45(6) it is necessary to begin by identifying the place that the sub‑section has in the scheme of s 45 and in Pt IV as a whole. In the courts below it would seem that most attention was given to the relationship between s 45 and other provisions in Pt IV. In particular, the parties emphasised that s 45(6) serves to prevent overlapping between s 45(2) and s 47. So much may be accepted, but it does not reveal what is to be understood as constituting some relevant overlap. That depends upon the operation which is to be given to s 45(6).
In identifying the operation to be given to s 45(6), it is not useful to adopt a description of the relevant arrangement as "horizontal" or "vertical". There are at least three related reasons why that is so.
First, the Act does not adopt a classification which uses those terms. Adopting them confuses the task of construing the Act's provisions. It is necessary to pay attention to the text of applicable statutes in preference to judicial or other glosses on that language[16]. Not only does adopting these terms distract attention from the language of the Act, it does so by introducing terms which are, so it seems, intended to convey value or other judgments about the social or economic consequences that are assumed or expected to follow from the making of or giving effect to the arrangement to which one of these descriptions is applied. Much turns, therefore, on both the content given to the terms and the validity of the assumptions about consequences that their use entails.
Secondly, and no less importantly, employing the descriptions of "horizontal" and "vertical" appears intended to adopt, or at least runs a serious risk of inviting the adoption of, the usage of such terms in the wholly different statutory context of United States antitrust law. In particular, the use of these terms invites attention to the distinction drawn in the antitrust law of that country between arrangements which are to be condemned as "per se" violations of antitrust law and arrangements which are to be tested against the so‑called "Rule of Reason". As Judge Posner rightly has written[17], "[t]hese are not illuminating terms. What they gesture at is the distinction, fundamental in law, between a rule and a standard." (emphasis added) It is unhelpful to use the language of gesture in preference to construing the statute.
Even in the United States, "horizontal" and "vertical" are not terms having agreed or fixed meanings. They are jargon, used as shorthand descriptions, sometimes conveying different meanings to different readers. Moreover, it is not accepted in that country that their use necessarily entails any conclusion about the economic consequences of the arrangement. As Professor Hovenkamp points out[18], "[s]imply to conclude that an agreement is horizontal establishes nothing about whether it is competitive or anticompetitive".
These are reasons enough to conclude that the adoption of these terms is not useful in the present context. There is, however, a third point of particular application to this case. The non‑competition provisions proposed restricted the acquisition of goods and restricted the supply of services. They can, therefore, be said to reflect a dual and composite relationship. Describing the effect of those provisions as a "horizontal" or a "vertical" restraint states a conclusion which masks that dual character. Moreover, it inverts the proper order of inquiry because the argument proceeds from classification to a conclusion about the application of the Act, rather than beginning with the proper construction and application of the relevant provisions.
It is necessary to consider the place which s 45(6) has in s 45 itself. It is evident that s 45(6) qualifies in two distinct steps the operation of other provisions of s 45: "[t]he making of a contract ... does not constitute a contravention of this section ... and this section does not apply to or in relation to the giving effect to a provision of a contract" (emphasis added). Accordingly, the inquiry must begin by identifying the prohibition contained in s 45(2) that is said to be engaged. Is it the making of a contract, arrangement or understanding (s 45(2)(a)(i)), or is it the giving effect to a provision of a contract, arrangement or understanding (s 45(2)(b)(i))? If it is of the former kind, attention must be directed to the first part of the introductory words in s 45(6), which refer to the making of a contract, arrangement or understanding. If it is of the latter kind, the focus will fall upon the second part of those introductory words: "this section does not apply to or in relation to the giving effect to a provision ...".
What was alleged here was that there had been an attempt to make, or induce the making of, a contract containing an exclusionary provision. The question presented under s 45(6) was whether the contravention alleged was "by reason that" the contract would contain a "provision" meeting the description given in s 45(6) - a provision the giving effect to which would, or would but for the operation of s 47(10), constitute a contravention of s 47. That question, and in particular the use of the expression "by reason that", invites attention to whether the contravention meets the description given in s 45(6). It does not invite or permit any distributive application of that part of the sub‑section in which giving effect to the contract in some ways falls within the sub‑section and giving effect to it in other ways does not.
