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Published online by Cambridge University Press: 24 January 2025
One of the most important sections of the Trade Practices Act is section 45, which concerns restraint of trade. Dr Pengilley begins by outlining the provisions of the Trade Practices Act dealing with restraint of trade and the role of the Trade Practices Commission in relation to those provisions and in comparison to the courts. Detailed analysis is then given to numerous decisions, from a number of jurisdictions, relevant to the interpretation of section 45. Extensive examination is also made of a large number of Trade Practices Commission decisions regarding clearance or authorisation of conduct which is, or may be, contrary to section 45. The article concludes by discussing and assessing the implications of the High Court's only decision to date on the interpretation of section 45.
This article sets out the position as at 1 August 1976.
The views expressed are the personal views of the writer. The writer is indebted to Mr J. D. Pyne and Dr G. de Q. Walker for their reading of the drafts of this article and the helpful comments they have made on such drafts.
1 S. 2(3) and Australian Government Gazette No. 75B, 13 September 1974, 1.
2 S. 2(4).
3 In this article, it is not intended to deal with a number of aspects which may touch on restraint of trade under the Trade Practices Act. Thus, for example, the constitutional reach of the Act is not covered. Neither are the exemption provisions set out in the statute (s. 51). Questions of “severance”, though of great practical importance, are similarly not dealt with. Corporate and individual responsibility for breaches of the legislation is a separate topic as are the principles of private action. The inter-action of ss. 45 and 47 is also not dealt with. With the intent of conserving space s. 45(3) is not covered. Though important, the general thrust of section 45 (3) is covered by the comments in this article relevant to s. 45(4). The summary given is the legal position as at 1 August 1976. It is a summary only for the purpose of giving the legislative background against which this article has to be viewed. It is not an all encompassing summary.
4 The italics here and elsewhere are that of the writer.
5 S. 45(1).
6 S. 45 (2)(a). The section states that “a corporation” shall not be party to the prohibited activities and this terminology is general in the Act. The word “corporation”, however, generally covers individuals (s. 6(2)(h)). This raises questions as to the Constitutional reach of the Act into which it is not intended here to delve.
7 S. 45(2)(b). See also comments supra, n. 6.
8 S. 45(4) but see also 45 (3) and n. 3supra.
9 S. 76.
10 s. 77.
11 S. 76; see also s. 169 and definition of “Courts” in s. 4.
[Editor's note: Since the creation of the Federal Court of Australia (see Federal Court of Australia Act 1976) and the abolition of the Industrial Court (see Conciliation and Arbitration Amendment Act (No. 3) Act 1976, s. 4) the Federal Court of Australia has jurisdiction over matters arising under the Trade Practices Act. The definition of “Courts” in the Trade Practices Act, s. 4 has been amended accordingly (see Federal Court of Australia (Consequential Provisions) Act 1976, s. 3) .]
12 s. 80.
13 Jbid.
14 S. 82.
15 s. 92(1).
16 s. 92(2).
17 Ibid.
18 s. 88(2).
19 s. 88(1).
20 s. 90(5).
21 s. 88(1).
22 See, e.g., ss. 45(8), 88(4), 88(5).
23 S. 91(2).
24 s. 91(3).
25 s. 90(2).
26 s. 101.
27 I.e. as at 1 August 1976. By the time this article appears, there may well be significant changes in the position as stated in this article but these cannot be anticipated with any degree of certainty at this stage.
28 Quadramain Pty Ltd v. Sevastapol Investments Pty Ltd (1976) 50 A.L.J.R. 475.
29 Ibid.
30 References given in this article are to the Commission Registration Numbers and the date of the Commission's decision.
31 s. 90(4).
32 The Commission, under s. 28(1)(a) of the Trade Practices Act, has an obligation “to make available to persons engaged in trade or commerce and other interested persons general information for their guidance with respect to the carrying out of the functions, or the exercise of the powers, of the Commission ... “.
33 Eighteen such Guidelines have been issued as at 1 August 1976. Guidelines are directed to a number of matters (e.g. advertising guidelines) as well as to restraint of trade. Six Guidelines relate primarily to restraint of trade.
34 Each Guideline issued by the Commission specifically carries a notation that the Commission cannot bind the courts and neither can it bind the Attorney- General or individual litigants as to cases such persons may come to bring before the courts.
35 S. 92(1).
36 Quadramain Application (Cl8284-11 August 1975).
37 Shell Authorisation Determination-Public Hearing No. 1 of 1975. Determination 9 December 1975.
38 Shell Authorisation Determination, supra, para. 9.3(b).
39 Quadramain Application, supra, n. 36.
40 (1976) 50 A.L.J.R. 475.
