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ACCC v Liquorland (Australia) Pty Ltd

[2006] FCA 826

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Applications were made for liquor licences in NSW near Liquorland and Woolworths.  Legislation gave Liquorland and Woolworths the right to object to those applications and they did so (or threatened to do so) in relation to each application.  In each case the objection was subsequently withdrawn.  The negotiations which led to the withdrawal resulted in deeds restricting the liquor licences that were granted to the applicants – including the type and quantity or takeaway liquor that could be stocked or sold.  The location and configuration of premises was also restricted. 

The ACCC alleged these constituted contracts, arrangements or understandings which substantially lessened competition or constituted exclusionary provisions.


Trial judge (Allsop J)

Market definition

[429] Market definition is not an exact physical exercise to identify a physical feature of the world; nor is it the enquiry after the nature of some form of essential existence. Rather, it is the recognition and use of an economic tool or instrumental concept related to market power, constraints on power and the competitive process which is best adapted to analyse the asserted anti-competitive conduct. See generally, Breyer S, “Five Questions about Australian Anti-Trust Law” (1977) 51 ALJ 28 at 33-4; Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 per French J at 175 (with whom Spender and O’Loughlin JJ agreed see 159 and 185 respectively); Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211 at 218-9 (“Queensland Wire (FC)”); Brunt M, Economic Essays on Australian and New Zealand Competition Law, Ch 5 “Market Definition Issues in Australian and New Zealand Trade Practices Litigation (1991)” especially at 203-214, 218-219 and 230-37; Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313 at 328-29; Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 at 132; Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157 at [57] and [58]; Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213; (2002) 118 FCR 236 at [114] ("Rural Press (FC)"); and Australian Competition and Consumer Commission v Australian Safeway Stores Ltd [2003] FCAFC 149; (2003) 129 FCR 339 at [193] and [194].

Exclusionary provisions

Can a purpose of restricting dealings with a 'class' exist where the relevant class does not exist at the time of the agreement?

[811] ‘There is no reason ... to conclude that a purpose is not to prevent sales to particular persons (or classes of person) merely because the purpose is to prevent the sale in the future of goods to a particular class formed in the future. ... The question is: What was the purpose of the provision? In this case: What was the subjective purpose of Woolworths as to the provision? Was it, relevantly, to prevent, restrict or limit supply or acquisition of goods to or from particular persons or classes of persons. If the restriction is to operate through a party not yet able to supply, that does not gainsay the purpose which is one which is to operate in the future. The future operation of a relevant restriction is contemplated by s 4D(2). I see no reasons to constrain s 4D(1) by the implication of a need for a present legal right or capacity to supply, if a purpose otherwise satisfying s 4D is found, though only to operate at some future time or in some future circumstance.’

[812] ‘For the same reasons, I reject the submissions of Woolworths that the s 4D case fails because of the futurity of the class. The task is not an over-elaborate one. It is to ascertain the relevant purpose of the provision, here, by ascertaining the purpose of the party, Woolworths, by whose efforts the clauses were included in the deeds. If, taking into account any element of futurity, the class has the requisite particularity, the provision will be satisfied.’

[813] ‘Woolworths submitted that the particularity of the persons or class must arise entirely otherwise than by the characteristic of being excluded from supply. ...  relevant to the particularity of the class, is the fact that its members are the objects of the purpose in question.’

[814] ‘It was submitted by Woolworths that the class cannot be ‘some unidentified potential group of customers’. The relevant question is not an isolated proposition capable of independent analysis; rather, the relevant question is whether, on the facts as they present themselves here, a purpose of each relevant provision was to prevent, restrict or limit the supply of goods to particular persons or class of person. The degree of definition and the common characteristics that lead one to the conclusion that a class is ‘particular’ is not capable of being expressed otherwise than by application of the language chosen by Parliament to the facts and purpose in question. To seek to do so is to embark on a process of deconstructing, or glossing, of Parliament’s words with the almost inevitable (and certainly impermissible) substitution of a different word or phrase for that chosen by Parliament. That one person’s view that the definition of a class to which the purpose in question was directed is sufficiently ‘particular’ to fall within the section is open to debate is an inevitable consequence of the indeterminate frame of reference contained within the adjective ‘particular’.

[816] ‘... Woolworths’ purposes included, relevantly, the purpose of preventing the supply of takeaway packaged liquor (other than themed liquor) to all future customers of the Ettamogah Pub. The commercial aim of Woolworths was to protect the existing business of Woolworths in the local area from losing custom to the Ettamogah Pub. The purpose therefore can also, and separately, be expressed to be preventing the supply of takeaway packaged liquor (other than themed liquor) to future customers of the Ettamogah Pub who might otherwise buy such liquor from the Woolworths’ stores in the area. I do not think that one can define the group any more closely. Though the evidence tells one that there is likely to be a geographical catchment for people who will shop at the Ettamogah Pub or the Woolworths’ stores at Campbelltown, that does not really assist in the delineation of the class. ... the class can be defined in one of two ways. It has a degree of particularity in both forms. This is sufficient, it seems to me, for the class to be called a particular class. The purpose of Woolworths was directed towards restricting supply to that identifiable (and particular) class. I therefore conclude that the purpose of the provisions of the Ettamogah Deed, in particular clause 1.2, was to prevent or restrict or limit the supply of takeaway packaged liquor to the above particular classes of persons. I conclude that Woolworths thereby contravened s 45(2)(a)(i) and (b)(i) in that respect.’

