Foxtel Management Pty Limited & Ors v Seven Cable Television Pty Limited & Ors S273/2000 [2001] HCATrans 344 (10 August 2001)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney Nos S272 and S273 of 2000

B e t w e e n -

FOXTEL MANAGEMENT PTY LIMITED

First Applicant

SKY CABLE PTY LIMITED

Second Applicant

THE NEWS CORPORATION LIMITED

Third Applicant

NEWS LIMITED

Fourth Applicant

and

SEVEN CABLE TELEVISION PTY LIMITED

First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED

Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

Third Respondent

TELSTRA CORPORATION LIMITED

Fourth Respondent

TELSTRA MULTIMEDIA PTY LIMITED

Fifth Respondent

TELSTRA MEDIA PTY LIMITED

Sixth Respondent

Office of the Registry

Sydney Nos S227 of 2000

B e t w e e n -

FOXTEL MANAGEMENT PTY LIMITED

Applicant

and

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

Respondent

Applications for special leave to appeal

GLEESON CJ

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 AUGUST 2001, AT 11.18 AM

Copyright in the High Court of Australia

MR A.C. ARCHIBALD, QC: If the Court pleases, in each of these matters I appear with my learned friends, DR G.A. FLICK, SC, and MR R.P.L. LANCASTER, for the applicants. (instructed by Allens Arthur Robinson)

MR A. ROBERTSON, SC: If the Court pleases, in these matters, your Honours, I appear with my learned friend, MR N.J. WILLIAMS, for the respondent in matter 227, and the third respondent in 272 and 273. (instructed by the Australian Government Solicitor)

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR C.A. MOORE, for the first respondent in 272 and 273. (instructed by Freehills)

GLEESON CJ: There is a certificate from the Deputy Registrar that she has been informed by the solicitors for the second, fourth, fifth and sixth respondents that those respondents do not wish to be represented at the hearing of these matters and will submit to any order of the Court save as to costs. Yes, Mr Archibald. Could you just remind us about the difference between these two matters?

MR ARCHIBALD: The three matters?

GLEESON CJ: No, the two. These are listed as two matters.

MR ARCHIBALD: Yes, I am sorry. In the first matter, 227, the application is within time; in the second listed matter the application is made out of time, although the point is identical.

GLEESON CJ: Is there any objection to an extension of time?

MR ROBERTSON: We have taken the point, your Honours, in relation to the first of the matters, that is, 227, the within time one, that it was an abuse of process because there were other extant orders, and we draw your Honours' attention to the different reasons given as to why an extension of time is necessary, but we put those matters in our written submissions and we do not wish to say anything more about it - but, to answer your Honour's question directly, there is an objection on that basis.

GLEESON CJ: Well, we will just hear full argument on the applications without at this stage - - -

MR JACKSON: We have an objection, too, your Honour, but we take the same course.

GLEESON CJ: Yes.

MR ARCHIBALD: The matters raise the question as to whether, for the purposes of Part XIC of the Trade Practices Act, the ACCC may properly assess whether competition is promoted - which is the objective to which regard must be had - as to whether they may assess the promotion of competition without identifying the relevant markets in which that competition is occurring.

GLEESON CJ: What do you mean by "identifying"?

MR ARCHIBALD: We do not mean define absolutely precisely and mark out specifically metes and bounds. By "identifying", we mean address sufficiently for the purposes of the case at hand the parameters of the market or markets, and perhaps even alternative markets, in order sufficiently to assess the competition that may be seen to be occurring, and likely to occur, in that arena.

GLEESON CJ: So it is an issue about, if I can put it this way, the fulfilment of the decision-making body of its obligation to consider all relevant facts.

MR ARCHIBALD: Yes. In the argot of competition economics or competition law, one speaks about defining the market.

GLEESON CJ: Yes, but what about the argot of administrative law?

MR ARCHIBALD: Well, for the purposes of administrative law, the point that we sought to make originally was that there was a failure to address the question of market in a way that exposed reviewable error, because in the way the Commission had approached the matter, it was saying there were four dimensions of a market. You need to look at product, you need to look at geography, you need to look at time and you need to look at function. The point was that the Commission had looked at two but not all four of those elements and had therefore failed to address imperative matters that would need to be addressed in order to form a view as to the markets that existed.

GLEESON CJ: But in terms of the exercise in judicial review of administrative action that was engaged in by the Federal Court, what was the issue that presented itself?

MR ARCHIBALD: They erred because they misunderstood the legal conception of market or because they failed to have regard to relevant matters which were imperative to be taken into account in order to form the view about a market. No doubt that the Commission addressed market, and sought to identify it - and in their discussion paper, they said, "The first step we will take will be to identify market". And so they did. We complained that they erred in a reviewable way in addressing that task, but the answer that we were given at first instance and on appeal was, essentially, "The error of which you complain has no consequence because it was not necessary for the regulator to address markets. What they have to address, according to the statutory criterion, is competition in markets, and they can do that without any real identification of markets". And so the answer we got when we raised our challenge was, "Your point is irrelevant because the complaint which you do make is founded upon a predicate that is not sound, namely, there is no need to do the exercise in any event".

GLEESON CJ: I thought we said something about this in the context of refugees fairly recently.

McHUGH J: In Yusuf's Case, which we discussed. I have just sent out for it.

MR ARCHIBALD: Yes. So the point has emerged really from the answers given to the contention that were made below, rather than it being formulated in that precise way. But the problem is a very fundamental one, for the point seems to be - and, indeed, it seems to be encouraged by the Commission - that when one is considering competition in markets in Part XIC, one is able to approach, and perhaps bound to approach, the issue in a way that is fundamentally different from the way one approaches questions about competition in markets in Part IV. For there, the Commission seemed to accept, and we would say it is abundantly clear, that in order to comprehend elements of competition, it is necessary to identify the market.

