Middleton, Justice John --- "What will the Australian Competition Tribunal do now without Limited Merits Review?" (FCA) [2018] FedJSchol 7

The Australian Energy Regulator has clipped NSW transmission monopoly TransgridaEURtms proposed capex budget by $311 million over the next five years as policymakers strive to avoid a return to aEURoegold-platingaEUR of networks that drove up power prices in the past decade.

10 On 1 July 2016, I took over from Justice Mansfield as President. Criticism of the gold-plating at the expense of consumer welfare was voiced in some quarters. To a member of the executive and not the judiciary, perhaps more leeway can be taken in the way in which criticism is expressed. Where Ministers of the Crown made comments about the attitude of the Victorian Court of Appeal to sentencing, threats of contempt of court were made, and issues arose as to the appropriateness of the criticisms made by certain Ministers and the appropriateness of the Court of AppealaEURtms reaction to those criticisms.

11 Holding none of the contempt powers of the judicial arm of government, I bore the criticisms against the Tribunal silently. They were not personal. Personal attacks can be amusing to others. There was the famous incident of the Birmingham newspaper in 1900 which contained a criticism in the following terms of Justice Darling who was holding the local assizes in England:

aEUR| If anyone can imagine Little Tich upholding his dignity upon a point of honour in a public house, he has a very fair conception of what Mr Justice Darling looked like in ruling the Press against the printing of indecent evidence. His diminutive Lordship positively glowed with judicial self-consciousness. No newspaper can exist except upon its merits, a condition from which the Bench, happily for Mr Justice Darling, is exempt. There is not a journalist in Birmingham who has anything to learn from the imprudent little man in horsehair, a microcosm of conceit and empty headedness. One is almost sorry that the Lord Chancellor had not another relative to provide for on the day that he selected a new judge from among the larrikins of the law. One of Justice DarlingaEURtms biographers states that aEURoean eccentric left him much moneyaEUR. That misguided testator spoiled a successful bus conductor.

12 I like to recall this episode to put all criticism in proper context.

13 Returning to the chronology and moving on to 2017. That was a year which comprised a period of transition in the work of the Tribunal following on in part from the discontent expressed earlier by various stakeholders. Limited Merits Review of regulatory decisions made pursuant to the National Electricity Law and the National Gas Law was abolished by operation of the Consumer Amendment (Abolition of Limited Merits Review) Act 2017. In addition, whilst a separate reform, merger authorisation applications would no longer be able to be made direct to the Tribunal. Such applications would be able to be made only to the Australian Competition and Consumer Commission. The Tribunal would, however, have power to review merger authorisation determinations made by the ACCC. These changes were affected by the operation of the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth). Given these changes the Tabcorp Holdings LimitedaEURtms applications seeking an authorisation under s 95AT of the CCA to acquire the issue shared capital of Tatts Group Ltd were the last applications of their type.

14 For those of you who read the small print and are here for the refreshments, let me explain what is meant by aEURoeLimited Merits ReviewaEUR. It is well established the term aEURoereviewaEUR is used in various senses in public law and that it takes its content from the particular statutory or constitutional settings in which it appears: see East Australian Pipeline Pty Limited v Australian Competition and Consumer Commission [2007] HCA 44; (2007) 233 CLR 229 at [62] per Gummow and Hayne JJ; at [13] Gleeson CJ, Heydon and Crennan JJ agreeing.

15 Taking the National Electricity Law as an example, the review contemplated by the National Electricity Law did not involve a de novo hearing. Rather, the nature of the review was intended to be a limited merits review regime. It was supposed to be limited in a number of ways. The matters that could be raised in a review were specified in s 71O:

71OaEUR"Matters that may and may not be raised in a review

(1) The AER, in a review under this Subdivision, mayaEUR"

(a) respond to any matter raised by the applicant or an intervener; and

(b) raise any other matter that relates toaEUR"

(i) a ground for review; or

(ii) a matter raised in support of a ground for review; or

(iii) a matter relevant to the issues to be considered under section 71P(2a) and (2b).