If giving effect to the agreed provision would constitute a contravention of s 47, or would do so but for the operation of s 47(10), it meets the statutory description and s 45(6) is engaged. This construction of s 45(6) gives effect to its text. Although not advanced by the ACCC in the courts below, it was not submitted that the course of proceedings precluded the ACCC from now relying on it. It is a construction which does not depend upon substituting, for the statutory expression "by reason that", an expression like "if and in so far as", or even, as the appellants submitted, the single word "if". It is, therefore, a construction which takes a different course from that proposed by the ACCC at trial. Instead of taking a particular term of the contract, arrangement or understanding as the starting point, and working out the extent to which that term meets the criterion stated in s 45(6), it is a construction which begins with the prohibition of s 45(2) and treats s 45(6) as a qualification to that prohibition. The question is whether the criterion for engaging the qualification is met, not the extent to which the parties' agreement can have an operation of the kind which meets that criterion.
That requires the identification of whether the making of the contract, arrangement or understanding in question would contravene s 45 because it contained a provision of the specified kind. If it would contravene s 45 for either of two reasons - first, because it contained a provision of the specified kind but, secondly, because it contained a provision which would otherwise contravene s 45 - s 45(6) is not satisfied.
The answer to the inquiry just described is not dictated by the particular drafting adopted by parties. There may be no written record of an agreement, let alone of any arrangement made by, or understanding reached between, the parties. Where there is no written record, there could be no resort to drafting. Further, and no less importantly, it is necessary to recognise that "contract, arrangement or understanding" encompasses such a wide range of consensual arrangements that the word "provision" and cognate expressions cannot be understood as confined to what might appear as a single clause of a written agreement. "Provision", when it is used in s 45(6), directs attention to the content of the agreement, arrangement or understanding rather than the manner of its expression.
That conclusion is reinforced when due account is paid to the use of the expression "the giving effect to which". That is an expression of wide meaning and its use requires consideration of the various kinds of conduct which it encompasses. As has been indicated above, s 4(1) of the Act requires that "give effect to", in relation to a provision of a contract, arrangement or understanding, "includes do an act or thing in pursuance of or in accordance with or enforce or purport to enforce". Necessarily, then, the relevant inquiry is about what may be done under the contract, arrangement or understanding, not how it is drafted. That is, the inquiry must focus upon the content of the stipulations which the parties have made or agreed. Thus, upon analysis, the one verbal composite may contain stipulations each of which is a "provision" in the statutory sense, and with different statutory characteristics. Do the stipulations which cause a contravention of s 45(2) meet the criterion in s 45(6)?
In the present case, the admittedly dual significance of the non‑competition stipulations is important. The parties intended both to restrict NPP's freedom to supply services to others, and to restrict its freedom to acquire goods from them. Making a contract with non‑competition provisions to that effect would have constituted a contravention of s 45(2). But for the operation of s 47(10) the former provision would have contravened s 47(1). It would have been conduct of the kind described in s 47(4). The latter provision would not have contravened s 47.
It follows that s 45(6) was engaged in respect of the former but not the latter provision. The limited effect of s 45(6) in the present case was as follows. The making of the contract would not have constituted a contravention of s 45 by reason that the contract contained the former provision. However, the making of the contract would have constituted a contravention of s 45 for other reasons, specifically because it contained the latter provision, the giving effect to which would not have contravened s 47. In respect of the latter provision, the criterion for engaging the qualification in s 45(6) to the prohibition imposed by s 45(2) was not met. In those circumstances, s 45(6) provides to Visy Paper no answer to the case made against it by the ACCC.
The appeal should be dismissed with costs.
KIRBY J. This appeal concerns the proper interpretation and application of provisions of the Trade Practices Act 1974 (Cth) ("the TPA"). The point of construction in issue relates to the allocation of regulatory responsibilities to different sections of the Act that forbid anti-competitive arrangements. The point arises in a factual and commercial context in which potentially more than one of the statutory provisions is applicable.
The facts and the history of the proceedings are described in the reasons of Gleeson CJ, McHugh, Gummow and Hayne JJ ("the joint reasons")[19]. Also set out there are the relevant statutory provisions[20]. I will not repeat any of this detail. I agree that the appeal must be dismissed. However, I wish to add some observations of my own.
My observations relate to the preferable course to be followed in exercising the dual tasks of (1) characterising the contracts alleged to contain anti-competitive provisions, which were adopted by Visy Paper and attacked by the ACCC, and (2) identifying the statutory provisions potentially applicable to them. Those tasks should be carried out in a manner that enables the clarification of the intended operation of the proposed contracts in their commercial context and that is consistent with the scheme, contained in the TPA, for regulating anti-competitive practices. In my opinion, consideration of the categories of vertical and horizontal arrangements[21] assists in the performance of this task. Only when that task is carried out correctly is it possible to determine the controversy in issue: namely whether the qualification contained in s 45(6) of the TPA applies so as to take the proposed contracts out of the per se prohibition provided in s 45(2)(a)(i) of the TPA.

