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Published online by Cambridge University Press: 24 January 2025
In this article the author exhaustively examines the decisions of both the Trade Practices Commission and Tribunal and abstracts from them a number of general conclusions which are of invaluable assistance in interpreting section 50 of the Trade Practices Act. This discussion is particularly apposite in the present economic climate when the merger is increasingly popular, especially as the Act has only been recently amended. The author concentrates on “market definition” in all its permutations and discusses the various indicia of altered competition levels and the consequent likelihood of success of a merger application. As the author points out in his conclusion, attention to such details amply repays the effort involved when viewed against the backdrop of sanctions which the Act contains against those who infringe it.
1 The test for an authorisation is contained in sub-s. 90(9):
90(9) The Commission shall not make a determination granting an authorization under sub-section 88(9) in respect of a proposed acquisition of shares in the capital, or of assets, of a body corporate unless it is satisfied in all the circumstances that the proposed acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to take place.
Until 1977 it was also possible to obtain a clearance for a proposed acquisition, which the Commission would grant if it found no likelihood of substantially lessened competition. Although clearances can no longer be obtained the Commission's clearance decisions afford useful guidance in determining the effect on competition as a factor on an authorisation application.
2 S. 50, so far as is material, now provides:
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 control or dominate a market for goods or services; or
(b) in a case where the corporation is in a position to control or 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 control or dominate that market.
(2) If—
(a) a body corporate that is related to a corporation is, or two or more bodies corporate each of which is related to the one corporation together are, in a position to control or 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 that corporation, together are in a position to control or dominate a market for goods or services, the corporation shall be deemed for the purposes of this section to be in a position to control or 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 or in a State; and
(b) a reference to controlling or dominating a market for goods or services shall be construed as a reference to controlling or dominating such a market either as a supplier or as an acquirer of goods or services in that market.
3 The Commission was so informed in at least two matters, Australian Products & Distribution Ltd (1975) T.B. 8,912, and Olympic Tyre & Rubber Company (1975) T.B. 8,912. Throughout this article the abbreviation “T.B.” refers to the CCH Australia Ltd, Trade Practices Reporter, Transfer Binder.
4 The Trade Practices Tribunal, on application made to it, re-hears authorisations refused by the Commission. Such an application is called an application for review and is provided for by s. 101 of the Act. The case in Queensland was the first fully heard and determined by the Tribunal under the 1974 Act. It has a long title and may be shortly referred to as the Queensland Flour case. The full title is Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1975) 25 F.L.R. 169. That report is abridged and the judgment is fully reported in CCH Australia Ltd, Trade Practices Reporter, Vol. 2, case no. 40-012, page 17,223.
5 It was never possible to obtain a review of a clearance denied by the Commission. Accordingly only the refusal of authorisation was taken to the Tribunal.
6 Woodward J., President; Shipton and Brunt, Members.
7 (1975) 25 F.L.R. 169, 187-189.
8 S. 4E, introduced after Queensland Flour, on 1 July 1977, now defines “Market” as follows:
4E. For the purposes of this Act, “market” means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services.
9 A view that was applied by the Commission, in Grosby Footwear Pty Ltd (1976) T.B. 16,111.
10 The Commission has proved itself quite prepared to look at sub-markets. See its decision in Queensland Flour (1975) T.B. 8,847-15; and Williams The Shoeman Pty Ltd (1975) T.B. 8,845-30. So did the Tribunal itself in Howard Smith Industries Pty Ltd and Adelaide Steamship Industries Pty Ltd, CCH Australia Ltd, Trade Practices Reporter, Vol. 2, 17,324, hereinafter called “Howard Smith”.
11 Bok, “The Tampa Electric Case and the Problem of Exclusive Arrangements under the Clayton Act” 1961 Supreme Court Review (United States) 267, 301, n. 99.
It may also be that support for the view expressed above can be found in some of the Commission's decisions. In A.R.C. Industries Ltd (1975) T.B. 8,845-9, 8,845-12, the Commission said: “The Commission considers the product markets directly affected by the proposed acquisition to be the markets in which A.R.C. and Cyclone (the target company) are actually or potentially in competition.” That approach seems very close to “constructing the market” with reference to the particular evil under investigation.
12 (1975) T.B. 8,904.
13 Id. 8,906.
14 (1975) T.B. 8,845-27.
15 (1964) 378 U.S. 441.
16 U.S. v. E.l. Du Pont De Nemours (1955) 351 U.S. 377.
17 (1962) 370 U.S. 294.
18 Id. 325.
19 (1975) T.B. 8,825.
20 Id. 8,827.
21 Ibid.
22 Supra n. 17.
23 (1975) T.B. 16,107.
24 (1975) T.B. 8,904.
25 (1975) T.B. 8,809.