(2) In a review under this Subdivision, the following provisions apply in relation to a person or body, other than the AER (and so apply at all stages of the proceedings before the Tribunal):

(a) a regulated network service provider to whom the reviewable regulatory decision being reviewed applies may not raise in relation to the issue of whether a ground for review exists or has been made out any matter that was not raised and maintained by the provider in submissions to the AER before the reviewable regulatory decision was made;

(b) a regulated network service provider whose commercial interests are materially affected by the reviewable regulatory decision being reviewed may not raise in relation to the issue of whether a ground for review exists or has been made out any matter that was not raised and maintained by the provider in submissions to the AER before the reviewable regulatory decision was made;

(c) an affected or interested person or body (other than a provider under paragraph (a) or (b)) may not raise in relation to the issue of whether a ground for review exists or has been made out any matter that was not raised by the person or body in a submission to the AER before the reviewable regulatory decision was made;

(d) subject to paragraphs (a), (b) and (c)aEUR"

(i) the applicant, or an intervener who has raised a new ground for review under section 71M, may raise any matter relevant to the issues to be considered under section 71P(2a) and (2b); and

(ii) any person or body, other than the applicant or an intervener who has raised a new ground for review under section 71M, may not raise any matter relevant to the issues to be considered under section 71P(2a) and (2b) unless it is in response to a matter raised byaEUR"

(A) the AER under subsection (1)(b)(iii); or

(B) the applicant under subparagraph (i); or

(C) an intervener under subparagraph (i).

(3) For the purposes of subsection (2)(d)aEUR"

(a) a reference to an applicant includes a reference to a person or body who has applied to the Tribunal for leave to apply for a review under this Subdivision;

And

(b) a reference to an intervener includes a reference to a person or body who has applied to the Tribunal for leave to intervene in a review under this Subdivision.

16 The matters which the Tribunal could consider when making its determination in respect of an application for review were specified in s 71R:

71RaEUR"Matters to be considered by Tribunal in making determination

(1) Subject to this section, the Tribunal, in acting under this Division with respect to a reviewable regulatory decisionaEUR"

(a) must not consider any matter other than review related matter (and any matter arising as a result of consultation under paragraph (b)); and

(b) must, before making a determination, take reasonable steps to consult with (in such manner as the Tribunal thinks appropriate)aEUR"

(i) network service users and prospective network service users of the relevant services; and

(ii) any user or consumer associations or user or consumer interest groups,

that the Tribunal considers have an interest in the determination, other than a user or consumer association or a user or consumer interest group that is a party to the review.

(3) If in a review the Tribunal is of the view that a ground for review has been made out, the Tribunal may, on application by a party to the review, allow new information or material to be submitted if the party can establish to the satisfaction of the Tribunal that the information or materialaEUR"

(a) was publicly available or known to be available to the AER when it was making the reviewable regulatory decision; or

(b) would assist the Tribunal on any aspect of the determination to be made and was not unreasonably withheld from the AER when it was making the reviewable regulatory decision,

and was (in the opinion of the Tribunal) information or material that the AER would reasonably have been expected to have considered when it was making the reviewable regulatory decision.

(4) Subject to this Law, for the purpose of subsection (3)(b), information or material not provided to the AER following a request for that information or material by it under this Law or the Rules is to be taken to have been unreasonably withheld.

(5) Subsection (4) does not limit what may constitute an unreasonable withholding of information or material.

(5a) In addition, if in a review the Tribunal is of the viewaEUR"

(a) that a ground for review has been made out; and

(b) that it would assist the Tribunal to obtain information or material under this subsection in order to determine whether a materially preferable NEO decision exists,

the Tribunal may, on its own initiative, take steps to obtain that information or material (including by seeking evidence from such persons as it thinks fit).

(5b) The action taken by a person acting in response to steps taken by the Tribunal under subsection (5a) must be limited to considering decision related matter under section 28ZJ.

(6) In this sectionaEUR"

review related matter meansaEUR"

(a) the application for review; and

(b) a notice raising new grounds for review filed by an intervener; and

(c) the submissions made to the Tribunal by the parties to the review; and

(d) decision related matter under section 28ZJ; and

(e) any other matter properly before the Tribunal in connection with the relevant proceedings.