[21]

Characterising the parties' arrangements

A dual and composite relationship: In the present appeal, a number of unusual features of the commercial relationship between Visy Paper and NPP, the different markets in which they participated and the industry itself, posed difficulties for the task of characterising the arrangements for the purposes of applying ss 45 and 47 of the TPA to them.
One such difficulty concerned the commercial practice in the waste collection industry of obtaining used paper as an input in the process of production for recycled paper. Waste could be collected either in the form of acquiring goods (that is, waste purchased from customers) or providing services in the form of waste (or rubbish) removal services to customers at some or no charge. The form of obtaining waste used by a collector depended upon the quality and quantity of the waste generated[22]. It also depended upon the current export prices for waste product[23].
The fact that obtaining waste by collectors may be characterised as the supply of waste collection services, at least in some circumstances, is said to take on a particular significance in this appeal on the footing that it engaged s 47(4) of the TPA[24]. However, a number of observations should be made about that feature of the waste collection industry, particularly in the context of the relationship between Visy Paper and NPP.
First, whilst it is true that the collection of waste had a dual and composite character, it is also true that the underlying purpose of any activity to collect used paper was to obtain a resource for producing recycled paper by manufacturers such as Visy Paper. Secondly, NPP itself never provided rubbish collection services. While it did receive waste from rubbish collectors for a fee, this was not the major source of the waste paper that NPP obtained and on-sold to Visy Paper[25]. Thirdly, from the time that its processing and decontamination plant at Silverwater closed, NPP received no payment from any customer for the removal or acceptance of waste[26]. Fourthly, it was the attempt by NPP to purchase waste paper from the Local Government Recycling Co-operative Ltd and subsequently from other Visy Paper customers that prompted Visy Paper to renegotiate its relationship with NPP by reference to the non-competition provisions[27].
Nature of the parties' relationship: The second factual point of difficulty encountered in characterising the arrangements concerns the nature of the relationship between Visy Paper and NPP. To the extent that both Visy Paper and NPP, at least initially, participated in the waste collecting industry as waste collectors, they were competitors. However, NPP was also a supplier to Visy Paper, which was a manufacturer of recycled paper. While NPP did not produce recycled paper, it initially had a plant for sorting and processing waste, as did Visy Paper[28]. Even after NPP shut down its processing facility, both Visy Paper and NPP continued to participate in the business of collecting waste as competitors. At the same time, Visy Paper had an existing contract for the purchase of waste paper products from NPP[29]. Accordingly, Visy Paper and NPP were in a vertical (supplier-purchaser) relationship, which they were negotiating to continue. It was in that context that the contracts, subsequently attacked in the Federal Court by the ACCC, were proposed by Visy Paper.
The applicable characterisation: The legal question that emerges from these arrangements relates to the proper characterisation of the anti-competitive clauses and the role they played, or were intended to play, in structuring the Visy Paper-NPP relationship and the proposed arrangements. That question may be answered by reference to the concepts of vertical and horizontal arrangements. Did the proposed contracts (all of which included a non-competition clause) attempt to put in place an exclusive dealing arrangement as an aspect of the vertical (supplier-purchaser) relationship? Or were the proposed contracts to be characterised as forming a horizontal arrangement (as between competitors), containing an exclusionary provision to lessen the competition between them? To the extent that the proposed contracts could fall within both the vertical and horizontal arrangement categories, did s 45(6) of the TPA operate to absolve Visy Paper of any violation of s 45?
At this point, the concessions made by the ACCC need to be considered. Given the ACCC's concessions about the purpose and effect of the arrangements, if no violation of s 45(2)(a)(i) occurred, the making of the proposed contracts would not constitute a violation of the TPA.