26 Id. 8,811. Further examples are The Land Newspaper (1975) T.B. 8,832, 8,834; Tubemakers of Australia Ltd (1976) T.B. 16,132, 16,133, and the fresh application 16,150; Siddons Pty Ltd (1976) T.B. 16,164; Grosby Footwear Pty Ltd (1976) CCH Australia Ltd, Trade Practices Reporter, Vol. 2, 16,111; and Coca Cola Operations Pty Ltd (1975) T.B. 8,904, 8,906.
27 Supra n. 10.
28 (1975) T.B. 8,845-4.
29 First Annual Report of the Trade Practices Commission year ended 30 lune 1975 62.
30 (1975) 24 F.L.R. 286. Criticised (1975) 50 A.L.J. 89.
31 In that case the distributor, Ira Berk, terminated the Datsun franchise of its dealer, Top Performance Motors. While, when a consumer is choosing a purchase, other light cars are no doubt substitutable for Datsuns, a dealer may find it very difficult to obtain a franchise from another manufacturer, and so to him a Toyota or a Mazda may not be at all readily substitutable for a Datsun. Perhaps it could be argued that the distributor was monopolising the market for Datsun dealerships rather than Datsun cars themselves.
32 (1975) T.B. 8,839.
33 Supra n. 25.
34 (1975) T.B. 8,832.
35 Id. 8,834.
36 (1975) T.B. 8,845-9.
37 Id. 8,845-13.
38 (1975) T.B. 8,847-9.
39 (1975) T.B. 8,841.
40 Id. 8,842.
41 Softwoods Holding Ltd (1975) T.B. 8,805.
42 Id. 8,806.
43 (1963) 374 U.S. 321.
44 Id. 357.
45 Concentration levels in Australian industry are very high. Various studies are collected by Santow, “Mergers and the Commonwealth Trade Practices Act 1974” (1975) 49 A.L.J. 52.
46 In Dairy Vale (1975) T.B. 8,807, and Associated Products & Distribution Pty Ltd (1975) T.B. 8,825.
47 (1975) 25 F.L.R. 169.
48 Second Annual Report of the Trade Practices Commission-Year ended 30 June 1976 para. 1.21.
49 (1964) 377 U.S. 271.
50 (1960) 370 U.S. 294.
51 (1963) 374 U.S. 321.
52 (1975) T.B. 8,604.
53 (1975) T.B. 8,812.
54 (1975) T.B. 8,842.
55 (1976) T.B. 16,156.
56 Supra n. 52.
57 E.g. Riverfruit Industries (1975) T.B. 8,845-5.
58 Supra n. 47.
59 (1975) T.B. 8,825.
60 (1974) T.B. 8,804.
61 Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1915) 25 F.L.R. 169, 189.
62 (1975) T.B. 8,816.
63 Comeng Holdings (1975) T.B. 8,813, 8,845-8.
64 Other examples are Austral Mining (Holdings) Pty Ltd (1915) T.B. 8,825; Pak Pacific Corporation Pty Ltd (1975) T.B. 8,841, 8,842; Scovill Australia Pty Ltd (1975) T.B. 8,845-7, 8,845-8; Howard Smith Industries Pty Ltd (1975) T.B. 8,845-14, 8,845-16; Kiwi Australia Ltd (1975) T.B. 16,101, 16,102; Ampol Petroleum Ltd and Newbold General Refractories Ltd (1915) T.B. 16,104; Clements Marshall Consolidated Ltd (1976) T.B. 16,117; Peninsular Group Holdings Ltd (1976) T.B. 16,163; L.G. Abbott & Co. (1975) T.B. 8,845-4; Riverfruit Industries (1975) T.B. 8,845-5; Williams the Shoeman Pty Ltd (1975) T.B. 8,845-30.
65 Sims Consolidated Ltd (1975) T.B. 16,107, 16,109. In Regal Industries Pty Ltd (1976) T.B. 16,106, 16,107, Coinmissioner Venturini took into account that, although entry into the drycleaning business was not difficult, new entry on a meaningful scale was not likely. Clearance was denied.
66 Supra n. 64.
67 (1964) 376 U.S. 651.
68 CCH Australia Ltd, Trade Practices Reporter, Vol. 2, 17-324, 17,340.
69 Associated Products Distribution Ltd, supra n. 59.
70 (1975) T.B. 8,829.
71 (1975) T.B. 8,839.
72 (1975) T.B. 16,106.
73 (1975) T.B. 16,132, 16,135.
74 Pioneer Concrete Services Limited (1975) T.B. 8,830.
75 (1975) T.B. 8,839.
76 (1975) T.B. 8,845-22, 8,845-26.
77 First Annual Report of the Trade Practices Commission-year ended 30 June 1975 68.
78 (1975) T.B. 8,832, 8,836.
