Express law No. 08

16 September 2004

Australian Competition & Consumer Commission v Australian
Safeway Stores and Mark Jones - Update

The High Court has refused to grant special leave to
appeal to both the Australian Competition & Consumer
Commission (ACCC) and also to Australian Safeway Stores
(Safeway) and Mark Jones (Jones) in respect of the judgment
of the Full Federal Court. Consequently, the decision
of the Full Federal Court stands. The ACCC has been successful
in establishing four contraventions of the misuse of
market power provisions of the Trade Practices Act and
one instance of price fixing.

Background

This is an update of an earlier AGS Casenote (attached)
that overviewed the proceeding in detail and the decision
of the Full Federal Court.

We briefly summarise the background.

On 9 occasions Safeway refused to accept supplies of bread
products of a major plant baker (eg. Tip Top Bakeries)
at one of its supermarkets while a plant baker supplied secondary branded
bread sold at a discounted price by an independent retailer
located in the vicinity of the Safeway supermarket. Jones
was Safeway's bread category manager responsible
for arranging the supply of bread.

The deletion of bread was alleged to be intended to deter
the baker from supplying cheap bread and to damage the
independent retailers. The conduct was alleged to be a
misuse of market power in contravention of s 46 of the
Trade Practices Act (TPA).

The ACCC also alleged that Safeway and Tip Top had made
a price fixing agreement as to the type of bread products
to be sold at Tip Top's Preston Market Stall and
the price of products, in contravention of s 45 of the
TPA.

Safeway denied the allegations. Safeway's primary
defence was that it only deleted bread products having
first made a request for a case deal of the plant baker
for the supply of proprietary brand bread and the
request had been refused. Safeway had to delete the bread
as it was seen by consumers to be uncompetitive on price.

Trial Judge

At first instance, following a lengthy trial, Justice
Goldberg dismissed all of claims of the ACCC: ACCC v Safeway
(No 2) [2001] FCA 1861; (2001) 119 FCR 1. His Honour held
that Safeway had not breached s 46, on the grounds that
there had not been a taking advantage of market power.
Safeway would have acted in the same manner without market
power. Secondly, a case deal was sought in five incidents,
which was considered to be inconsistent with Safeway having
an anti-competitive purpose.

In relation to the Preston Market price fixing allegations,
on the evidence Goldberg J was not satisfied that the participants
to discussions had a meeting of minds in order to give
rise to a proscribed arrangement.

Since Safeway was not found to have contravened the Act,
the Judge did not consider it necessary to deal with the
issue of Jones's liability as an accessory.

Full Federal Court on appeal

The Full Federal Court, by majority, held that Safeway
had contravened s 46 in relation to four incidents where
there had been a deletion of bread products: ACCC v Safeway
[2003] FCAFC 149; (2003) 198 ALR 657.

Also, the Full Court was unanimously of the view that
a price fixing arrangement had been made in relation to
the Preston Market incident.

The Full Court made declaratory orders against Safeway
in relation to the four incidents found to contravene s
46 and ordered Safeway to pay 80 per cent of the ACCC's
costs of the appeal: ACCC v Safeway (No 2) [2003] FCA 811.

High Court special leave applications

The ACCC, Safeway and Jones each filed separate applications
seeking special leave to appeal to the High Court. The
applications were heard on 10 September 2004. The High
Court refused to grant special leave in respect of all
applications. The Court stated that the issues of fact
and law raised did not warrant the grant of special leave.
Further, as the conduct in issue occurred some years ago,
it was not considered in the interests of justice to further
extend the litigation.

Outcome

The refusal of special leave means that the declaratory
orders of the Full Federal Court stand.

This represents the first case in which the ACCC has succeed
in obtaining as a final outcome in a contested proceeding
declaratory orders of contravention of s 46. (Earlier cases
where the ACCC has succeeded in obtaining declarations
of contravention of s 46 have been set aside on appeal.
See for example the decisions in Boral, Rural
Press and
Universal Music).

Important points to emerge from the Full Federal Court
judgment are:

  • Focus on the conduct of the respondent and inferences
    arising in ascertaining whether there has been a contravention.
  • Pleading a policy based on a course of conduct can
    give rise to scope for argument.
  • The purpose asserted by the respondent is not necessarily
    determinative of whether a proscribed purpose exists.
  • A defence based on the fact that a request had been
    made for a similar deal to that provided to a competitor
    is
    not necessarily inconsistent with a purpose of damaging
    the competitor or deterring competitive conduct.

Pursuant to the orders of the Full Federal Court, the
proceeding is remitted to Justice Goldberg to hear and
determine the following matters:

  • the pecuniary penalties to be imposed.
  • injunctive relief.
  • the liability of Jones.
  • costs of the trial.

The judgment of the Full Federal Court is reported
at[2003] FCAFC 149 (see http://www.austlii.edu.au/au/cases/cth/FCAFC/2003/149.html)
and (2003) 198 ALR 657.

Graham Thorley and Gavin Carroll with AGS Melbourne acted
on behalf of the Australian Competition & Consumer
Commission in conduct of the proceeding.

For further information please contact:

Tony Burslem
Tel: (02) 6253 7460
tony.burslem@ags.gov.au

Important: The material in Express law is
provided as an early, interim view for general information
only and further analysis on the matter may be prepared
by AGS. The material should not be relied upon for
the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the basis
of any of the material in this message.