[25]

An apparent incongruity: The argument of the ACCC provides one answer to Visy Paper's invocation of s 45(6) of the TPA in this appeal as a defence to its alleged violation of the TPA. However, in certain respects, that answer is curious. It implies that, because the non-competition clauses only contained a restriction upon the supply of waste removal services by NPP to Visy Paper's customers, they might be treated as falling outside s 45. The reasons for such a differential consequence are not immediately apparent[34]. Both restrictions have a similar purpose and effect. Each aims to remove competition between Visy Paper and NPP. The "victims" of either restriction would be customers of Visy Paper which might, for whatever reason, decide either to sell waste products to NPP rather than to Visy Paper, or to engage NPP, rather than Visy Paper, for waste removal services.
Before this Court the parties did not elaborate two issues that could have been relevant to the resolution of the questions presented for decision and to the apparent incongruity just mentioned. The first concerns the legislative policy that informs the statutory definition of "exclusive dealing" within s 47(4) of the TPA as the acquisition of goods and services on condition only that the seller "will not supply goods or services" to a particular person or class of persons[35]. As Hill and North JJ[36] pointed out in the Full Court, the Swanson Committee, reviewing the TPA[37], recommended that the definition of exclusive dealing in s 47 of the TPA should include the acquisition of goods and services on the condition that the seller will not acquire goods and services from, or supply goods and services to, particular persons or classes of persons. Given the final form in which s 47(4) was enacted, that recommendation was clearly not accepted in its entirety.
The second, related issue is whether, in order to establish the practice of "exclusive dealing" as that practice is defined in s 47(4) of the TPA (and by analogy the other sub-sections in s 47), there is any necessary nexus between the "goods or services" acquired by the purchaser and the "goods or services" that the seller is restricted from supplying to particular persons or classes of persons. It is here that the concepts of vertical and horizontal arrangements are of assistance. Is the reference to a restriction on the supply of goods and services by the seller at large? Or is it necessarily related to the "goods or services" acquired by the purchaser[38] and therefore an aspect of their vertical (supplier-purchaser) relationship? To answer these and the other questions, it is helpful to determine whether the restrictions contained in the anti-competitive clauses in the contracts proposed by Visy Paper are more an aspect of the horizontal than the vertical relationship between Visy Paper and NPP. This requires close analysis of the statutory provisions in the context of the legislative scheme contained in Pt IV of the TPA.

[26]