41 Note s. 45(1) refers only to a “contract in restraint of trade” omitting the words “arrangement or understanding”. However, s. 45(1) applies only to contracts made before the commencement of the Act. S. 45(2) will clearly be the more relevant section in future. It refers to the making of “contracts, arrangements or understandings”.
42 Newton v. Commissioner of Taxation [1958] A.C. 450.
43 Re The Wellington Fencing Materials Association [1960] N.Z.L.R. 1121.
44 [1958] A.C. 450.
45 Ashton v. Inland Revenue Commissioner of New Zealand [1975] 1 W.L.R. 1615, 1621. The case involved the construction to be put on s. 108 of the Land and Income Tax Act 1954 (N.Z.). So far as here relevant, s. 108 of the New Zealand statute may be considered equivalent to s. 260 of the Australian Income Tax Act.
46 E.g., U.S. v. National Association of Real Estate Boards (1950) 339 U.S. 485; U.S. v. Nationwide Trailer Rental Systems Inc. 1955 Trade Cases 68,101; Plymouth Dealers Assoc. of Northern California v. U.S. 1960 Trade Cases 69,726; Re The Wellington Fencing Materials Association [1960] N.Z.L.R. 1121.
47 [1960] N.Z.L.R. 1121, 1128.
48 (1921) 257 U.S. 377.
49 Maple Flooring Manufacturers' Association v. U.S. (1925) 268 U.S. 563.
50 (1921) 257 U.S. 377, 410.
51 (1925) 268 U.S. 563.
52 Re British Basic Slag Agreements [1963] 1 W.L.R. 727.
53 Id. 747 per Diplock L.J.
54 Re Mileage Conference Group of the Tyre Manufacturers' Conference Ltd's Agreement [1966] 1 W.L.R. 1137, 1159.
55 Re The European Sugar Cartel: Co-operatieve Vereniging 'Suiker Unie' UA v. E.C. Commission [1976] 1 C.M.L.R. 295.
56 Id. 405.
57 Petrofina (Gt. Britain) Ltd v. Martin [1966] Ch. 146, 180. (Italics added.)
58 Esso Petroleum Co. Ltd v. Harper's Garage (Stourport) Ltd [1968] A.C. 269.
59 Northern Pacific Railway Co. v. U.S. (1958) 356 U.S. 1, 7.
60 (1971) 125 C.L.R. 353.
61 Id. 375.
62 Queensland Co-operative Milling Association v. Pamag Pty Ltd (1973) 47 A.L.J.R. 342.
63 E.g., Pharmaceutical Society of Great Britain v. Dickson [1970) A.C. 403, 431, 440; Schroeder Music Publishing Co. Ltd v. Macauley [1974) 1 W.L.R. 1308, 1315.
64 Amoco Australia Pty Ltd v. Rocca Bros Motor Engineering Co. Pty Ltd (1973) 47 A.L.J.R. 681.
65 See cases cited supra, n. 46.
66 See American Column & Lumber Co. v. U.S. (1921) 257 U.S. 377, cf. Maple Flooring Manufacturers' Association v. U.S. (1925) 268 U.S. 563.
67 U.S. v. Baton Rouge Insurance Exchange 1958 Trade Cases 69,068.
68 Fashion Originators Guild v. F.T.C. (1941) 312 U.S. 457. Note that it is possible that such a purpose in Australia may merit authorisation on “public benefit” grounds under s. 90(5) of the Trade Practices Act.
69 Pharmaceutical Society of Great Britain v. Dickson [1970] A.C. 403.
70 F.T.C. v. Pacific States Paper Trade Association (1927) 273 U.S. 52.
71 Klor's Inc. v. Broadway-Hale Stores Inc. (1959) 359 U.S. 207.
72 Marin County Board of Realtors Inc. v. Palsson 1975-2 Trade Cases 60,445.
73 U.S. v. Abrasive Grain Association 1948-1949 Trade Cases 62,329.
74 U.S. v. American Lindseed Oil Co. (1923) 262 U.S. 371.
75 U.S. v. Coal Dealers' Association of California (1898) 85 F252.
76 Klors Inc. v. Broadway-Hale Stores Inc. (1959) 359 U.S. 207.
77 Id. 212.
78 Daily Mirror Newspapers Ltd v. Gardner [1968] 2 Q.B. 762, approved in Brekkes v. Cattel [1972] Ch. 105. Such a statement should be borne in mind by parties seeking authorisation pursuant to s. 90(5) of the Trade Practices Act-a subject dealt with later in this article.
79 Associated Press v. U.S. (1945) 326 U.S. 1.
80 Keifer-Stewart Co. v. Joseph E. Seagram & Sons Inc. (1951) 340 U.S. 211. Note that this activity is not within the exemption of s. 45(5) Trade Practices Act as it involves concerted action by more than one party.
