'Why can't a woman be more like a man?': American and Australian approaches to exclusionary conduct

Melbourne University Law Review, Dec, 2007 by George A. Hay, Rhonda L. Smith

IV SECTION 46 OF THE TRADE PRACTICES ACT 1974 (CTH)

The life of s 46 of the TPA is short by comparison to that of [section] 2 of the Sherman Act and, until recently, there were comparatively few s 46 decisions from the courts. However, in the period since 1998, not only has there been a number of TPA s 46 cases but most have been appealed to the Full Federal Court and a significant number have then proceeded to the High Court. Thus, in a relatively short period, a distinctive Australian jurisprudence has begun to emerge. To see these developments it may be appropriate to consider the cases chronologically, but for consistency they are examined under the same headings as the Sherman Act [section] 2 cases discussed in Part III above.

To set the scene for what follows, some general observations are made concerning the differences of approach under TPA s 46 compared with [section] 2 of the Sherman Act when determining whether a firm's conduct has crossed the line from aggressive but fair competition to anti-competitive conduct. These differences are partly due to differences between the statutes--s 46 of the TPA is more prescriptive than [section] 2 of the Sherman Act. As a threshold issue, s 46(1) of the TPA requires that a firm must possess substantial market power before its conduct can violate that section. Next, there must be a nexus or causal relationship between the firm's market power and the alleged conduct and, finally, the firm's purpose for the alleged conduct must be at least one of three anti-competitive purposes specified in the section, namely:

1 eliminating or substantially damaging a competitor; (95)

2 preventing entry of a competitor into a market; (96) and/or

3 deterring or preventing competitive conduct in a market. (97)

As recently confirmed by the High Court, each of these issues must be established sequentially. (98)

Queensland Wire Industries Pty Ltd v The Broken Hill Pry Co Ltd ('Queensland Wire') (99) was the first trade practices case to be heard on appeal by the High Court and it laid the foundations for the interpretation and analysis of the three elements to be considered in TPA s 46 cases. The Broken Hill Proprietary Company Limited ('BHP') produced Y-bar, a steel product commonly used in the manufacture of star picket fencing posts, and marketed a bundled product consisting of star pickets and fencing wire. (100) Queensland Wire Industries Proprietary Limited ('QWI') requested supply of Y-bar from Australian Wire Industries Proprietary Limited ('AWI'), a BHP subsidiary, in order to make its own star pickets. (101) Although supply was not refused, the price was commercially unrealistic--an effective refusal to deal. (102) As a consequence, QWI claimed that AWI and BHP had breached s 46 of the TPA. (103) The High Court took the opportunity to explain the relevant meaning of competition and market power, but of particular significance in the present context is its approach to '[m]isuse of market power'. (104) First, it was made clear that the term had no moral overtones, it simply meant use. (105) Secondly, the Court identified the requirement for a causal link to be established between market power and the alleged conduct. (106) This was to be done by assessing whether in an otherwise competitive market the firm would have been likely to engage in the conduct, such as a refusal to deal ('competition test'). (107) At trial, Pincus J commented that s 46 of the TPA 'does not make it unlawful simply to have a monopoly, although a characteristic of a monopoly may well be to keep consumer prices up.' (108) Although the High Court ultimately found that AWI and BHP had contravened s 46 of the TPA, (109) this view has been reaffirmed on various occasions. Indeed, the statement by the High Court that competition was ruthless and that competitors were likely to be injured, was expanded in Boral with the statement that '[a] rational business firm seeks to maximise profit and to increase its share of the market.' (110) The import of this seems to be that a finding of 'tak[ing] advantage' of 'a substantial degree of power in a market' requires more than a firm with market power maximising its profits. (111)