Anti-competitive arrangements and the TPA

United States analogue: Part IV of the TPA appears under the heading "Restrictive Trade Practices". It contains a detailed scheme for the regulation of anti-competitive practices. Specific provisions in Pt IV prohibit joint[39] and unilateral[40] conduct on the part of corporations, where such conduct would tend to impede the competitive process.
The approach adopted by the Parliament in Pt IV of the TPA may be contrasted with s1 of the Sherman Act[41], which prohibits any "contract, combination … or conspiracy, in restraint of trade or commerce". The application of s1 is not confined to parties to a contract, combination or conspiracy who are in competition. It therefore includes arrangements between parties at the same level in the supply chain which are competitive in the same market (horizontal arrangements), as well as agreements between parties at different levels in the supply chain (vertical arrangements). Partly as a consequence of the broad language of s1, the development of antitrust doctrine in the United States of America has been largely left to the courts. Over time, those courts have relied upon screening mechanisms to assist in the identification of the types of arrangement that were inimical to the competitive process and that should therefore be subjected to the prohibitions contained in the Sherman Act. Such mechanisms became necessary because of the breadth of the prohibition appearing on the face of the statute.
The TPA was enacted in Australia many decades after its United States counterparts. In its original form, s 45(2) prohibited arrangements "in restraint of trade and commerce"[42]. It appears that Pt IV, both in its original terms and as subsequently amended, borrowed from the United States experience of applying the Sherman Act to particular commercial arrangements. For example, those types of arrangement identified as inherently damaging to the competitive process were subjected to prohibition without further inquiry[43]. This category of prohibition corresponded to the per se rule of illegality developed in United States jurisprudence[44]. In contrast, other types of restrictive arrangements were subjected by the TPA to less rigorous restriction, out of recognition that such arrangements could have legitimate justifications or were otherwise favourable to competition. Such arrangements were prohibited only if they had the purpose or effect of "substantially lessening competition"[45]. This latter inquiry calls for consideration of the design of the arrangement, as well as its effects or likely effects on competition and the competitive process in the relevant market, reflecting the "rule of reason", developed in United States antitrust jurisprudence[46].
Overlapping provisions: The detailed scheme of regulation of restraints on trade appearing in the TPA has the consequence that a variety of arrangements, occurring in different commercial contexts, must be tested against the criteria in the several sections of that Act. It follows that an arrangement may fall within the scope of more than one section of the TPA. The question of which section applies to an arrangement may be determinative of whether or not the arrangement constitutes a violation of the TPA, as different sections impose different legal consequences. That there would exist such overlap was recognised by the Parliament in enacting the TPA: for example, s 45(6) has the purpose of ensuring the proper allocation of regulatory responsibilities for a given arrangement that may fall within the scope of ss 45 and 47 of the TPA.
In applying s 45(6) to particular factual circumstances, a court must give effect to its language. However, it should be recognised that the different sections in Pt IV of the TPA are not intended to work in a mechanical or artificial way. The scheme adopted in Pt IV therefore should be interpreted and applied in a manner that allows the provisions to work together so as to give effect to the identified legislative policies[47]. More than once in recent cases[48] I have had occasion to insist upon the application to the TPA of the purposive approach to legislative construction. That approach has now been generally adopted as the usual approach of this Court to problems of statutory construction[49].
Adopting a contextual approach: The problem presented by this appeal should not, therefore, be resolved by consideration of the words of s 45(6), read in isolation from the two sections in issue or separate from the rest of Pt IV. Nor should attention be confined to semantics or a search for a judicial paraphrase for the statutory language[50]. Rather, it is necessary to take a contextual approach, by identifying the legislative policy behind the applicable sections (s 45(2)(a)(i) when read with s 4D, as well as s 47 of the TPA), in an attempt to ascertain the role that the sections play in the overall scheme of regulating arrangements that restrict competition in the particular market. Such an approach requires consideration of the statutory context in which the terms, "exclusionary provisions" and "exclusive dealing", are found. The concepts of horizontal and vertical arrangements are useful in locating the respective fields intended to be covered by the terms "exclusionary provision" and "exclusive dealing".

[27]

The TPA: "exclusionary provisions" and "exclusive dealing"

