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Australian Rugby Union Limited v Hospitality Group Pty Ltd

[2000] FCA 823



In response to an allegation of breach of contract by on-selling tickets, THG and ICM claimed that any restrictive condition attached to the sale of tickets contravened ss 45, 46 and 47 of th TPA.

A relevant issue was whether there was a market for the supply of corporate hospitality packages at international rugby uniotn test matches in Australia.


Held (on the issue of market)

The market claimed was held not to exist. A significant factor working against THG's claimed market definition was the fact that they did not call any evidence 'from its own ranks' or from those of its customers (see para 86). Market was discussed from para's 45-89

[47] 'There is undoubtedly what may be described as a commercial market for corporate hospitality. ...'

[49] 'One feature of the "product" is that the price for the ticket to the event is only a relatively small proportion of the price paid for the whole package. Furthermore, I conclude from the evidence that the primary consumers are not particularly price sensitive. The purpose of purchasing a hospitality package is to achieve important commercial objectives by, for example, cementing relationships with existing customers, creating new customers or rewarding key staff. Whilst, of course, not oblivious to cost or value for money, the most important consideration is to have a successful outing. The prestige and quality of the event is an important factor, but the hospitality provided, and general smooth organisation, is also important. The primary consumers are, by and large, substantial commercial entities, with expenditure on corporate hospitality being part of much larger marketing budgets. '

[51] 'On the evidence, there is a good correlation between those who are likely to be invited to corporate hospitality and those with an interest in rugby. Indeed, it is fair to say that the evidence supports the conclusion that, whilst many people interested in rugby may also be interested in, say, horse racing, golf or opera, there is a substantial body of people with an interest in rugby to the exclusion of, or which is greater than, other sports and entertainment. In other words, there is a substantial hard core of fans of international rugby matches. ...'

[52] 'It is contended for THG that these findings of fact as to the evidence and nature of the hard core fans establish that there is a market for the purposes of Pt IV for hospitality packages to international rugby matches in Sydney. It is contended for the ARU, whilst denying any obligation to assert or establish any market, that the market for Pt IV purposes encompasses a great range of sports and entertainments over a wide geographical area. It is said that the brochure of THG graphically makes this point. The response on behalf of THG is that offering different packages in the one brochure is similar to offering different products in a supermarket, and does not establish a market for relevant purposes.'

[53] 'This simplified summary of contentions requires particular attention to be paid to the principles that are to be applied. The law on the topic was authoritatively settled by the High Court in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd [1989] HCA 6; (1989) 167 CLR 177.'

[His Honour set out various key quotes form that case]

[56] '... Among the points of interest to emerge are the following: ...

'3. That s 4E (which was not in force until after Re Queensland Co-operative Milling Association) introduces economic concepts already recognised in the overseas and Trade Practices Tribunal decisions. The section was introduced as the result of a Swanson Committee recommendation which regarded the hallmark of substitutability to be:

"reasonable interchangeability of use and which have high cross-elasticity of demand, ie, where a small increase in the price of a particular product would cause a significant quantum of demand for a similar product to switch to the product in question." (emphasis added)

4. Where the products are not actually the same, differentiating characteristics and reasonable interchangeability are to be judged in relation to specific use of the products.

5. What is required is the existence of an area of actual or potential close competition between close substitutes in particular goods or services.'

[57] 'I can, for the purposes of the present case, put aside supply side substitution in defining the product market (if it be relevant to that market), although the geographic market may be different. There is no suggestion that anyone else apart from the ARU can produce international rugby test matches in Australia in the foreseeable future. It also effectively controls the provincial unions.

[58] The concept of market is well explained by the Trade Practices Tribunal in Re Queensland Co-operative Milling Association (supra) at 517:

"We take the concept of a market to be basically a very simple idea. 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, ie a relatively high cross-elasticity of demand or cross-elasticity of supply?"

[59] Guiding myself by these principles, I first approach the product market without regard to geography or functional level. I use "product" to describe the services offered. It is relevant to note that hospitality packages to international rugby union matches are in fact different from hospitality packages to other sports or entertainments because rugby union is a distinct sport, not to be confused with any other sport or entertainment. It has, among other factors, distinct rules, organisation and history. It has not been suggested that even rugby league (which was a breakaway from rugby union) is regarded as the same as rugby union.

