Trade Practices Commission v Australia Meat Holdings Pty Ltd
(1988) 83 ALR 299;  FCA 244
(15 July 1988)
This case involved a prosed merger between abattoirs. A key issue became whether the market that included the particular AMH abattoirs involved in the case was confined to northern Queensland or whether it encompassed the entire state.
Note: this case was decided when the merger test in s 50 of the Act was a market dominance rather than a competition test - at the time it was (relevantly) formulated as follows:
50(1) A corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate if-
(a) as a result of the acquisition, the corporation would be, or be likely to be, in a position to dominate a market for goods or services; or
(b) in a case where the corporation is in a position to dominate a market for goods or services
(i) the body corporate or another body corporate that is related to that body corporate is, or is likely to be, a competitor of the corporation or of a body corporate that is related to the corporation; and
(ii) the acquisition would, or would be likely to, substantially strengthen the power of the corporation to dominate that market.
(a) a body corporate that is related to or associated with a corporation is, or two or more bodies corporate each of which is related to or associated with the one corporation together are, in a position to dominate a market for goods or services; or
(b) a corporation, and a body corporate that is, or two or more bodies corporate each of which is, related to or associated with that corporation, together are in a position to dominate a market for goods or services,
the corporation shall be deemed for the purposes of this section to be in a position to dominate that market.
(3) In this section
(a) a reference to a market for goods or services shall be construed as a reference to a substantial market for goods or services in Australia in a State or Territory; and
(b) a reference to dominating a market for goods or services shall be construed as a reference to dominating such a market either as a supplier or as an acquirer of goods or services in that market."
ABH (first respondent) was an abattoir operator in Queensland. In January 1988 it acquired all issued shares in Thomas Borthwick & Sons (Australasia) Ltd. Thomas Borthwick owned abattoirs at Bowen and Mackay. The TPC argued the acquisition would result in AMH being in a position to dominate the market for slaughter cattle in northern Queensland or, alternatively, that it would be in a position to dominate the market for slaughter cattle in northern and central Queensland or, alternatively, that it would be likely to substantially strengthen the existing power of AMH to dominate either of those markets . The TPC sought an order for divestiture of the Thomas Borthwick share or a declaration that the acquisition was void. (para 2 FCA; page 302 ALR)
Held (Justice Wilcox)
- The product market was defined as 'fat cattle market' which excluded store cattle but included cattle purchased for feed lots. [para 60; page 320]
- The geographic market was confined to the northern region Queensland. Although cattle could be carried fairly easily to southern Queensland, industry evidence indicated that cattle producers did not like to truck cattle far away (for various reasons, including transportation cost and damage - bruising and weight loss - to cattle during transportation). (para 119; page 336)
- Dominant position: Justice Wilcox held that s 50(1)(a) had been contravened; in particular, as a result of the acquisition AMH was 'in a position to dominate the northern Queensland fat cattle market' (para 187; page 353)
- The Court had jurisdiction to declare the transaction void under s 81(1A); in particular, Borthwick (a UK company) engaged in conduct, within Australia, which involved being 'knowingly concerned' in the acquisition by AMH
- Despite having jurisdiction to declare the transaction void the Court should not exercise its discretion to do so in this case
- Although divestiture under s 81 could be ordered, in this case it would be more appropriate to allow AMH to offer an appropriate undertaking to the Court.
Justice Wilcox provided a detailed overview of the Queensland cattle industry (pp 304-306; para's 3-10), the formation of AMH (pp 306-308; para's 11-18), the negotiations for sale (pp 308-312; para's 19-32) and the completion of the transaction (pp 312-314; para's 33-36). His Honour then set out the course of the litigation (from para 37; page 214). His Honour observed that the time for the trial was extended by the vast amount of evidence adduced on the issue of market definition and noted [page 316; para's 43-44]:
 I am sure that the parties intended this material to be helpful to the Court and I salute the industry of the many people involved in its collection and analysis. However, although none of the evidence is irrelevant, much of it has proved to be of little assistance. It is for me a matter of concern that the curial determination of the limits of a market - about which question I assume commercial people frequently make almost intuitive judgments - should be seen as requiring the time, effort and expense involved in this case. My concern is intensified by the circumstance that, almost by definition, proceedings to prevent a breach of s.50, or to reverse the effects of an antecedent breach, will always involve a measure of urgency. I suppose that the very flexibility of the concepts of market and of dominance necessarily casts a wide evidentiary net; but, in this type of litigation, there is a particular need for rigorous consideration of the probative value of potential items of evidence.