17 Then the grounds for review where intended to be limited by s 71C:

71C Grounds for review

(1) An application under section 71B(1) may be made only on 1 or more of the following grounds:

(a) the AER made an error of fact in its findings of facts, and that error of fact was material to the making of the decision;

(b) the AER made more than 1 error of fact in its findings of facts, and that those errors of fact, in combination, were material to the making of the decision;

(c) the exercise of the AER's discretion was incorrect, having regard to all the circumstances;

(d) the AER's decision was unreasonable, having regard to all the circumstances.

(1a) An application under section 71B(1) must also specify the manner in which a determination made by the Tribunal varying the reviewable regulatory decision, or setting aside the reviewable regulatory decision and a fresh decision being made by the AER following remission of the matter to the AER by the Tribunal, on the basis of 1 or more grounds raised in the application, either separately or collectively, would, or would be likely to, result in a materially preferable NEO decision.

(2) It is for the applicant to establish a ground listed in subsection (1) and the matter referred to in subsection (1a).

18 The aEURoenational electricity objectiveaEUR (the aEUR~NEOaEURtm) was set out in s 7 and stated as follows:

7 National electricity objective

The objective of this Law is to promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to--

(a) price, quality, safety, reliability and security of supply of electricity; and

(b) the reliability, safety and security of the national electricity system.

19 The expression aEURoematerially preferable NEO decisionaEUR was defined in s 71A with reference to s 71P(2a)(c) as follows:

71P Tribunal must make determination

(1) If, following an application, the Tribunal grants leave in accordance with section 71B(1), the Tribunal must make a determination in respect of the application.

See section 71Q for the time limit within which the Tribunal must make its determination.

(2) Subject to subsection (2a), a determination under this section may--

(a) affirm the reviewable regulatory decision; or

(b) vary the reviewable regulatory decision; or

(c) set aside the reviewable regulatory decision and remit the matter back to the AER to make the decision again in accordance with any direction or recommendation of the Tribunal.

(2a) Despite subsection (2), the Tribunal may only make a determination--

(a) to vary the reviewable regulatory decision under subsection (2)(b); or

(b) to set aside the reviewable regulatory decision and remit the matter back to the AER under subsection (2)(c),

if--

(c) the Tribunal is satisfied that to do so will, or is likely to, result in a decision that is materially preferable to the reviewable regulatory decision in making a contribution to the achievement of the national electricity objective (a aEURoematerially preferable NEO decisionaEUR) (and if the Tribunal is not so satisfied the Tribunal must affirm the decision); and

(d) in the case of a determination to vary the reviewable regulatory decision--the Tribunal is satisfied that to do so will not require the Tribunal to undertake an assessment of such complexity that the preferable course of action would be to set aside the reviewable regulatory decision and remit the matter to the AER to make the decision again.

(2b) In connection with the operation of subsection (2a) (and without limiting any other matter that may be relevant under this Law)--

(a) the Tribunal must consider how the constituent components of the reviewable regulatory decision interrelate with each other and with the matters raised as a ground for review; and

(b) without limiting paragraph (a), the Tribunal must take into account the revenue and pricing principles (in the same manner in which the AER is to take into account these principles under section 16); and

(c) the Tribunal must, in assessing the extent of contribution to the achievement of the national electricity objective, consider the reviewable regulatory decision as a whole; and

(d) the following matters must not, in themselves, determine the question about whether a materially preferable NEO decision exists:

(i) the establishment of a ground for review under section 71C(1);

(ii) consequences for, or impacts on, the average annual regulated revenue of a regulated network service provider;

(iii) that the amount that is specified in or derived from the reviewable regulatory decision exceeds the amount specified in section 71F(2).

(2c) If the Tribunal makes a determination under subsection (2)(b) or (c), the Tribunal must specify in its determination--

(a) the manner in which it has taken into account the interrelationship between the constituent components of the reviewable regulatory decision and how they relate to the matters raised as a ground for review as contemplated by subsection (2b)(a); and

(b) in the case of a determination to vary the reviewable regulatory decision--the reasons why it is proceeding to make the variation in view of the requirements of subsection (2a)(d).