Two legislative constructs: "Exclusionary provision" and "exclusive dealing", as these terms are defined and used in the TPA, are legislative constructs. They do not have any particular or technical meaning, nor do they correspond to any specific type of anti-competitive conduct. Yet the Parliament has attached different consequences to arrangements according to the type of provision they contain, thereby pronouncing a stronger legislative condemnation of certain kinds of restrictive arrangements. The characteristics of those arrangements and the reasons they are subject to that stronger condemnation shed light on when and how the relevant provisions of Pt IV should be applied. To steer the mind safely through the relevant words of the TPA (which constitute a less than perfect example of the drafter's art), regard must be had to the reasons for the enactment of the statutory provisions; their potential intersection; and the intended field for their operation within the statutory scheme.
Exclusionary provisions: The TPA gives effect to special vigilance about certain types of arrangements among competitors. For example, s 45A(1) of the TPA prohibits any arrangement among parties "in competition with each other" containing a provision for the "fixing, controlling or maintaining … the price for, or a discount, allowance, rebate or credit" by deeming such an arrangement of itself to have the purpose or effect of "substantially lessening competition"[51]. Similarly, agreements among competitive parties containing an "exclusionary provision" are subject to an outright prohibition in s 45(2)(a)(i) of the TPA. The definition of "exclusionary provisions" in s 4D(1)(a) confines attention to arrangements between persons "any 2 or more of whom are competitive with each other". Such arrangements restrict output in the relevant market with effects substantially equivalent to the elimination of price competition. Experience (and economic theory) suggests that such horizontal arrangements are inherently harmful to the competitive process. They are "socially inefficient"[52] and without legitimate justification.
Exclusive dealing: Section 47 of the TPA defines and regulates the practice of "exclusive dealing". Unlike s 4D, s 47 does not restrict attention to arrangements where the parties are competitive with each other. Thus, the focus of the section is not upon horizontal arrangements among competitors, but on vertical non-price restrictions[53] between parties that are at different levels in the supply chain, in a supplier-purchaser relationship. Importantly, exclusive dealing is prohibited only to the extent that it has the purpose or effect of substantially lessening competition[54].
Before an arrangement will be found to violate the TPA on the basis of "exclusive dealing", it is necessary to consider the purpose and likely effect on the level of competition in the market of the arrangement (and, in particular, the restrictions it imposes on some or all of the parties). That such an inquiry is required reflects legislative recognition that vertical non-price restraints are not necessarily anti-competitive. Nor do they necessarily have an exclusionary purpose and effect. Whether or not a likely adverse effect on competition would result from such arrangements depends upon a number of factors. These include the reason for, and nature of, the restriction imposed; the state of competition in the upstream and downstream markets; the duration of the arrangement between the parties; the relative size of the parties; and the degree to which the arrangement forecloses access to the market for other traders[55]. In circumstances where the level of competition is not under threat, such vertical restraints may have legitimate justifications. In a particular case they may even enhance competition.
A horizontal or vertical arrangement? The common element in the definition of an "exclusionary provision" in s 4D of the TPA and some of the types of "exclusive dealing" identified in s 47, is the restriction on the supply of goods and services to (or the acquisition of goods and services from) a person or a particular class of persons. The key difference between the sections is that s 4D of the TPA is aimed at arrangements between parties "competitive with each other". In contrast, s 47 focuses on supply-acquisition relationships. Therefore, not every arrangement that falls within the "exclusive dealing" definition in s 47 will also fall within the scope of s 4D.
In that statutory context, s 45(6) of the TPA performs one of two functions. First, it ensures that a vertical "exclusive dealing" arrangement is governed by s 47, given the broad definition of parties that are "competitive" for the purposes of s 4D. Secondly, where competitors in a market come into a supplier-purchaser relationship, any non-price restrictions that are an aspect of their vertical relationship (and that can fall within the definition of "exclusive dealing") are to be governed by s 47. Section 45(6) of the TPA is clearly not intended to remove from the per se prohibition in s 45(2)(a)(i), exclusionary restraints which are an aspect of the horizontal relationship between competitors, and which are designed to restrict supply or eliminate price competition. A provision in an arrangement that envisages the supply of goods or services from one of the parties to the other will not of itself attract the operation of s 45(6) so as to preclude the application of s 45(2)(a)(i).
Characterisation of the arrangements between Visy Paper and NPP as either horizontal or vertical enables an evaluation of whether the restrictive provisions in the contracts proposed by Visy Paper are protected by the operation of s 45(6). Only then is it possible to conclude whether the restrictive provisions are "exclusionary provisions" within s 4D. On my analysis, the making of an arrangement does not constitute a violation of s 45 by reason of a restrictive provision being characterised as an element of a vertical "exclusive dealing" arrangement between the parties. However, the provision will be prohibited by s 45(2)(a)(i), regardless of the actual effect of the provision on competition in the market, if it restricts the supply of goods or services to the customers or potential customers of the parties. This is because such a restriction would become an aspect of the parties' horizontal relationship as competitors and thereby restrain competition between them.

