The High Court has delivered its second competition law judgment this year (the first was Flight Centre), this time providing some important clarification to the meaning of ‘market in Australia’.  The case revolved around allegations of price fixing in relation to air cargo and was decided by reference to Australia’s (now repealed) price fixing provision (replaced by new cartel laws in 2009).  Despite the fact that the new cartel laws do not require that the market be ‘in Australia’, with the result that the decision is now less relevant for cartel conduct, market definition remains a key element of many of the competition law provisions of the Act (importantly, section 4E of the Act defines market as a ‘market in Australia …’).

Background

The case involved two (of many) proceedings against international airlines alleging price fixing and other anti-competitive activity in relation to surcharges involving international air cargo.  Most airlines settled with the ACCC; however, Air New Zealand and PT Garuda Indonesia challenged the claims, arguing (among other things) that the conduct did not take place in a market ‘in Australia’, as was then required by the Act for price-fixing conduct.

The Federal Court

At first instance Justice Perram found for the airlines, despite finding there was collusion in relation to surcharge pricing.  His Honour concluded that there was no ‘market in Australia’ for the relevant services (with the result that there was no contravention); the place where the choice of airline was made (the ‘switching decision’) was, his Honour concluded, the key indicator of the market location. As these switching decisions did not occur in Australia (they were held to have occurred in Hong Kong, Singapore and Indonesia) there was no market in Australia.

The full Federal Court, by majority (Justices Dowsett and Edelman; Justice Yates dissenting), upheld an appeal by the ACCC.  Importantly, their Honours found that the conduct did take place in a ‘market in Australia’; part of the service was provided in Australia and it did not matter, their Honours found, that the market also extended to other jurisdictions.

The High Court

The airlines appealed to the High Court and the matters were heard together.  The relevant issue was whether there was a ‘market in Australia’. The Court unanimously concluded that there was. The High Court’s judgment summary states that:

The plurality [comprising Chief Justice Kiefel and Justices Bell and Keane; Justices Nettle and Gordon each produced separate opinions] held that a market, within the meaning of the [Act], was a notional facility which accommodated rivalrous behaviour involving sellers and buyers, and that it was the substitutability of services as the driver of the rivalry between competitors to which s 4E looked to identify a market, rather than the circumstances of the act of substitution or the “switching decision” itself. In this case, the primary judge’s findings established that Australia was not merely the “end of the line” for the air cargo services but was also a vital source of demand for those services from customers, namely, large shippers who were regarded as important to the profitability of the airlines’ businesses. As a practical matter of business, the airlines’ rivalrous pursuit of Australian customers, in the course of which the matching of supply with demand occurred, was in a market which included Australia; that was so even if the market might also have been said to include Singapore, Hong Kong or Indonesia’

The Court’s key focus for purposes of geographic market definition was, therefore, where rivalry in relation to the services took place; it was not limited to place of the ‘switching decision’, nor was it dependent on the fact that a portion of the service was delivered in Australia.

The High Court’s decision provides some useful clarification on the meaning of ‘market in Australia’ for purposes of the Act. Importantly, the fact that conduct occurs outside Australia will not prevent there being a ‘market in Australia’ for purposes of the Act if, in practice, rivalry in relation to the goods or services takes place (at least in part) in Australia.

For more detail on the High Court’s reasons and relevant extracts see my case page.

Further reading

• High Court case page
• Elizabeth Avery and Matthew Barry, ‘The long arm of Australian competition law: High Court unanimously dismisses Air Cargo appeals, holding airlines competed in a market in Australia’ (Gilbert+Tobin Insights, 22 June 2017)
• Johanna Croser & Dougal Ross, ‘Final destination: High Court decides market ‘in Australia’ for the Air Cargo Cartel’ (Johnson Winter & Slattery, 26 June 2017)
• Avryl Lattin and James M Cooper, ‘End of the line: the air cargo cartel litigation comes to a close in Australia’