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Published online by Cambridge University Press: 24 January 2025
The passing of the 1988-1989 third financial quarter will probably be viewed by the BHP Group with mixed emotions. On the one hand BHP was recently reported to be “on course for [a] record $1 bn profit” for this current financial year, having in the first nine months lifted its profits to $768 million, a 5.8 per cent increase on the $725.8 million for the equivalent period in the 1987–1988 financial year. On the other hand however it was in this third quarter that the High Court, at the expense of BHP, was given its first opportunity to consider s 46 of the Trade Practices Act 1974 (Cth) in Queensland Wire Industries Pty Ltd v Broken Hill Pty Ltd and Australian Wire Industries Pty Ltd. In a decision shedding some much needed light on the section, the Court unanimously held that BHP misused its substantial degree of power in the steel products market by refusing to supply Y-bar to Queensland Wire Industries Pty Ltd (QWI), albeit in continued adherence to its policy of committing that product to manufacturing processes within the BHP group.
1 The Weekend Australian 1-2 April 1989, 29. The major contributor to these results was said to be the steel division, which commenced its run into the final straight with a nine-month net profit of $320.6 million, as compared with $112.4 million for the same period last year; see also theCourier Mail I April 1989, 33.
2 (1989) 63 ALJR 181. This decision is hereafter referred to as Queensland Wire, and the parties as 'QWI', 'BHP' and 'AWi' respectively.
3 Queensland Wire supra n 2, 182.
4 At the relevant time, s 46(1) provided that “A corporation that is in a position substantially to control a market for goods and services shall not take advantage of the power in relation to that market it has by virtue of it being in that position for the purpose of (a) eliminating or substantially damaging a [competitor]; (b) preventing the entry of a person into that market or into any other market; or (c) deterring or preventing a person from engaging in competitive conduct in that market or in any other market”.
5 Queensland Wire Industries Pty Ltdv Broken Hill Pty Co Ltd(l987) 75 ALR 331.
6 Ibid 337.
7 Apart from an admission made on behalf of BHP, Pincus J drew a Jones v Dunkel (1959) IOI CLR 298 type inference on the basis that no relevant BHP witnesses were called to give evidence on the point; (1987) 75 ALR 331, 338-339.
8 Ibid 343.
9 Ibid 345-346.
10 Ibid 349.
11 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1988) 78 ALR 407.
12 Cf Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd (1975) 5 ALR 465.
13 Whatever view was taken as to market definition BHP was always going to have a substantial degree of market power(cf cases such as Europemballage Corp and Continental Can Co Inc v EC Commission [1973] CMLR 199). The Full Court might have taken the opportunity to confirm the approach to market definition adopted by the European Court in that case as being apposite in Australia.
14 (1988) 78 ALR 407,415.
15 Ibid 410,414.
16 Queensland Wire supra n 2.
17 (1975)5>ALR 465.
18 See the discussion of the case in B G Donald andJ D Heydon, Trade Practices Law 1978) Vol I 95.
19 (1975)5ALR 465.
20 (1981) 6 TPC 596.
21 As was pointed out by Mason CJ and Wilson J, the questions of market definition and evaluating market power are all part of the one process and are merely separated for simplicity's sake: “Accordingly, if the defendant is vertically integrated, the relevant market for determining degree of market power will be at the product level which is the source of that power” (Queensland Wire supra n 2, 184).
22 Ibid 192-193.
23 (1987) 75 ALR 331, 337.
24 Id.
25 Ibid 349.
26 Ibid 337.
27 Queensland Wire supra n 2, 186.
28 Although their Honours did not seem to regard the fact of vertical integration as precluding such a holding: see passage cited supra n 21.
29 Queensland Wire supra n 2, 188.
30 Id.
31 Ibid 189.
32 Ibid 190.
33 Ibid 189. Dawson J also raised the single entity point, but thought it not conclusive to the question of whether there was a market for Y-bar. A market could exist as long as there was a product for exchange, irrespective of whether any sales had taken place: id.
34 Ibid 194-195.
35 Ibid 194.
36 Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976) 17, para 4.22.
37 Queensland Wire supra n 2, 194.
38 Id. See Re: Queensland Co-operative Milling Association; Re: Defiance Holdings Ltd (1976) 8 ALR 481, 517; Re: Tooth & Co Ltd and Tooheys Ltd (1979) 39 FLR I, 38; and United States vdu Pont & Co 351 US 377 (1956); and Europemballage Corp and Continental Can Co Inc v EC Commission [1973] CMLR 199.
39 9510 F 2d 894 (1975).