[60] Are the differentiating characteristics of international rugby union hospitality packages such as to deny interchangeability of function with packages involving other sports or entertainment? I have little difficulty in concluding, as a matter of fact, that, generally speaking, there is no relevant interchangeability between different recognised sports. Each is distinct with a recognised identity precisely because it has its own special characteristics, appealing to its own audience of players and fans. A long line of United States authorities recognise the unique character of major organised professional sports for market purposes. ...'

[61] 'The fact that some players and some fans may, on occasion, play or follow other sports is beside the point. ...' [his Honour then discussed the Full Court's judgment in Arnotts v TPC (1990)

[63] 'Thus, the question of interchangeability is debateable. There is plainly some substitutability. The issue is whether it is sufficiently close to qualify. It is therefore prudent to look more closely than hitherto at the issue of cross-elasticity of demand.'

[After discussing evidence of pricing etc, his Honour continued]

[73] 'This body of material indicates that:

1. International rugby matches are among a group of elite events in demand for corporate hospitality.

2. The inability to offer hospitality packages for international rugby matches would be a competitive disadvantage for those in the field.

3. It is, at least, doubtful whether international rugby matches played in Sydney can be distinguished from international rugby matches played elsewhere in Australia.

4. Events in the package are substitutable for some clients - this is evidenced, for example, by bundled packages, clients taking packages in more than one event, and by transfer to another event if one is sold out.

5. Pricing of corporate hospitality packages takes account of the price of other hospitality packages to some extent, but there is no close parallel between the price of packages for different events. The differing content of the packages makes comparison difficult.

6. The principal purpose for which the price of other packages is taken into account is to assess, in general terms, what the traffic will bear, rather than to undercut to attract extra custom from other events or avoid losing custom to other events. It is to be borne in mind, of course, that the clients are primary, rather than secondary, consumers.

7. There is no reliable evidence of customers moving from event to event because of the price.'

[81] '... I do not accept the criticism as to the level of price changes as being too small to be valid. The question is not what level of price increase would cause a change in behaviour. It is obvious there will be a price at which consumers will not purchase services because they do not regard the services as good value, not because they wish to transfer to a substitute. That level of increase may cause the consumer to spend the money saved in some quite different way at another time. The issue is close substitution, and the test of price sensitivity is to be judged by modest, rather than major, price increases. In my view, increases of 10% and 20% are certainly significant enough. The difficulty of comparing actual packages is not a factor in the survey because it assumes the same non-event content. The criticism that the survey does not take account of quality differences has little weight. Price sensitivity is the standard test for substitution, and, of course, assumes constant quality. ...'

[84] 'Taking all of this into consideration, there is much to be said for the view that there is no close substitute for international rugby union test match hospitality. It is unique in its appeal to a significant number of consumers, primary and secondary. This conclusion is assisted by considering whether a monopolist in the provision of international rugby test match hospitality packages could extract a super profit or monopoly rent, which is the other, and business, end of the test of price sensitivity. If the cross-elasticity of demand is not high enough, and substitutability not close enough, then price competition will only be partially successful (if at all) in restraining the price the monopolist can charge. This, of course, does not mean that the monopolist is able to charge an unlimited amount. With discretionary spending such as is involved here, a limit is set by what people can afford (or choose) to spend.' ...

[86] 'However, THG has called no evidence from its own ranks or from the ranks of its consumers, whether primary or secondary. It is a participant in the market, however it be defined. It has actually set and charged prices. It is part of a group of companies involved in corporate hospitality in a number of countries. I can infer from its documents which are in evidence that it would have directly and indirectly available to it evidence of actual market behaviour by customers and potential customers. Indeed, with the possible exception of IMG, it would probably have a better relevant knowledge of the realities of this field of commerce than any of the parties who were called. Such evidence would have been most relevant ... There is no suggestion that it was not available. I must apply the principle in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 and assume that any such evidence would not have assisted THG's case ... This, in itself, does not mean that THG must fail. ... However, in this case there is evidence both ways. The question of market is one of fact and degree, and the evidence which has been called permits an answer either way. In those circumstances, I regard the Jones v Dunkel inference as a powerful factor against THG's case. This is particularly so where the instructions on behalf of THG for the design of the Sergeant survey were narrow, and did not permit a comprehensive investigation of the cross-elasticity of demand.'

[87] 'Therefore, notwithstanding the appeal of much of THG's argument upon this issue, I find that THG has failed to establish the market pleaded. It follows that the defence and cross-claim based upon breach of Pt IV of the Act must fail. Each alleged breach depends upon THG establishing the market as alleged by it.'



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