 In particular I deprecate the course, taken by AMH, of supplying to economists proofs of the evidence to be given by other witnesses and then eliciting from those economists opinions as to the proper conclusion upon the definition of the market. Economists are able to assist the Court in relation to economic principles. But, once the relevant principles are expounded, their application to the facts of the case is a matter for the Court. The proper definition of a market is entirely a matter of fact, the determination of which ought not to be made more protracted and expensive by the adduction of unnecessary expert evidence.
After setting this scene his Honour discussed legal concepts surrounding market definition (from para 46; page 317). He referred to his previous judgment in Mark Lyons discussing this concept and to the seminal decision of the Tribunal in Re Queensland Co-operative Milling Association Limited (1976) 25 FLR 169 (QCMA). While noting that in Mark Lyons and QCMA and most other cases considering this issue the 'alleged market was one in which the relevant company acted as vendor', in this case it is the 'obverse situation' - the market alleged involves AMH acting as purchaser (see para 46; page 316). Nevertheless, his Honour considered the QCMA guidance was still relevant:
[page 316-317; para 46 - quoting QCMA]
"A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them. (If there is no close competition there is of course a monopolistic market.) Within the bounds of a market there is substitution -- substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm's product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance and cost and price incentives.
It is the possibilities of such substitution which set the limits upon a firm's ability to 'give less and charge more'. Accordingly, in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were to 'give less and charge more' would there be, to put the matter colloquially, much of a reaction? And if so, from whom? In the language of economics the question is this: From which products and which activities could we expect a relatively high demand or supply response to price change, i.e. a relatively high cross-elasticity of demand or cross-elasticity of supply?"
His Honour also adopted the submission by counsel for AMH that:
[page 317; para 47] A market is the field of activity in which buyers and sellers interact, and the identification of market boundaries requires consideration of both the demand and supply side. The ideal definition of a market must take into account substitution possibilities in both consumption and production. The existence of price differentials between different products, reflecting differences in quality or other characteristics of the products, does not by itself place the products in different markets. The test of whether or not there are different markets is based on what happens (or would happen) on either the demand or the supply side in response to a change in relative price. [emphasis added]
There was a dispute as to the product market.
[para 49; page 317] The applicant contends that the product market consists of cattle turned off for immediate slaughter and that it does not include either store cattle or feed lot cattle. AMH, by contrast, submits that there is but a single product -- beef cattle -- which includes all three categories.
After discussing evidence of industry practice his Honour noted:
[para 54; page 319] It is common ground between the parties, and their expert witnesses, that the existence of marginal overlapping and substitutability does not in itself negative the existence of separate markets. A question of degree is involved in determining at what point the substitutability of one product for another means that the two products should be regarded as being with the same market. None of the expert witnesses offered any opinion upon that matter. A judgment must be made upon the basis of the whole of the relevant evidence, and considering that question from the point of view of both vendors and purchasers.
His Honour then observed that in 'one sense there is almost complete substitutability by vendors of stores for fat cattle' (para 55; page 319) but tat 'under certain circumstances, purchasers may substitute as between store cattle and fat cattle' (para 56; page 319).
[para 57] The evidence establishes that, in the present context, store cattle and fat cattle are separate products offered in separate markets; and this notwithstanding that, on the margin, purchasers will sometimes buy one product in substitution for the other.
On the other hand, his Honour was:
[para 59; page 320] ... not persuaded that feed lot cattle ought to be regarded as being within a different product market to fat cattle. There is no evidence of any practice, within the industry, of holding "feed lot sales" in the same way as producers and their agents hold store sales and fat cattle sales. Whereas, both in publications and in the evidence, there are frequent references to stores and fat cattle as being separate products, there is no such recognition of feed lot cattle. In contrast to the store market, but like the fat cattle market, usually the purchasers of feed lot cattle are slaughterers. And feed lot cattle are cattle very nearly ready for slaughter. There must be a high degree of substitutability. I think that the correct conclusion is that the sale of feed lot cattle takes place within the same market as the sale of fat cattle.