(3) For the purposes of making a determination of the kind in subsection (2)(a) or (b), the Tribunal may perform all the functions and exercise all the powers of the AER under this Law or the Rules.

(4) (Repealed)

(5) A determination by the Tribunal affirming, varying or setting aside the reviewable regulatory decision is, for the purposes of this Law (other than this Part), to be taken to be a decision of the AER.

20 The so called limitation of review came from the matters that could be raised by an applicant, the matters that could be considered by the Tribunal and the grounds themselves. Nevertheless, in practice the review was hard to limit, and the Tribunal had to hear, consider and then make a determination on the basis of voluminous material and complex economic concepts as they applied to a rather complicated regulatory regime. The real problem with attempting any limitation of review in practice was that the grounds of review were very wide, particularly relating to reviewing facts and dealing with the unreasonable ground. The Tribunal had (and still has) the advantage of being a specialist body, with economic experts as members. But hearing, considering and deliberating all takes time, even for an efficient economist. Then the Tribunal has to produce comprehensive reasons for the decision. The width of the review grounds inevitably left open, not only for the ingenious counsel, but also even for the less ingenious, the opportunity to re-argue effectively all the matters that were before the AER (and sometimes more). This involved sometimes an analysis of those riveting topics such as the cost of corporate income tax (Gamma), return on debt, forecast bushfires safety capex, forecast labour cost escalation and forecast inflation, as in SA Power Networks (2016) ACompT 11.

21 Now review of the AER is in the domain of the Federal Court by way of the normal judicial review process, where the concept of unreasonableness will undoubtedly arise. This is not the time to discuss the implications of the High Court decision in Minister for Immigration and Citizenship v Li [2012] HCA 61; (2013) 249 CLR 332 and the subsequent Federal Court decisions that have very usefully elaborated and provided clarification on some of the questions the High CourtaEURtms decision raised. I do mention in passing that it has been observed that the courts may lack the institutional, technical and democratic credentials of the executive and this underpins constitutional norms that restrict unreasonableness review: see Lord Irvine aEURoeJudges and Decision Makers: the Theory and Practice of Wednesbury ReviewaEUR (1996) Public Law 59, 60-61. It may be difficult for the Court to grapple with the unreasonableness ground where the Court (unlike the Tribunal) does not itself possess the expertise to assess the scope and detail of a submission which involves this ground. I refer in this regard to the approach of the Full Court in Australian Competition and Consumer Commission v Australian Competition Tribunal [2017] FCAFC 150 at [84] per Besanko, Perram and Robertson JJ, where they were confronted with dealing with an argument that aEURoea aEUR~marginal costaEURtm analysis is inapposite to the economics of individual wagersaEUR. Understandably, the Full Court found it difficult to do much with this statement without more information and submission on the wagering system.

22 Despite the legislative changes made in 2017 and the abolition of Limited Merits Review being conducted by the Tribunal, the Tribunal still has jurisdiction over a number of important matters.

23 The Tribunal has power under Part IIIA the CCA to review decisions relating to the declaration of services (see definition at s 44B) such as roads, railway lines, electricity grids and gas pipelines.

• Section 44K gives the Tribunal power to review a decision of the Minister regarding the declaration of services.
• Section 44L gives the Tribunal power to review a decision of the Minister not to revoke a declaration of services.
• Section 44LJ gives the Tribunal power to review a decision of the Minister relating to the eligibility of a declared service.
• Section 44PG gives the Tribunal power to review a decision made by the ACCC relating to the approval of a competitive tender process for government owned facilities.
• Section 44PH gives the Tribunal power to review a decision of the ACCC to revoke an approval of a competitive tender process for government owned facilities.
• Section 44ZP gives the Tribunal power to review a final determination of the ACCC relating to access to declared services.
• Section 44ZX gives the Tribunal power to review a decision of the ACCC not to register contracts for access to declared services.
• Section 44ZZBF gives the Tribunal power to review an access undertaking decision of the ACCC.