81 Pengilley, “Restrictive Trading Agreements” (1973) 47 The Australian Accountant 396.
82 H.R. Deb. 1962, Vol. 36, 424.
83 Hepworth Manufacturing Co. Ltd v. Ryott [1920] 1 Ch. 1, 26. Approved by the Australian High Court in Buckley v. Tutty (1971) 125 C.L.R. 353.
84 Eastham v. Newcastle United Football Club Ltd [1964] Ch. 413.
85 Blacker v. New Zealand Rugby Football League (Inc.) [1968] N.Z.L.R. 547; Buckley v. Tutty (1971) 125 C.L.R. 353.
86 Nagle v. Feilden [1966] 2 Q.B. 633.
87 U.S. v. Schubert (1955) 348 U.S. 222; U.S. v. International Boxing Club of New York Inc. (1955) 348 U.S. 236.
88 Associated Press v. U.S. (1945) 326 U.S. 1.
89 Pharmaceutical Society of Great Britain v. Dickson [1970] A.C. 403.
90 Ibid.
91 U.S. v. American Medical Association (1940) 110 F 2d 703; American Medical Association v. U.S. (1942) 130 F 2d 233 cf. on appeal (1943) 317 U.S. 519; U.S. v. Oregon Medical Society (1952) 343 U.S. 326, 338-339.
92 U.S. v. National Association of Real Estate Boards (1950) 339 U.S. 485, 490.
93 Goldfarb v. Virginia State Bar (1975) 421 U.S. 773.
94 Blacker v. New Zealand Rugby Football League (Inc.) [1968] N.Z.L.R. 547.
95 See Pengilley, “Exclusive Dealing under the Trade Practices Act” (1975) 3 Australian Business Law Review 174, 197-202.
96 It is realised that this is assertion without discussion. The point appears clear to the writer on comparative evaluation but it cannot be elaborated in detail in this article. This view has been confirmed by at least two U.S. authorities (Professors Weston and Mnookin) with whom the writer has discussed the matter in detail.
97 Information Circular No. 3-10 December 1974.
98 Information Circular No. 1-10 December 1974.
99 Australian Federation of Travel Agents (C7515, 16 July 1975).
1 Information Circular No. 9-26 May 1975.
2 E.g., Australian Federation of Travel Agents (C18520, C18437 and C7515- all decisions 15 May 1975); Wholesale Wine and Spirits Merchants Association of N.S.W. (C3093-28 July 1975); Wholesale Wine &Brandy Association of N.S.W. (C3748-28 July 1975); Wine & Brandy Producers Association of South Australia (C515-28 July 1975); Australian Pharmaceutical Manufacturers Association (C21031-23 October 1975); Australian Veterinary Association (C21167- 21 November 1975). In particular, see letter from Australian Federation of Travel Agents dated 9 September 1975 and Commission's reply of 24 October 1975 (on public register No. C7515). Note the A.F.T.A. Code of Ethics sub- sequently cleared (C23242-2 August 1976). Other Codes of Ethics cleared include codes relating to Beer Advertising (C22033:...._17 December 1975) and a code relating to Law Society rulings on Business Names (C23119-9 April 1976).
3 Pharma Buy (C4272-ll July 1975); Magnetic Electrix Application (C939-24 October 1975); Donlan Liquor Market (C763-8 August 1975).
4 Information Circular No. 15-12 May 1976.
5 (1921) 257 U.S. 377.
6 (1925) 268 U.S. 563.
7 E.g., Tractor & Machinery Association of Australia (C266-71-6 November 1975).
8 Information Circular No. 14-28 April 1976.
9 Information Circular No. 7-12 May 1975.
10 Myers Application (numerous registration numbers-25 June 1976). A number of other decisions express the same view.
11 Northpoint Shopping Centre (C931-26 September 1975). A number of other decisions express the same view.
12 Ibid.
13 Ibid.
14 Starbridge No. 1 Pty Ltd (C21332-19 May 1976). Two large lessees occupied 63% of Shopping Centre but paid only 17.9% of contributions.
15 Information Circular No. 1-10 December 1974.
16 First Annual Report of the Trade Practices Commission-Year Ended 30 June 1975 paras. 1.39 and 1.40.
17 Shell Authorisation Application (Public Hearing No. 1 of 1975-Determination dated 9 December 1975), para. 47.
18 Australian Paper Manufacturers Limited (A974-5; A4018-9-28 January 1976).
19 Nixon Blayney Pty Ltd (A15250-3-15 January 1976).
20 Ibid.
21 Victorian Building Societies (A4217-23 February 1976); Institute of Launderers and Linen Suppliers (A3554-23 February 1976).
