Dowling v Dalgety Australia Limited
(1992) 14 ATPR 41-165
Dowling wanted to conduct auction sales at the Goondiwindi saleyards which were jointly owned by Dalgety and two other companies. The owners used them to conduct their auctions and reached an agreement between themselves that they would not permit other auctioneers could use the saleyards. Dowling claimed that this agreement was anticompetitive contrary to s 45challenged this claiming SLC in the provision of marketing livestock services in Goondiwindi.
On the issue of substantial lessening of competition
The court was not convinced that the inclusion of Dowling as a member of the association would mean that he would offer a reduced competition so that his inclusion would reduce the price of livestock selling services.
The market for provision of livestock in the relevant area was highly competitive; the refusal to allow Dowling’s application to personally conduct the auctions for his client’s livestock at the Goondiwindi saleyards did not alter that fact.
Dowling competed ‘in all aspects of the livestock selling services market in the Goondiwindi area except one’. Dowling argued that his inability to conduct auctions at the saleyards might lead the auctioneers who were conducting sales to give preference to their client’s stock over Dowling’s. He also claimed there were barriers to entry to setting up his own saleyards (in particular, cost and timing – convenience for buyers and sellers).
If Dowling was given access there would be four auctioneers instead of three at the saleyards. There was evidence that some clients of Dowling’s would ‘prefer to sell their stock at auction in the Goondiwindi Saleyards using the auctioneering services of Mr Dowling.’ However,
‘The important test of competition in a market is price elasticity. A relevant question is whether Mr Dowling would charge less commission if he were to be admitted to membership of the Association; and, if he did, whether this would exert a downward pressure upon price. … I am not persuaded that the inclusion of Mr Dowling as a member of the Association would mean that he would offer a reduced commission … and I am not persuaded that his inclusion would have a downward influence on price of the services, that is, reduced commission. Competition also requires independent rivalry in all dimensions of the "price-product-service" packages offered to customers. In this respect the market for livestock selling services in the Goondiwindi district is already a competitive market; … Auction selling services are only one aspect of the market, … In my view the addition of Mr Dowling and other auctioneers … would improve competition, but I do not see that it would represent a substantial improvement in the sense of considerable. I am not satisfied that the exclusion of Mr Dowling from the right to auction cattle at the Goondiwindi Saleyards has or is likely to have the effect of substantially lessening competition in the relevant market. …’
On issue of purpose
‘Purpose' is concerned with motivation and reasons for provision. This involves subjective considerations. ‘Substantial’ (in the context of ‘substantial lessening of competition’) means ‘considerable.’ It was unnecessary, in this case, for the Court to reach a conclusion as to whether ‘substantial’ in the context of ‘substantial purpose’ means ‘considerable’ or ‘real or of substance and not insubstantial or nominal’.
Purpose will ‘generally be inferred from the nature of the contract, the circumstances in which it was made and its likely effect’. It is important to look at the purpose when the contract is made - however, subsequent conduct may be relevant in determining purpose, for example, if the purpose is a ‘continuing purpose’
Here there were two purposes: (1) not sharing a valuable asset with a person having no proprietary interest, and (2) not allowing additional competition at the Saleyards.
The Court concluded the respondents did not have a substantial purpose of substantially lessening competition:
‘Their primary and only real purpose was to ensure that an asset that the respondents jointly owned and had spent money on building up (both physically and its goodwill) was not shared with others’.
On the issue of taking advantage of market power
'If a corporation has market power which causes it to exercise rights which it would not exercise under competitive conditions then the exercise of those rights is the exercise of market power, and it is this consideration that runs through the judgments in Queensland Wire. The central determinative question to ask is: Has the corporation exercised a right that it would be highly unlikely to exercise or could not afford for commercial reasons to exercise if the corporation was operating in a competitive market? If so, is likely to have taken advantage of its market power.'
There was no taking advantage in this case. Although the ownership of land may give rise to market power, in merely exercising their rights of ownership, the respondents were not taking advantage of market power. The right was not one in which the Dalgety’s were highly unlikely to have exercised or could not afford for commercial reasons to have exercise if it. was operating in a competitive market