24 The Tribunal also has power to hear applications regarding the following:

• Section 10.82A of the CCA gives the Tribunal power to review certain decisions of the ACCC in relation to international liner cargo shipping.
• Section 102 of the CCA gives the Tribunal power to review determinations of the ACCC relating to:
  • Notices issued under s 93 of the CCA concerning exclusive dealing.
  • The grant or refusal of authorisations for company mergers or acquisitions.
• Section 151CI of the CCA gives the Tribunal power to review a decision of the ACCC relating to exemptions under s 151BA.

25 In addition, pursuant to s 44O of the CCA, a responsible minister of a State or Territory can apply to the Tribunal for review of a Commonwealth ministeraEURtms decision as to whether an access regime is an effective access regime pursuant to the CCA (see ss 44M & 44N).

26 Then, although s 44ZZMAA abolishes limited merits review by the Tribunal of decisions made under energy laws, it has a carve out for decisions relating to the disclosure of confidential or protected information. Therefore, to the extent that an energy law reserved to the Tribunal the power to make decisions about the disclosure of confidential or protected information, such a provision would continue to have effect, and any application about disclosure could be brought to the Tribunal.

27 Then thinking beyond the square, there may be other ways the expertise of the Tribunal could be usefully employed in the development of competition law. The Tribunal is a panel of experts in a number of fields. The Tribunal is comprised of presidential members and lay members who are qualified by virtue of their knowledge of, or experience in, industry, commerce, economics, law or public administration. The Deputy Presidents are: Justice Andrew Greenwood, Justice Lindsay Foster, Justice David Yates, Justice Alan Robertson, Justice Kathleen Farrell and Justice Jennifer Davies. There are seven lay members of the Tribunal: Mr Robyn Davey, Mr Grant Latta AM, Professor David Round AM, Mr Rodney Shogren, Mr Ray Steinwall, Dr Darryn Abraham and Professor Kevin Davis.

28 The Tribunal is supported by a Registrar (Tim Luxton) and Deputy Registrars (Nicola Colbran, Katie Lynch, Geoffrey Segal and Russell Trott).

29 The TribunalaEURtms very talented lay members could be as a panel of experts available for assisting the competition law work of the Federal Court.

30 Section 54A of the Federal Court of Australia Act 1976 (Cth), inserted in 2009 by the Federal Justice System Amendment (Efficiency Measures) Act 2009 (Cth) contains a power to appoint a referee. It states:

Referral of questions to a referee

(1) Subject to the Rules of Court, the Court may by order refer:

(a) a proceeding in the Court; or

(b) one or more questions arising in a proceeding in the Court;

to a referee for inquiry and report in accordance with the Rules of Court.

(2) A referral under subsection (1) may be made at any stage of a proceeding.

(3) If a report of a referee under subsection (1) is provided to the Court, the Court may deal with the report as it thinks fit, including by doing the following:

(a) adopting the report in whole or in part;

(b) varying the report;

(c) rejecting the report;

(d) making such orders as the Court thinks fit in respect of any proceeding or question referred to the referee.

31 Very recently, in Kadam v MiiResorts Group 1 Pty Ltd (No 4) [2017] FCA 1139 at [35]- [62], Lee J helpfully set out the background to the use of referees as a method of ensuring that discrete issues in litigation are determined with maximum efficiency. In Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527, Murphy J adopted the comments of Lee J, and in a different discourse of jurisprudence referred to the use of a panel of candidates for selection as referees.

32 Whether as referee, assessor, or a court-appointed expert, the panel of those qualified to be Tribunal members may well assist in the selection of referees, assessors or court-appointed experts in the context of a complex competition case.

33 Then finally there is the possibility in the future of extending the ambit of the functions of the Tribunal. This would involve the third arm of government, the Parliament, introducing legislative change.

34 There are some examples of Competition Tribunals in other parts of the world which could be used as possible examples to adopt. The United Kingdom Competition Appeal Tribunal is an independent and aEURoespecialist judicial bodyaEUR. The Tribunal is headed by the President. Its membership consists of a Panel of Chairmen and a Panel of Ordinary Members. Ordinary members are selected for their expertise in law, business, accountancy, economics, public service and other related fields, and have included academics, business people, and solicitors.