[para 60; page 320] The relevant product market, for the purposes of this case, may then be defined as the fat cattle market, using that term to exclude store cattle but to include cattle purchased for feed lots. [emphasis added]
On this issue of geographic market his Honour first considered vendor attitudes (from para 61; page 320).
[para 61; page 320] There is no doubt that, as a general theoretical proposition, it is possible to transport fat cattle from any part of Queensland for slaughter in any other part. It does not, of course, follow that the whole of Queensland should be regarded as constituting, or being part of, a single market. That question depends upon whether or not, in practice as distinct from theory, the whole of Queensland is an area in which there is a single "field of rivalry" between those involved in the fat cattle market; between producers for sales and between abattoir operators for purchases.
His Honour then discussed the methods of sale of fat cattle - either by private treaty or auction - noting the 'largest producers sell almost exclusively by private treaty' (para 62; page 320). Three methods of private treaty purchases were then identified, with the majority of AMH purchases being 'weight and grade' or 'over the hooks' purchases (para 63; page 621). Evidence of a number of producers was then considered with the result that Justice Wilcox accepted that 'vendors of fat cattle are generally most unwilling to effect a sale at a location further from their own property than is absolutely necessary' (para 65; page 321) for a variety of reasons, including expense, loss of condition (or even loss of life of the cattle, particularly aged cattle), bruising, inability to inspect, management problems resulting from dealing at a distance and humanitarian concerns (reducing distressed suffered by cattle during transportation). His Honour summarised the attitude of producers with quotes from the evidence:
[para 73; page 323-324] Mr R J Schmidt, Managing Director of King Ranch Australia and a man with 35 years experience in the industry, said in his statement: "It is my considered opinion that northern based producers including King Ranch are effectively constrained to selling to north based purchasers and that there is in effect a discrete livestock selling market there". Mr Ian Barrett, who has been in the industry since 1956, said: "From my experience and knowledge of the local industry I can say that very few cattle are ever sent by local producers to saleyards or meatworks in southern Queensland. The only time I would consider selling cattle in southern Queensland would be in desperate times such as severe drought". Mr K H Power, a producer near Cloncurry, put the matter in this pithy manner: "I am a firm believer that to go past the first set of weighing scales is only foolhardiness as cattle lose weight, bruising increases and returns diminish".
His Honour considered it significant that there was no evidence 'as to the existence of any producer who habitually sells fat cattle at a location remote from the property from which they are turned-off.' [para 76; page 324]
His Honour then considered conduct of purchasers (from para 78; page 324), noting that several witnesses 'deposed to the fact that their [abattoir] companies normally made all their purchases in the local region.' (para 78; page 325). Although some witnesses called by AMH 'asserted the willingness of their employers to purchase cattle in northern Queensland whenever the prevailing prices so permitted' only 'a minor percentage of the cattle purchased by their respective employers came from central Queensland.' (para 78; page 78; page 325). His Honour went on to look at sales figures in some detail.
After referring to the numbers of cattle that are slaughtered in southern or central Queensland, his Honour noted:
'... although the cattle just mentioned are actually slaughtered in the southern or central region, the contract of sale of the cattle is made in the northern region. These cattle are not sent out of the northern region for sale elsewhere. If there is a separate northern market, it seems to be legitimate to regard it as including sales made within the northern region to people who come up from the south with the purpose of buying cattle to be taken away by them to another place.' (para 92; page 329)
[para 93; pages 329-330] Thirdly, and assuming contrary to the above that the cattle exported from the northern region should be regarded as being sold outside the region, it is common ground between the experts that the existence of some sales outside the limits of a hypothetical market does not necessarily negative the existence of a separate market. Everything must depend upon the extent of the exceptions. Mrs Smith was asked in cross-examination what she would regard "as being a significant movement of cattle from the north to the south sufficient to link the two divisions into one market. She replied: "somewhere upwards of 30 plus per cent". When asked to comment upon the figure of 20% she replied: "no, I think that is on the lower side". Mrs Smith did accept that 20% may be a sufficient movement if the product was the same in the two divisions, but she explained that this condition would require that something like 70-80% of the cattle in the south were the same as those in the north. The evidence, of course, shows that this condition is not satisfied. Although the range of types of beast produced in the north overlaps that of the south, an analysis of the use of the ultimate product, beef, would show significant regional differences in the proportions used for domestic consumption, export of prime cuts and manufacturing meat. So Mrs Smith's evidence should be interpreted as requiring a movement of something like 30% before it could be said that there was only one market.