Competition does not exist in a vacuum; it is a process. It occurs only in the context of markets, and in order to understand competition you have to lay out a framework of the markets in which that is occurring. Our submission is that that is palpably the approach that is required under Part IV and it is the approach that is also required under Part XIC. There is nothing different in the concepts of competition or markets in Part XIC that would countenance or permit any different approach.

The Full Court seemed to advance as the reason for permitting the different approach that the question raised by Part XIC is of a general kind. The provision in question is section 152AB(2)(c) - it is at page 458 of the print. So the task of the Commission is to determine whether to declare a service. In considering whether to declare a service, the regulator, the Commission, is to consider whether the declaration will:

promote the long-term interests of end-users of carriage services -

that is subsection (1). Then subsection (2) provides that:

in determining whether a particular thing promotes the long-term interests of end-users -

of carriage services -

regard must be had to the extent to which the thing is likely to result in the achievement of the following objectives:

(c) the objective of promoting competition in markets for listed services;

And the Full Court concluded, paragraph 136 at page 209, line 27, that:

Although this provision mentions "market", the central idea there expressed is the achievement of the objective of the promotion of competition in this area. This is a far more generalised notion than the specific issue of market definition.

Now, whether it is general or whether it is not, in order to conclude whether declaration of a service is likely to result in achievement of the objective of promoting competition in markets necessarily requires, in our submission, that as part of the process the market be identified.

The Full Court accepts that attention is directed to the concept of promoting competition but, in order to be able to assess whether declaration will promote competition, one needs to understand competition, and competition cannot be understood absent identification of markets. The observations in QCMA, in our submission, are of assistance and relevant in this regard. There is, of course, a very well-known passage in which the Tribunal expressed the essentiality of identification of markets as the first step. That is on page 189 at about point 9 on the page. But it is the antecedent paragraphs which, in our submission, are particularly pertinent in the present case. The Tribunal said, in the first complete paragraph on that page:

Competition is a process rather than a situation. Nevertheless, whether firms compete is very much a matter of the structure of the markets in which they operate. The elements of market structure which we would stress as needing to be scanned in any case are these -

And a number are set out. Then in the next paragraph the Tribunal continued:

How decisive is it, then, that the acquisition of Barnes by either Defiance or Q.C.M.A. would raise market concentration ratios in some markets in some degree? Evidently, provided markets have been defined appropriately, it is relevant but not decisive. While the equation of anti-competitive effect with enhanced concentration is tempting in its mechanical simplicity, there is much more to the idea of competition than this. No doubt, other things being equal, significantly lower market concentration is preferable to a high level. But other things are rarely likely to be equal -

From that proposition it follows that the identification of markets is the essential step.

Now, here, the Commission proceeded upon the footing that niche programmers should be given the opportunity to participate in the market. The concept seems to have been that if you have more suppliers in the market, more choice for consumers, competition would be promoted; lower concentration. No doubt it is right in a simplistic way that one would think that that may be so, if all other things are equal but, unless you identify the markets, you cannot be satisfied that all other things are equal. And if you find that they are not equal, it may well be that simply allowing more competitors in will, in fact, not promote competition. It may promote competitors but it may not promote the process of competition.

So it was essential for the Commission, in our submission, in addressing the question here to identify markets. Our complaint was that they had reviewably failed to address that question in a proper way. The answer given below - - -

McHUGH J: That seems to be review of a question of fact. In Yusuf's Case, Justices Gummow, Hayne and myself said:

What is important, however, is that the grounds of judicial review that fasten upon the use made of relevant and irrelevant considerations are concerned essentially with whether the decision-maker has properly applied the law. They are not grounds that are centrally concerned with the process of making the particular findings of fact upon which the decision-maker acts.

Now, if that correctly states the law, what is the error?

MR ARCHIBALD: The error here, as we were seeking to contend, was the failure by the Commission to address dimensions of the market which are essential to be taken into account in reaching a conclusion as to what the market is. The particular dimension that was emphasised in our grounds was failure to have regard to the time dimension. And absent a consideration of the time dimension, no conclusion about the market could be a sound conclusion because it excluded from consideration a fundamental and necessary factor, ie - - -

McHUGH J: Mr Archibald, that seems to me to be an attack on the reasoning process of the Tribunal rather than a misapplication of the law.

MR ARCHIBALD: In our submission, no. It is a failure by the Commission to have addressed factual matters which were vital to be taken into account if they were to reach a view about market. But that is not really the point that is made against us by his Honour in the Full Court.

McHUGH J: I understand that.

MR ARCHIBALD: It is that they did not need to. That was the answer: they did not need to. Indeed, perversely, if they did not need to, they may have been wrong in any event in doing what they were doing, albeit that we said that what they did was done in a flawed fashion. So either way, it really leaves a position, in our submission, where what the Commission did was flawed and not in conformity with their statutory task.

It is a very important thing not only for this industry but for everybody concerned with Part XIC to understand whether the concepts of competition and markets and the way in which the Commission can go about things is different in a fundamental way from the task that anybody, including a court, must approach what we say are the same concepts in respect of other parts of the Trade Practices Act, particularly Part IV. And so for those reasons, in our submission, the question is a very important one with very significant ramifications, if the Full Court's decision is upheld; and it does involve a case in which the conclusion of the Full Court in the present case is significantly flawed. If the Court pleases.

GLEESON CJ: We do not need to hear you, Mr Robertson, nor Mr Jackson.

The Court is of the view that in this matter there are insufficient prospects of success of appeal to warrant a grant of special leave and in each matter the application is refused with costs.

MR ARCHIBALD: If the Court pleases.

AT 11.34 AM THE MATTER WAS CONCLUDED