35 The Tribunal hears proceedings under nine legislative regimes, covering communications, electricity and energy, postal services, civil aviation and financial services.

36 With respect to particular regimes, the Tribunal may hear:

(1) appeals on the merits in respect of decisions applying competition rules or imposing penalties;

(2) applications for review of decisions in relation to merger and market investigation; the acceptance or release binding commitments; and price control matters;

(3) aEURoeprivate actionsaEUR being damages or other monetary claims where loss or damage has been suffered as a result of an infringement of a relevant prohibition under competition legislation (these can be brought on an individual or collective basis. In collective proceedings, the Tribunal may hear applications for approval of collective settlements); and

(4) applications for interim measures (such as injunctions) under the competition legislation.

37 The Canadian Competition Tribunal is a court of record. Appeals from any decision of the Tribunal lie to the Federal Court of Appeal.

38 Lay members are appointed on a part-time basis and on the basis of their expertise based on their individual backgrounds in economics, business, finance, accounting or marketing. Pre-requisites for lay member appointments include a postgraduate degree at the Doctorate or Masters level in the relevant field, or, in the case of business, commerce and finance expertise, they may instead hold a professional designation such as Chartered Accountant. They must also have advanced experience in their field as well as experience in reviewing and analysing jurisprudence, legal and economic arguments, industry studies and expert testimony and in applying expert evidence to determine the merits of cases in the context of competition law.

39 The types of matters that the Canadian Competition Tribunal hears include business mergers; abuse of dominant position; agreements between competitors; refusal to comply; price maintenance; other restrictive trade practices; deceptive marketing practices; specialization agreements; delivered pricing; foreign judgments, law and directives that adversely affect economic activity in Canada; and refusals to supply by foreign suppliers.

40 The Canadian Competition Tribunal hears cases which are generally of national interest and large in scope and complexity, which involve significant financial stakes and directly impact on the competitiveness of private enterprise and industry.

41 The Hong Kong Competition Tribunal is aEURoea superior court of recordaEUR set up in 2012 to deal with legal proceedings concerning competition matters. Appeals against any decision of the Tribunal lie to the Court of Appeal.

42 The Tribunal does not have official lay members. However, it may appoint specially qualified persons as aEURoeassessorsaEUR to assist it in disposing of proceedings.

43 The Tribunal hears a range of applications including those made by the Competition Commission with regard to alleged contraventions of the Competition Rules, applications for the review of certain determinations; private actions in respect of contraventions of the Conduct Rules, applications for the disposal of property or the enforcement of commitments. It also has the power to hear matters arising out of substantially the same facts as those matters in relation to which it has jurisdiction.

44 The Conduct Rules fall under two main categories: aEURoeprohibition of anti-competitive agreements, concerted practices and decisionsaEUR; and aEURoeabuse of market poweraEUR. The Competition Rules comprise three rules: the two Conduct Rules and the prohibition of anti-competitive mergers and acquisitions.

45 There are three main types of cases heard before the Tribunal:

(1) Applications (with leave) to review a reviewable determination made by the Competition Commission;

(2) enforcement proceedings, or applications to enforce aEURoecommitmentsaEUR (which are essentially undertakings); and

(3) aEURoefollow-on actionsaEUR, or proceedings brought by persons who have suffered loss or damage as a result of a contravention of a Conduct Rule.

46 Those few examples from overseas demonstrate that in certain countries Competition Tribunals are given quite diverse and wide-ranging functions and powers. It may be that the Australian Competition Tribunal could have its role expanded in other areas of competition law.

47 Competition law now touches all manner of economic activities aEUR" the natural monopolies, the activities the preserve of the State, professions, sport and the media, both on the national and international stage. Lawyers and economists now work as a team, as complex cases require both legal and economic input. The Tribunal has a team already assembled as a Tribunal with expertise and experience in competition law. The Tribunal has already streamlined its practice directions and electronic lodgement of documents, and is in the process of updating its website to make it more user friendly and informative. To use in a quite different context to when it was used by a former Prime Minister in 2014, the Australian Competition Tribunal is aEURoeopen for businessaEUR.

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