[para 94; page 330] ...although it was accepted that some degree of movement may occur between separate markets, no witness for AMH was prepared to specify a relevant percentage or to deny that the degree of movement found in this market was consistent with the existence of two or more separate fat cattle markets in Queensland.
[para 96; page 330] This accords with such evidence as is available of people's perceptions of the position. In commenting upon the cattle population and slaughter statistics, Mrs Smith said that the northern region of Queensland "has traditionally been self-sufficient with the regional abattoirs killing those animals which are available for slaughter". ...
[para 97' pages 330-331] The matters just discussed tend towards the conclusion that there is a separate fat cattle market in northern Queensland; although perhaps not in central Queensland. But AMH puts two major arguments against such a finding: price correlation and the potential for southern abattoirs to buy more cattle in the north. [emphasis added]
His Honour noted (para 98; page 331):
There is a broad correlation between the price of fat cattle in Queensland and the export price for beef. Furthermore, as was conceded on behalf of the applicant, there is a general correlation between the prices of cattle in the various regions of Queensland, one factor in that correlation being the common response of the various regions to variations in export prices. Judging by those who gave evidence, Queensland cattle producers keep themselves well informed about prices obtaining in various parts of the State.
As a general rule, his Honour observed, cattle prices tend to be lower in northern Queensland than in the south (para 99; page 331) and that 'broadly speaking, cattle prices throughout Queensland move in the same direction' (para 102; page 332).
His Honour concluded on this point:
[para 103; page 332] I think that it is not accurate to say that prices of cattle are similar throughout Queensland, save for discounts reflecting the cost of transport. It is accurate to say that prices follow a similar trend ... this trend broadly follows the export beef price. But there are idiosyncratic differences suggestive of separate market forces. The fact that two series of prices respond in a similar way to a particular external stimulus does not necessarily mean that they are within the same market.
His Honour then considered the 'importance of potential in determining the existence of a common market', adopting the following quote by Professor Officer to illustrate the point [para 104; page 332]:
Two stores (A & B) are 5 kilometres apart on a road. The question is are they in competition? Most likely the stores will attract customers in their immediate area. In fact it is likely that upwards of 75 percent of customers are regular clients of one store or the other, it is the balance of customers who visit, alternatively, either store that link the stores in competition. Clearly, we do not require every customer to be clients of both stores for the stores to be in competition. In fact, suppose every potential customer of either store received regular bulletin of the stores' prices. The posted prices, indicating little or no difference between the stores, would induce the clients of store A to be those closest to store A relative to store B and similarly for B. In fact, we would not need, in these circumstances, any customers visiting both stores to link the stores in competition. It is the potential for customers to change their custom if prices are out of alignment that maintains competition. [my emphasis]
Professor Officer suggested that the knowledge by producers and abattoir operators of price levels throughout Queensland and 'the potential for both sellers and buyers to switch the point of sale meant that the whole of the State constituted, or was within, a single market.' (para 104; page 332)
His Honour concluded that the view of Prof Officer (for AMH) as to geographic limits of the market could not be 'accorded much weight', noting some errors with figures and locations of some buyers in his evidence (para's 115-116; page 335)
Conclusions on geographic market
His Honour concluded that:
[para 119; page 336] Questions of degree are involved which, in the end, require an exercise of judgment. However, I think that the movement figures, and distance barriers, are such that the northern region of Queensland must be regarded as constituting a separate fat cattle market. For the reasons I have indicated, I do not think that the evidence relating to price correlation or potential negatives that conclusion. [my emphasis]
His Honour then considered whether or not AMH was in contravention of s 50 with respect to the northern market.