[28]

Given the character of the commercial relationship between Visy Paper and NPP, it is impossible to avoid the conclusion that the non-competition clauses in the contracts proposed by Visy Paper, which restrained NPP from acquiring waste paper products from or providing waste removal services to Visy Paper's existing or potential customers, were primarily referable to the horizontal relationship between those two corporations as competitors, rather than to their vertical supplier-purchaser relationship.
As part of the vertical relationship, Visy Paper could impose certain valid restraints on NPP's conduct that would also protect any investment in NPP's operations funded by Visy Paper[56]. For instance, Visy Paper could prevent NPP from supplying waste paper products to Visy Paper's manufacturing competitors, within s 47(4). The original 1995 contract provided for such a relationship[57]. Similarly, the draft supply agreements proposed by Visy Paper provided that NPP would sell exclusively to Visy Paper the whole of its stocks of certain categories of waste paper[58]. This would have imposed a restriction on NPP not to supply waste paper products to any of Visy Paper's competitors in the paper recycling industry that might also have been interested in purchasing such products. That restriction would not violate the TPA, to the extent that it did not have the purpose or effect of "substantially lessening competition"[59].
As part of the vertical relationship, Visy Paper could lawfully negotiate the price at which it would purchase waste paper products sold by NPP. Through negotiating the purchase price, Visy Paper was able to restrain the degree to which NPP could compete with Visy Paper for customers in the waste collection market. However, to the extent that Visy Paper remained in the waste collection market, and therefore remained competitive with NPP in that market, it could not lawfully negotiate restrictions about the price at which they would acquire waste products or the price at which they would supply waste removal services to customers. Nor could it lawfully restrict the customers from which NPP could obtain waste in either form. All such restrictions or attempted restrictions were a feature of the horizontal relationship between Visy Paper and NPP as competitors. They were therefore governed by s 45(2)(a)(i) of the TPA read with s 4D.
Competitors in a market cannot, by also engaging in a concurrent supply relationship, guard against the operation of a per se prohibition on certain types of arrangements deemed inherently inimical to the competitive process. By the operation of s 45(6) of the TPA, a contract may provide for the establishment of a vertical relationship of supply and acquisition subject to non-price restraints (that is, make provision for exclusive dealing) without constituting a violation of s 45 of the TPA. However, in the present appeal, the restrictive provisions created an exclusionary restraint on the competitive conduct of two parties which were, and continue to be, in competition with each other in the relevant market. Therefore, s 45(6) of the TPA was not engaged. The per se prohibition in s 45(2)(a)(i) of the TPA thus applied to the arrangement.

[29]

The language of the provisions of the TPA applicable to this case is obscure. Indeed, it represents a significant challenge for interpretation. It is in need of redrafting by reference to concepts and purposes. It requires the negotiation of too many cross-references, qualifications and statutory interrelationships. This imposes an unreasonable burden on the corporations and their officers subject to the TPA, the ACCC enforcing the Act and courts with the responsibility of assigning meaning to, and applying, its provisions.
It is in the context of such legislative opacity and unwieldiness that it is essential, in my view, to adopt a construction of the TPA that achieves the apparent purposes of that Act by furthering the objectives of Australian competition law. Keeping such purposes in mind helps to shine the light essential to finding one's way through the maze created by the statutory language. Even then, there is a substantial danger of losing one's way in the encircling gloom.
The approach to the construction of s 45(6) of the TPA that I favour is consistent with the language of the Act. It has the benefit of treating in a substantially similar way restrictive provisions that have the same purpose and effect. It also promotes the apparent legislative policies of according greater vigilance towards, and scrutiny of, horizontal arrangements among competitors, which are aimed at restricting output and competitive conduct in a market. When competitive parties enter into a supply and purchase agreement, subject to a restrictive provision that can be characterised as establishing an "exclusive dealing" arrangement within s 47, the making of such an agreement will not constitute a violation of s 45 by reason of such restrictive provision alone.
However, in this appeal, the contracts proposed by Visy Paper, apart from an exclusive supply relationship, also sought to impose non-competition arrangements that were primarily referable to the competitive relationship between Visy Paper and NPP in the waste collection market in which Visy Paper continued to participate. As such, those provisions were subject to the per se prohibition provided in s 45(2)(a)(i) of the TPA. The Full Court was correct to so conclude.