Particularity of purpose in s 45(2)(ii)

[826]: Woolworths submitted that the Commission must establish that Woolworths had the purpose of harming the competitive process or state of competition in the relevant markets alleged by it so as to substantially lessen competition in those markets; that it was insufficient to demonstrate that Woolworths had the purpose of harming any of the licence applicants in question; and that it was insufficient to establish that Woolworths had the purpose of protecting its own business.

[827] At one level these propositions can be readily accepted. However, the notion of purpose in the context of s 45(2)(a)(ii) and (b)(ii) must be understood in the real world. People are unlikely ever to direct themselves to a consideration of market definition, the choice of a market, the notion of the competitive process (as opposed to competitors), the elements of the operation of the competitive process and the substantial (in the sense discussed below) lessening, preventing or hindering of competition. No cross-examination was directed to Mr Smith or Mr Meagher in these terms, that is, using this terminology. I have little doubt that they did not converse or think in these terms. What they did was to formulate their approach, purposes and, no doubt, discourse in everyday terms, in which terms they were cross-examined. What is necessary is to understand what the purposes of Mr Smith and Mr Meagher were and to assess whether in the language and the content of the Act those purposes included as a substantial purpose (for s 4F) a purpose of substantially lessening, preventing or hindering competition, competition being, of course, the competitive process.

[828] Debate took place on the meaning of the word “substantially”. Great care needs to be taken in debate about the content of such words. In s 46 “substantial” means “a considerable or large degree of such power”, when qualifying market power: Eastern Express Ltd v General Newspapers (1992) 35 FCR 43 at 63; and Universal Music at [131]-[132]. In relation to the word “substantial” in s 4F(a)(ii) and (b)(ii) Heerey J said the following in Monroe Topple at [97]:

Did the proscribed purpose, if it existed, loom large among the objects the corporation sought to achieve?”

[829] The content of the word “substantially” in s 45(2)(a)(ii) and (b)(ii) has been discussed in a number of cases, to some of which I referred at [86]-[89] above. It is clear that “substantially” is used in the sense of meaningful or relevant to the competitive process, and that it is necessary that the purpose be to achieve an effect of that kind. The discussion in Rural Press (HC) at [41] footnote 67 may indicate that there is a layer of meaning of “considerable” to be added to the notion of being meaningful or relevant to the competitive process. However, it is difficult to understand what purpose of the Act would be advanced by a conclusion that the purpose or effect of a provision was to lessen, prevent or hinder the competitive process, in a way which was meaningful and relevant to the competitive process, but was not sufficiently “considerable” to warrant relief. Once one recognises that the purpose must be to do something meaningful or relevant to the competitive process, adjectives, adverbs or like phrases connoting quantity, such as “considerable”, “more than nominal”, “more than insignificant”, can be seen to be subsumed in the evaluative and functional analysis in deciding whether a purpose or conduct was of a character deserving of the intervention of the Court, in the light of the purposes of the Act, as being meaningful or relevant to the competitive process. …

[830] The evidence of Mr Smith and Mr Meagher enables conclusions about their purposes to be drawn about all the episodes. Both men were very experienced in the industry. Both understood that an unrestricted off-licence was a scarce article and a potent item providing the foundation for the entry of potentially significant competition in the local area in which it was deployed.

[831] A substantial purpose of the objections and of the provisions was to prevent the licence being or becoming the platform or vehicle for a market entrant without restriction on its licence. … It was a purpose to ensure, as far as was possible by the provisions, that the licence to be granted could not in the future be available as a scarce and potent item to be used by an entrant to the business of selling takeaway liquor in the local area where Woolworths had, or would shortly have, a liquor outlet.

[832] This purpose flows easily from their evidence and from appreciating that they were intelligent men, experienced in the operation and working of the liquor industry and of the Licensing Court. …

[833] Once one accepts that the market was, as I have found, a local one, this purpose can be seen plainly to be relevant to the competitive process in that market. It was directed to denying any new potential entrant to the local market this vehicle (being a “potent item”) for entry to the market. This did not deny the potential new entrant the ability to enter the market by applying for its own licence. However, the purpose was to make sure, as far as was possible, that this licence could not be used for facilitating any unrestricted market entry, now, or in the future.

[834] The fact that this purpose may have been legitimately pursued simply by enforcing rights given by State law in a State court is not to the point. Nor is it to the point that Woolworths may have won these cases or that some restrictions may have been placed on the licence by the Licensing Court. The purposes of the deeds and their provisions included a purpose, as a substantial purpose, as I have described. That purpose was directed to the competitive process in a meaningful way. Therefore, I conclude that the provisions of each of the Ettamogah Deed, the Jin Ro Deed, the Palms Village Deed and the Global Beer Deed had the purpose of substantially lessening competition and that Woolworths thereby contravened s 45(2)(a)(ii) and (b)(ii) in those respects.