[para 122; page 337] In Trade Practices Commission v Ansett Transport Industries (Operations) Pty Limited  FCA 21; (1978) 32 FLR 305, Northrop J considered the meaning of the word "dominate", as used in s.50 of the Act. At p.325 he said that the word "is to be construed in its ordinary sense of having a commanding influence on". In an article commenting upon this construction, "Control or Dominate a Market: Developments in Australian Merger Law", 24 Antitrust Bulletin 371, Dr G de Q Walker contrasted the ordinary meaning of "dominate" with its meaning in economics, where it is nearer to "control". At that time, of course, s.50 specified an alternative test "a position to control or dominate"; so there was good reason for treating "dominate" as referring to something different to, and short of, "control". Dr Walker observed that the ordinary content of the word "dominate" was closer to sociology than to economics and, adapting the sociological meaning, he postulated the following proposition: "An enterprise is in a position to dominate a market when there is a probability that the other enterprises in the market will act in a way calculated not to affect adversely the dominant concern's short-term interests". "In other words", said Dr Walker, "they will behave non-competitively, which is the state of affairs that Parliament was seeking to prevent"
[para 123; page 337] The approach taken by Dr Walker is consistent with that of Northrop J. It seems to me that it is correct and that Dr Walker's explanation of the term usefully emphasises the point that dominance, unlike control, is not primarily concerned with the formal relationship between entities but rather with their conduct towards each other within a particular market environment. If the size or strength of a particular entity is such that, in practice, other entities are unable or unwilling actively to compete with it in a particular market, that entity is dominant in that market.
[para 124; page 337] The word "control" was dropped from s.50(1) in 1986; but it seems to me that this does not affect the continued application of the construction placed upon the word "dominate" by Northrop J. 125. After discussing the economic theory of domination, in Ansett at p.328, Northrop J postulated five criteria appropriate for consideration by him in that case: "(1) the firms operating in the market and the degree of market concentration, ie market share; (2) the capacity of (the alleged dominator) to determine prices for its services without being consistently inhibited in its determination by other firms; (3) the height of barriers to entry, that is the ease with which new firms may enter and secure a viable share of the market; (4) the extent to which the products of the industry are characterized by extreme product differentiation and sales promotion; (5) the character of corporate relationships and the extent of corporate integration".
[para 126; page 338] In formulating this list, Northrop J did not purport to prescribe criteria of universal application. No doubt there will be cases in which other relevant considerations emerge ...
His Honour then went on to consider the principles identified by Justice Northrop in Ansett.
His Honour estimated AMH held share of around 64.17% of the 'total northern turn-off of fat cattle' (para 131; page 339)
Corporate relationships - capacity
His Honour noted, in this context, that there was ample capacity 'at the beginning and end of a season but, sometimes, an over-supply in the middle of the year' and that 'AMH owns two abattoirs ... which are currently closed' but would be 'available to be used at any stage of the season'. (para 169; pages 348-349)
Entry barriers and product differentiation
His Honour noted that he could deal with this matter briefly 'because the evidence is clear that no prudent person would open a new export abattoir in north Queensland at the present time. ... a deterrent to a new entrant is the fact that cattle numbers in north Queensland have been static for some years and that this position appears likely to continue' (para 173; page 349)
[para 175; page 350] Another major deterrent to a new entrant is the extent of surplus capacity in the north, especially the surplus capacity in the hands of AMH. ...'
In relation to product differentiation, Justice Wilcox noted that the product differentiation that did exist was 'between regions, not between abattoirs' (para 176; page 350).
Wilcox J concluded:
[para 181; page 351] ... I conclude that the acquisition of Borthwick by AMH will enable AMH to dominate the northern fat cattle market. ...
[para 186; page 353] The question whether the acquiring corporation is likely to use its dominant position to the disadvantage of others is not a matter which arises under s.50. No doubt Parliament thought that it would be commercially naive to doubt that a corporation which does enjoy a dominating position will use that position to its own advantage. However, because it may be relevant on discretion, I should record that, in the present case, there can be no question that AMH would use its position to purchase cattle as cheaply as possible. ...
[para 187; page 353] I find, pursuant to s.50(1)(a) of the Trade Practices Act, that, as a result of the acquisition of Borthwick, AMH is in a position to dominate the northern Queensland fat cattle market; and that it is likely to continue to be in that position during the foreseeable future. It follows that the acquisition represents a contravention of s.50(1)(a). I reject the case made by the applicant in reliance upon s.50(1)(b), which case depends upon the proposition that AMH was in a position of dominance even before the acquisition.
[para 188; page 353] [Section 81] section provides two broad alternatives: an order for divestiture under sub-s.(1) or a declaration, under sub-s.(1A), that the acquisition is void. ... The applicant relies upon both sub-ss.(1) and (1A). However, before coming to the question of the form of relief appropriate to this case, it is convenient to set out my reasons for concluding that the Court would have jurisdiction to make an order under s.81(1A); and, accordingly, for dismissing the applications to set aside the service made upon each of the Borthwick respondents.