[30]

The joint reasons in this Court express disagreement with the approach that I favour[60]. I agree that it would be a mistake to import uncritically into the TPA extra-statutory concepts. Doing that could, in some circumstances, distract attention from the task of interpreting the provisions of the TPA[61]. I said as much in my reasons in Boral Besser Masonry Ltd v Australian Competition and Consumer Commission[62]. The identical point was made once again in News Ltd v South Sydney District Rugby League Football Club Ltd[63]. This Court there warned against the use of the concept of a "boycott" to limit the scope of an "exclusionary provision" as defined in s 4D of the TPA. It would be especially inappropriate to introduce extra-statutory concepts that amounted to nothing but empty labels that neither aid the process of reasoning nor illuminate the interpretation of the TPA.
Statutory construction is a text-based activity. But where the wording or structure of the statutory provisions is neither clear nor elegant, the duty of a court, and particularly of this Court, is to attempt to understand and explain the policy of the statute as it applies to the problem in hand[64]. Doing so helps in the task of statutory interpretation. It is not impermissible. It is essential.
Reliance upon the writings of legal scholarship[65], other disciplines (such as economic science in the context of the TPA[66]), the law of other countries, or international law, represents an intellectual contribution to judicial reasoning and judgment. It is not normative. Nor is it prescriptive. But such learning can help a court better to understand the nature of the problem presented for its decision[67].
For example, in Boral, members of this Court were of the opinion that the concept of "recoupment", as developed in antitrust decisions and literature in the very different statutory context of the United States, could be used to shed light on the circumstances in which, in this country, a corporation "take[s] advantage" of a substantial degree of market power for the purposes of s 46 of the TPA[68]. In Boral, the joint reasons of Gaudron, Gummow and Hayne JJ[69] even made reference to "horizontal price-fixing arrangements". Knowledgeable readers of Boral would have understood what their Honours were getting at by their use of that expression. Such readers would not have mistaken that reference to horizontal arrangements for jargon or slogans. I am willing to assume that readers of my reasons in this case would bring the same appreciation to my use of the same adjective.
In the present appeal, it is the TPA itself that makes a distinction between arrangements amongst parties that are competitive with each other (horizontal)[70], and arrangements among parties in a supplier-acquirer relationship (vertical)[71]. Thus, in the context of the TPA, the words vertical and horizontal are not jargon. Nor are they foreign or otherwise suspect. They are useful shorthand descriptions of concepts firmly rooted in the text of the Australian Act. It is that Act, the TPA, which imposes an outright prohibition on some contracts or arrangements, while treating others in accordance with a more flexible standard.
This Court should not shut its eyes to the intended operation and effects in the marketplace of the proposed arrangements, impugned by the ACCC. Nor should the Court run away from the complexity of the interpretive task involved. In a statutory context such as the present, where certainty is of great importance, and the potential consequences of breach significant, we should provide reasons that give guidance to those in the marketplace, as well as the ACCC, about the circumstances in which such arrangements will run afoul of the TPA. With every respect, this is the difficulty that I had with the joint reasons in this case. It was a difficulty that led me to attempt, in this concurrent opinion, to express a criterion for the operation of the TPA which I did not find in the joint reasons. Out of politeness, I would not have said this but for the criticism addressed to my endeavour, to which I adhere.

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