40 G de Q Walker's analysis of this decision in “Product Market Definition in Competition Law” (1980) 11 FL Rev 386,407.
41 Queensland Wire supra n 2, 194-195.
42 Ibid 193-195.
43 Id.
44 G Q Taperell, R B Vermeesch and DJ Harland, Trade Practices and Consumer Protection,(3rd ed 1983) 147-152; BG Donald and JD Reydon, supra n 18, 98-103.
45 Queensland Wire supra n 2, 184per Mason CJ and Wilson J, 188per Deane J, 189per Dawson J, and 194per Toohey J. This seems in any case to have been lately recognised by the Federal Court:Mark Lyons Pty Ltd v Bursill Sportsgear Pty Limited (1987) 75 ALR 581 (WilcoxJ).
46 Queensland Wire supra n 2, 188 per Deane J and 191, 195 per Toohey J.
47 Ibid 182, 186. Mason CJ and Wilson J also pointed to vertical integration as another indicium of market power relevant to the case at hand: ibid i85.
48 Ibid 190.
49 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331, 335- 336.
50 Queensland Wire supra n 2, 185.
51 Ibid 186.
52 Ibid 190.
53 [1973] CMLR 199.
54 Queensland Wire supra n 2, 184-185.
55 148 F 2d 416 (1945).
56 Queensland Wire supra n 2, 185.
57 United States v Columbia Steel Co 334 US 495 (1948) 528 per Reed J, cited at Queensland Wire supra n 2, 185.
58 148 F 2d 416 (1945).
59 Ibid 425-426.
60 Ibid 425.
61 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331, 341.
62 Id.
63 Statutory monopolies would be the most obvious exception.
64 (1987) 73 ALR 475.
65 (1986) 71 ALR 190.
66 (1986) 67 ALR 253.
67 Mark Lyons Pty Ltd v Bursi/I Sportsgear Pty Limited (1987) 75 ALR 581, 591-592. In relation to the relevance of market conduct to the analysis, see Queensland Wire supra n 2, 190per DawsonJ.
68 148 F 2d 416 (1945).
69 (1978) 20 ALR 31, 48-61.
70 Supra n 18, 224.
71 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331, 345.
72 Ibid 348.
73 Ibid 349.
74 Queensland Wire supra n 2, 185; see also 187per Deane J and 191 per Dawson J.
75 Trade Practices Consultative Committee, Small Business and the Trade Practices Act (1979), Vol I 70, para 9.27.
76 Queensland Wire supra n 2, 196.
77 Id.
78 Supra n 18,230.
79 Queensland Wire supra n 2, 196.
80 (1870) LR 6 QB I (choice of law in relation to foreign torts).
81 (1987) ATPR 48, 40-820.
82 Ibid 48,874-48,880.
83 Queensland Wire supra n 2, 186 per Mason CJ and Wilson J; see also 188-189 per Deane J, 191 per Dawson J and 197 per Toohey J.
84 Ibid 188 per Deane J, 191 per Dawson J and 197 per Toohey J.
85 Ibid 186 per Mason CJ and Wilson J, 188 per Deane J, 191per Dawson J and 197 per Toohey J.
86 Ibid 186 per Mason CJ and Wilson J.
87 It is clear at least from the judgments of Deane J (ibid 188-9), (Dawson J agreeing generally at 189), and Toohey J (at 197), that the evidence by way of admissions and absence of any adequate explanation were relevant also as tending to support a taking advantage finding; furthermore BHP's conduct in offering to supply only at a non-competitive price as opposed to refusing to supply outright also seemed to weigh in their Honours' minds:ibid 186 per Mason CJ and Wilson J, 188per Deane J, (Dawson J agreeing generally at 189) and 191- 192 per Toohey J. See also K Randall, “How Baxt sees the TPC's changing role”, Business Review Weekly, 14 October 1988, 73, 74.
88 K D MacDonald, “Queensland Wire Industries Pty Ltd v BHP'; Case Note (1989) 19 Qld L Soc J 131, 132-133.
89 Smithers J in Top Performance Motors (1975) 5 ALR 465, 472. See also Joske Jibid at 468, who limits that proposition to the situation where the contractual right is exercised in order to protect legitimate trade interests; and Wilcox J in Warman International v Envirotech Australia Pty Ltd (1986) 67 ALR 253, 277-278, who makes a similar point in relation to statutory rights provided they are exercised in good faith.
90 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331, 345- 346 (emphasis added).
91 Queensland Wire supra n 2, 190-191.
92 See supra n 83.
93 (1975) 5 ALR 465,472.