22 Institute of Launderers and Linen Suppliers (A3554-23 February 1976).
23 Australian Chamber of Shipping (A3193-21 June 1976). At the date of writing an appeal has been lodged to the Tribunal against the Commission's determination.
24 South Australian Chamber of Cement Distributors (A6102-11 June 1976); Timber Merchants Association of Victoria (A73-12 June 1975).
25 Glenila Poultry Services (A5050-1-6 May 1976). The point is quite general and appears in a number of Commission Authorisation determinations.
26 Hardware Retailers of Western Australia (A7102-31 March 1976).
27 Ibid. The same principle is stated in a number of cases e.g. Timber Merchants Association of Victoria (A73-12 June 1975).
28 Australian Federation of Travel Agents (A16164-28 April 1976).
29 Australian Federation of Travel Agents (C23242-2 August 1976).
30 Timber Merchants Association of Victoria (A73-12 June 1975).
31 A.C.T. Medical Association (A91-31 January 1975).
32 See the writer's article “Comments on Arguments in Justification of Agreements in Restraint of Trade-The United Kingdom, Australian and New Zealand Experience” (1974) 19 The Anti-Trust Bulletin 257.
33 Hydrocarbon Products Pty Ltd (A14 and A4029-ll March 1975).
34 Philips Industries Limited (A3502-29 October 1975).
35 Associated Biscuits International (A510-511-17 February 1975).
36 Herald & Weekly Times (Public Hearing No. 2 of 1975-Determination 24 May 1976). At the time of writing, the applicants have lodged an appeal from this decision on the question of the non-authorisation of exclusivity aspects of the agreement.
37 Shell Authorisation Application (Public Hearing No. 1 of 1975-Determination dated 9 December 1975).
38 See n. 36 supra.
39 (1976) 50 A.L.J.R. 475.
40 Heydon, “Restraint of Trade in the High Court” (1976) 50 A.L.J. 290.
41 (1848) 2 Ph. 774; 41 E.R. 1143.
42 Attorney-General of the Commonwealth v. Adelaide Steamship Co. Ltd (1914) 18 C.L.R. 30; Crown Milling Co. Ltd v. R. [1927) A.C. 394 (overruling the interpretation given in New Zealand to the Commercial Trusts Act 1910 by Merchants Association of New Zealand (Inc.) v. R. (1913) 32 N.Z.L.R. 537 and Fairbairn, Wright Co. v. Levin & Co. Ltd (1915) 34 N.Z.L.R. 1).
43 Attorney-General v. Brickworks Pty Ltd (1941) 41 S.R.(N.S.W.) 72.
44 Heydon, op. cit.
45 U.S. v. Trans-Missouri Freight Association (1897) 166 U.S. 290, 328 (italics added). In Standard Oil of New Jersey v. U.S. (1911) 221 U.S. 1, the Trans- Missouri Freight holding was modified by the “rule of reason” test, in that it was held that only “undue restraints” with a direct effect on trade or commerce were covered by the Sherman Act. Thus a judicial “de minimis” test was built into the legislation. The Australian Act has its own statutory “de minimis” test built in, ass. 45 (4) states that the restraint does not breach the legislation unless the restraint “has or is likely to have a significant effect on competition”. Similarly s. 45(3) has a “de minimis” test built in as regards those agreements to which the sub section relates.
46 [1894] A.C. 535.
47 Id. 565.
48 [1892] A.C. 25.
49 See U.S. v. Addyston Pipe & Steel Co. (1898) 85 F 271, 286.
50 Vancouver Malt & Sake Brewing Co. Ltd v. Vancouver Breweries Ltd [1934] A.C. 181, 189.
51 Blacker v. New Zealand Rugby Football League (Inc.) [1968] N.Z.L.R. 547, 568.
52 Mogul Steamship Co. Ltd v. McGregor Gow & Co. [1892] A.C. 25.
53 Rawlings v. General Trading Co. [1921] 1 K.B. 635.
54 Hardie & Lane Ltd v. Chilton [1928] 2 K.B. 306; Ware & de Freville Ltd v. Motor Trade Association [1921] 3 K.B. 40; Sorrell v. Smith [1925] A.C. 700; Thorne v. Motor Trade Association [1937] A.C. 797.
55 North Western Salt Co. v. Electrolytic Alkali Co. Ltd [1914] A.C. 461.
56 Ogden Industries Pty Ltd v. Lucas [1970] A.C. 113.
57 Id. 127.
58 Second Annual Report of the Trade Practices Commission-Year ended 30 lune 1976, para. 1.8.
59 [Editor's note: The Review Committee reported on 20 August 1976, see Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs. The government has announced its intention to make amendments to the Trade Practices Act in 1977.]