[para 189; pages 353-354] ... counsel for the Borthwick respondents conceded that s.50 was sufficiently wide to cover the case of an acquisition of shares in a foreign company trading in Australia. That concession was never retracted. In my view it was correctly made. The prohibition of the section is upon the acquisition by a corporation of any shares in, or assets of, a body corporate if that acquisition is likely to have specified consequences, in terms of market dominance. The word "market" is defined in s.4E of the Act so as to mean "a market in Australia". Thus s.50 is concerned with acquisitions which are likely to affect dominance in an Australian market. Although there is a presumption that "a statute is to be construed as limited in its operation to the territory or the nationals of the state which enacts it" ... the question of extra-territoriality is always one of interpretation. ... Section 5(1) of the Act provides that "Parts IV and V extend to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia or by Australian citizens or persons ordinarily resident within Australia".
[para 190; page 354] Whether or not s.50 would otherwise be interpreted as extending to the conduct in this case of AMH, s.5(1) puts that question beyond doubt. Section 50 is contained within Part IV of the Act and AMH is a company which is incorporated, and which carries on business, within Australia. Consequently, so far as AMH is concerned, it is immaterial that the relevant conduct took place in the United Kingdom and that it involved the acquisition of shares in a United Kingdom company.
[para 191; page 354] However, the situation relating to the Borthwick respondents is more complicated. It is a condition of relief under s.81(1A) that the Court find that the vendor of the relevant shares or assets was "involved in the contravention"; that is, in the present case, the contravention by AMH of s.50. Section 75B(1) explains what is meant by the words "involved in a contravention" of a provision of Part IV or V:
The TPC claimed that Borthwick was 'knowingly concerned' in AMH's contravention and therefore 'involved in a contravention' pursuant to s 75B(1).
His Honour observed
[para 196; pages 355-356] .... In the face of the express provisions for extra-territorial application of the Act made by s.5, it is difficult to ascribe to Parliament an intention that s.81(1A) should apply to persons who have no connection with Australia except the circumstance that they are the vendors of shares or of assets whose acquisition enables some other person to achieve a position of dominance in an Australian market in breach of s.50. ... The effect upon a vendor of an order under s.81(1A) may be significant. It is not difficult to see the disruption to international comity which might result from an Australian court declaring void a transaction entered into by a vendor who not only lacked a continuing association with Australia, such as residence, incorporation, or the carrying on of business in this country but who had not even the casual relationship of having engaged in Australia in conduct relating to the relevant transaction.
[para 197; page 356] On the other hand it seems to me that the submission of counsel for the Borthwick respondents, that all conduct outside Australia must be ignored, also goes too far. In a case where there is relevant conduct in Australia it is a misuse of language to speak of the statute being given extra-territorial effect. The statute applies because of that conduct. It attaches to conduct within Australia. But in assessing that conduct, in relation both to its nature and to its quality, the Court is required to take into account the whole of the available evidence. Evidence of events outside Australia may, for example, establish or negative the necessary knowledge. There is nothing unusual about that course. Australian courts commonly receive evidence of overseas events which bear upon conduct affected by Australian law.
[para 206; page 358] The Borthwick respondents were more than concerned about the acquisition of Borthwick by AMH. They were concerned in that matter. They took active steps to bring it about. Part of that activity took place in Australia. It matters not that a part of the Australian conduct, the visit to Mr McComas, not only failed of its purpose but, as events turned out, proved to be unnecessary.
[para 207; page 358] In my opinion the evidence demonstrates that the Borthwick respondents engaged in conduct, within Australia, which answers the description of being "knowingly concerned" in the acquisition by AMH. It follows that the Court has jurisdiction to declare the transaction void under s.81(1A) against those two respondents, Pacific Holdings and UK, who were vendors to AMH of the shares.
[Note that leave to appeal on the issue of jurisdiction was was refused
[para 40; page 315] During the course of the trial a further notice of motion, to like effect, was filed by the Borthwick respondents. Both motions were considered together and evidence was adduced by both the applicant and the Borthwick respondents upon the question of jurisdiction. After hearing argument I indicated my view - for reasons which I then shortly stated - that, if the contravention of s.50 were to be established, the Court would have jurisdiction to grant the relief sought ...