79 Areeda, Anti-Trust Analysis (2nd ed. 1974) 680.
80 E.g. Anderson, “Reciprocal Dealing” (1967) 76 Yale Law Journal 1020.
81 (1965) 380 U.S. 592.
82 Santow, op. cit. 67.
83 Ibid.
84 Photola Pty Ltd (1975) T.B. 8,831.
85 (1975) T.B. 8,823.
86 Rationalisation arguments were also considered in Howard Smith, supra n. 64, but a different approach seems to have been taken in Cottees General Foods Ltd (1975) T.B. 16,143, 16,145.
87 Sims Consolidated Ltd (1975) T.B. 16,107, 16,108.
88 Possibilities of rationalisation were also a factor in the clearance granted to Cottees General Foods Ltd, supra n. 86.
89 Increased efficiency of the target company flowing from the acquisition was the chief reason that the Commission granted clearance to Pronto Mixed Concrete Co. Pty Ltd to acquire Concrete Sand Pty Ltd (1975) T.B. 8,806.
90 Dairy Vale Co-operative Ltd, Southern Farmers Co-operative Ltd (1975) T.B. 8,913.
91 The Land Newspaper Ltd (1975) T.B. 8,915; Clements Marshall Consolidated Ltd (1976) T.B. 16,903.
92 (1975) T.B. 16,901.
93 (1975) T.B. 16,902.
94 CCH Australia Ltd, Trade Practices Reporter, Vol. 2, 17,324, 17,334.
95 Brambles Industries Ltd and Brink's Incorporated (1974) T.B. 8,802.
96 Swift & Company Ltd (acquisition of the issued shares of Monosteel (New-castle) Pty Ltd) (1975) T.B. 8,838; T.A.A.-Mayne Travel Industries Pty Ltd (1975) T.B. 8,845-32; Bunge (Industrial) Ltd (application for clearance to acquire 50% of the shares of H.P. Products Pty Ltd, (1975) T.B. 8,847-9, 8,847-10; Cottees General Foods Ltd (proposed joint venture with Henry Jones (IXL) Ltd) (1976) T.B. 16,143. Contrast however Allied Mills Industries Ltd (proposed acquisition of the W.A. flour miller, Peerless Roller Flour Mills Pty Ltd) (1976) T.B. 16,112. The Commission appears to have thought that the giant Allied Mills group would have exerted too strong an influence in a highly concentrated market (para. 26 of the decision). It denied clearance. That type of argument is well recognised in the United States. It was successful in the United States Supreme Court's decision in F.T.C. v. Proctor & Gamble (1976) 386 U.S. 568. Compare also the Commission's decision in St. Regis-AC/ Pty Ltd (1976) T.B. 16,156, 16,158.
97 Applied Power Australia Ltd (1975) T.B. 8,825.
98 Otis Elevator Company (1974) T.B. 8,801. A similar result was reached in Diverse Products Ltd (1975) T.B. 8,845-27, 8,845-29 and in Brown & Dureau Ltd (1975) T.B. 8,847-2; T.A.A.-Mayne Travel Industries Pty Ltd (1975) T.B. 8,847-5; Scovill Australia Pty Ltd (1975) T.B. 8,845-7; and Canada Dry Corporation (1975) T.B. 16,105.
99 (1975) T.B. 8,805.
1 Ibid. Where, but for the joint venture, either participant might have entered! the market the result could well be different. In U.S. v. Penn-Olin Chemical Co., (1964) 378 U.S. 158 the United States Supreme Court seems to have held thati even the mere possibility that one of the participants might have entered the: market alone was enough to condemn the joint venture, because its effect would1 be to eliminate that potential competition.
2 Cabal Pty Limited and Besselink Bros Pty Ltd (1975) T.B. 8,838. Another: example is Australian Wire Weavers Pty Ltd (1976) T.B. 16,140.
3 (1975) T.B. 8,845-14, 8,845-16.
4 (1976) T.B. 16,143, 16,145.
5 Supra n. 61.
6 CCH Australia Ltd, Trade Practices Reporter, Vol. 2, 17,223, 17,258. It should be noted that this portion of the judgment is not reproduced in the report of the decision in (1975) 25 F.L.R. 169.
7 Tubemakers of Australia Ltd (1976) T.B. 16,132, 16,135.
8 Ibid.
9 (1976) T.B. 16,137.
10 (1976) T.B. 16,112.
11 U.S. v.Greater Buffalo Press Inc. (1971) 402 U.S. 549.
12 Supra n. 90.
13 (1975) T.B. 8,806, 8,807.
14 Ibid.
15 (1975) 25 F.L.R. 169, 189; CCH Australia Ltd, Trade Practices Reporter, Vol. 2, 17,223, 17,246.
16 Ibid.
17 It did so in Queensland Flour and doubtless will do so in future cases.