94 Queensland Wire supra n 2 at 185 per Mason CJ and Wilson J, at 187 per Deane J and at 196 per Toohey J. These passages indicate that the index of legality is the proscribed purpose, rather than the reprehensibility or otherwise of the conduct.
95 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331, 347.
96 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1988) 78 A.LR 407, 415,418. See also the interlocutory decision of Franki J in Tavernstock v John Walker & Sons Ltd (1980) 6 TPC 308 (not referred to by Pincus J), where injunctive relief was not granted in respect of a refusal to deal because there was insufficient evidence that the applicant had previously dealt with the respondent and there was little evidence of inconvenience, because the applicant was able to get supplies from elsewhere.
98 See Trace X Chemicals Inc v Canadian Industries Ltd (1984) 2 Trade Cases para 66089: refusal of credit in the exercise of ordinary business judgment and in good faith held not to be monopolisation; Gamco Inc v Providence Fruit & Produce Building Inc 194 F 2d 484 (1952), 487-488; certiorari denied, 344 US 817 (1952).
99 342 US 143 (1951). See also United States v Klear/ax Linen Looms Inc 63 F Supp 32 (1945), where a linen rug manufacturer, upon discovering that one of its distributors was vying for Government contracts which it had always secured, refused to continue supplying goods to that distributor to persuade it to withdraw its bid. See the discussion of this case and Lorain Journal in “Refusals to Deal by Vertically Integrated Monopolists” (1974) 87 Harv L Rev 1720, 1734-1735.
100 See eg United Brands Co v European Economic Commission [1978) I CMLR 429.
101 (1984) ATPR 40-462.
102 See Eastman Kodak Co v Southern Photo Materials Co 273 US 359 (1927) and the discussion thereof in “Refusals to Deal by Vertically Integrated Monopolists” (1974) 87 Harv L Rev 1720, 1732-1737.
103 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331, 348- 349.
104 Queensland Wire supra n 2, 186.
105 Ibid 189.
106 Id.
107 Ibid 186; see Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331,338.
108 Queensland Wire supra n 2, 196.
109 W Pengilley, “Yet another layer of regulation”, Financial Review, 17 February 1989, 15. See also by the same author: “Denial of supply and misuse of market power in Australia: What follows from the High Court decision in Queensland Wire?”, Australian Trade Practices Reporter, Special Report 16 March 1989, I.
110 It is certainly clear from the decision that in order for there to be a taking advantage there must be conduct which the monopolist could only have engaged in by virtue of its market power. However it is also abundantly clear, at least from the judgments of Deane, Dawson and Toohey JJ, that an absence of competitive conditions alone would not necessarily justify the conclusion that market power was in fact used.
111 Queensland Wire supra n 2, 186.
112 W Pengilley, Financial Review 17 February 1989, 15. Seethe comments of Pincus] concerning the assessment of damages in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331, 347-348.
113 See “Refusals to Deal by Vertically Integrated Monopolists” (1974) 87 Harv L Rev 1720,1752-1761. But, if the monopolist's refusal to deal is cost justified, then would that not pose a barrier to liability in the first place? The author implicitly denies that suggestion because of the effect of decisions such as Eastman Kodak 273 US 359 (1927). The author concludes at 1761: “unless the courts require the Plaintiff to demonstrate that the monopolist refuses to deal although outsiders are more efficient, the monopolist could be deterred from undertaking socially desirable integration because it could result in extensive treble-damage liability”. Whether the existence of a discrete purpose requirement in s 46 distinguishes Australian law on the point (assuming that statement to accurately represent the US position) remains to be seen.
114 In Otto Tail Power Co v United States 410 US 366 (1973), 375 a duty to deal was imposedon a vertically integrated manufacturer in respect of second-level rivals but only “at rates which are compensatory and under terms and conditions which are filed with and subject to approval by the Federal Power Commission”.
115 “Refusals to Deal by Vertically Integrated Monopolists” (1974) 87 Harv L Rev 1720, 1758.
116 United States v Paramount Pictures Inc 334 US 131 (1948), 163.
117 “Refusals to Deal by Vertically Integrated Monopolists” (1974) 87 Harv L Rev 1720, 1755.
118 Cf" Denial of supply and misuse of market power in Australia”, Australian Trade Practices Reporter, Special Report (16 March 1989) I, 19.
119 [1913] AC 107, I 18, cited by Knox CJ, Isaacs, Rich and Starke JJ in The Amalgamate Society of Engineers v The Adelaide Steamship Company Limited and Others (1920) 28 CLR 129, 142-143.