Although Justice Wilcox determined that there was jurisdiction to make an order under s 81(1A) (declaring the transaction void) he did not consider it was appropriate to do so in this case:
[para 208; page 358] The Court retains a discretion as to the appropriate form of relief. I am of the opinion that it would be inappropriate to make a declaration under s.81(1A). There are three separate considerations which impel me to that conclusion. Standing alone, any one of these reasons might be sufficient. Taken in combination, they are overwhelming.
[para 212; page 359] I accept that the Court should not be astute to protect parties against the consequences of commercial risks freely undertaken by them. No doubt it is true that, in entering the transaction with AMH upon the assumption that the Commission would not seek to invoke s.81(1A), the vendors took upon themselves a commercial risk. But I think that, in so doing, they were substantially influenced by what had occurred in Australia upon the previous day [the only respondent referred to in the TPC's originally application was AMH], combined with the fact that no intimation had been given to them by the Commission that, if they did accept the AMH offer, the Commission might seek relief under s.81(1A). Although I intend no criticism of the Commission by the comment -- much was done in a very short time -- I think that, under these unusual circumstances, the failure of the Commission to issue a warning lulled the directors and the shareholders of plc into a not unjustifiable belief that they were not at risk in taking the course which they did. There would be a measure of harshness if the Court were now effectively to declare the transaction void, putting the vendors in a worse position than their position before the meetings of 26 January.
[para 213; page 359] The word "effectively" leads to my second reason for refusing relief under s.81(1A). The evidence indicates that, in actual fact, it is unlikely that any declaration made by this Court would achieve the desired purpose of reversing the transaction.
[para 227; pages 363-364] Of course, it would be open to the various boards of directors to recant this attitude and to decide voluntarily to give effect to any order which I might make. However, this is most unlikely. The only realistic view is that the Borthwick respondents would ignore any order made under s.81(1A) and that enforcement action against them, or any of them, in the United Kingdom courts would fail. Consequently, any such order must be regarded as futile.
[para 228; page 364] My third reason for concluding that no order ought to be made is that it is possible to avoid the undesirable features of AMH's breach of s.50 without making such an order. ...
His Honour then turned to the appropriate orders
[para 229; page 364] In a case where the Court finds that a person has contravened s.50 by acquiring shares in a corporation it will often be appropriate to make an order under s.81(1) requiring that person to dispose of those shares. It hardly lies in the mouth of the contravenor of s.50 to complain that the effect of such an order will be to cause it also to lose control of assets which are irrelevant to that corporation's dominance in a particular market. If the Court has no other way of vindicating the public interest sought to be protected by ss.50 and 81, it must be prepared to restore the position which existed before the contravention occurred.
[para 230; page 364] But, ideally, it is better to mould the order to the necessities of the case, going only so far as to remove from the control of the acquirer those assets which contribute to its market dominance. There is no public interest in forcing the divestiture of those that do not. Section 81(1) is not a penal provision.
[para 231; page 364] However, in the absence of an undertaking by the acquirer, there is a problem about taking this course. Where the contravention of s.50 takes the form of an acquisition of shares, the only order which may be made under s.81(1) is for the disposal by the acquirer of those shares. The reference to "assets", in s.81(1), is not a reference to assets indirectly acquired, through the acquisition of the company owning those assets, but to a direct acquisition of the assets of a body corporate. Section s.81(1) mirrors the proscriptions in the opening words of s.50(1).
[para 232; page 364] In the present case, counsel for AMH indicate that, if it is unsuccessful in its submission that there has been no breach of s.50, their client would wish to have the opportunity to frame a suitable undertaking under s.81(1C) of the Act, as an alternative to an order under s.81(1) for the disposal of the whole of the Borthwick shares. If no suitable undertaking is forthcoming, I will make an order under s.81(1). But it is appropriate to give the opportunity sought by counsel and, in accordance with the further request of counsel, to indicate my view as to the width of the appropriate undertaking.
[para 233; page 364] The major question in relation to any undertaking is the assets to which it should relate.
[His Honour went on to discuss the relevant assets in this case and continued]
[para 240; page 366] .. .In my view an appropriate undertaking in this case will include an offer to dispose of the Mackay abattoir, as well as that at Bowen. ...
Geoffrey de Q Walker, '"Control or Dominate a Market": Developments in Australian Merger Law' (1979) 24 Antitrust Bulletin 371