a a RI rr en RR . . - oe CATCHWGFDS TRADE PRACTICES - producer of beer enaaging carrier to deliver fo austomer - refusal to deliver wia rival carrier - whetner customer forced ta "acquire" services from third party - whether within s.47 Trade Practices Act - policy aspects of s.47 considered. Trade Fractices Act 1374 sub-seens. tii), 4706), 47077), ATL) TASTLEMAINE TOOHEYS LIMITED wv. WILLTAMS & HODGSON TFANSEFORT ETY, LIMITED No, G80 of 1985 { Coram: Fox. Sweenev & Lockhart JJ. fsx J (a Tl] THE FEDEPAL COURT OF AMTISTRALIA OUEENSLAND DISTRICT REGISTRY \ No. GO of 1985 d GENERAL DIVISION ) ON APPEAL from a sinale jiudde of che Federal Court of Australia BETWEEN: CASTLEMAINE TOOHEYS LIMITED Appellant aND: WILLIAMS 3 HODGSON TrAlisePort ELr. LIMITED Respondent MINUTE OF ORDER TUDGES MARING ORDEF : Fox. Sweeney & Lockhart Jd. DATE OF ORDER: 19 December 1985 WHERE MADE: Svdnev. THE COURT ORDERS THAT: 1. The appeal be dismissed. ae The appellant pay the respondent''s costs of the appeal. Note; Sethlement and entrv of orders is dealt with Order of the Federal Court Rules. IN THE FEDERAL COURT OF ANSTRALTA QUEENSLAND DISTRICT REGISTRY No.Ga0 ef 1385 -_ we ee SENERAL DIVISTON BETWEEN: CASTLEMAINE TOOHEZS EIMTTED appellanr VIILLEAMS S HOMGSON TRANSFORT ETY,. LIMITED Respondent CORAM: Fox. Sweeney and Lockhart Ji. DATE: Lo December 1995 REASONS FOR JNOGMENT Ex This 153 an appeal trom the sudament of a audva cf this WD Court (Walcox JT: in which he found for the applicant in a proceeding brouqht adainst the present appellant under 35.47 of te the Trade Practices Act, 1974 ("the Act"). The appellant makes beer in Brisbane and supplies if widely in Queensland and £0 other places. The respondent is a carrier ina larqe wavy of Business who wishes to be able to carry the appellant's beer to Northern Queensland. For most «of the distance, this carriage is done by rail. and this 15 arranged br the carrier. The appellant has a varietv of avenues for the distribution of its heer, The present case concerns what is called the North Queensland region, which is an area north cf an irregular line drawn from Aqnes Waters in the east to a point on the Northern Territory border south-west wf Mt, Tsa. There are re four depots in this reaion maintained by the appellant. namely At Rockhampton, Mackay, Townsville and Cairns. Fublicans can murchase trom these depots. and make their own arrandements cancerning carriage from the depor selected. Tha orice af the cor 1b D Lay 7) ra cn s nyoy ran v ay q et iam A iB un aw a oOcr s Dp 'oSD Ww ip pa] tT Pay S fey oy, ™ 1) cle oe} fay Tv iz] oO ma TT Ur Tf the beer is ordered from Brisbane the cast of the m y eight 1s shown separately on the invoice, and the licence f2e Ls calculated on the price of the beer. There 15 Therefore an advantage in publicans ordering direct, from Brisbane. The reasons for this rather anomalous situation were not fully rt r ow v uo ct a i) a D a cit) is) my w explained to us. bu ef the present problem. In both cases the appellant arranges the carriage of the toods, but in the one case the beer aoes into one of ifs stores, and in rne other 21t 1s delivered fo the customer. Thre= purchasecs expressed a wish in 1984 to take delivery from the Brisbane wa) brewery, using their own carriers, but the appellant does not supply on this basis to purchasers in the North Queensland caqion. It is submitted that its failure to do so is in breach of sub-section (6) and sub-section (7) of s,47 of the Act. Those provisions are as follows: By ~ wp corporation also engages in the practice of exclusive dealing 1f the corporatian - (a) supplies, or offers to supply, wands ar SECVLIes; 'h) supplies, of offers to supply, gods or services at a particular prica: or (eq) ives or allows, oar offers to dive or Allow. a discount, allowance, rabate or credit aun relation to the supply or proposed supply af qoods or services by the carporation. on the condition that the person fo whom the corporation supplies or offers vr proposes to supply the aoods or services oc, 1f that person 1S a body torporats, a body corporate e@lated to that bhadv corporate will acquire moods or services of a particular kind ar description directly a¢ 0 indirectly from another person. 3c endages in the practice oat Che corporation refuses - ib) ta supply gnads oc services ata particular price ta a person: ofr 62) ko give or allow a discotint, allowance, rebate or credit in relation fo the supply of qoods oar services to a person. for thea reason that the person or, 1£ the person 15 a hodvy corporate. a body corvoratea related to that body corporate has not acquired, or has not aqreed to acquire. aoods of services of aA particular kind ar description directly oe iundirectliv from < another person," The learned judge held that there had been a breach of s.47(6) and he awarded damages accordingly. He also held thar there was a threat of a breach of 5.47(7) and aranted an inquncticon in respect of it. In its correspondence with the purchasers mentioned in fhe North Oueensland reqion, the appellant said that it was - =a supplying on C.I.F. terms, and his Honour adopted this view. It would seem to me, with respect, that the agreements were not made on C.IVF. ferms. No documentarv transfers were made cr appellant units correspondence to secure, ar emphasize, this duty and right. The avpellant has used a few different carriers in the past for carrving, and arranging carriage, no the Worth Gueensianad region, but for some time it has used Oueenslana Ralrlfast Express (QORX). There 1s no evidence that it may not in future use another, or others, ain substitution for OFX, or together with it. At present and for some time it has used ARE a a onliv. but descr HB bes it as its "preferred carrier", ORK performs fi for the appellant a few tasks comnected with the carriadqe, in addition simply to carrvinad the oaeods. and arranzvinae rail cS. marriage. It delivers to the licensee's pramises. A particular task 15 that 1¢ collects empty keas (kilderkins) and returns them fo the brewer. The keqs are valuable, and the performance of fhe service is of importance to the brewer. The price lists sent out by the appellant in advance of 0D orders show clearly enough Fhat the beer is to be delivered to the licens ' Ss premis iy e my s. The price is quoted as an amount for heer, an amount tor "delivery and handling". and, asa tetal of these two tidures, tne "landed cost price", Te 1S common around that the property in the beer does mot pass ocintil delivery. Apperricnment to the parrcicular order Be Tt may not ne made until after the beer 15 delivered inte a store, either that of the carrier or the appellant. at the rcaalhead c1ty As the supply ot beer at the Licensee's premises has been a matter for the appellant. 1t has not been necessary for it ro seek to impose a condition concerning the use of GRX. nor has LE done zea. The three licensees who have in recent times asked Khakt beer y2 «delivered at the brewerv, to their nominated warrier (fhe vespoandent'., were told that beer was scald ta this cegion on C,I.F. terms, and the beer oardered was sold and delivered in the usual wav. Reterence was made to two extendina definitions. Paraqraph 47(13)(a) is as follows: "Cay a reference to a condition shall he read as a ceference to any condition, whether direct or indirect and whether having legal or equitable force or not, and includes a referance to a condition the existence or nature of which is ascertainable only by inference trom the conduct of persons oc from other relevant circumstances" " acquire' includes - 'Ad oun ré#lation fo aoods - acquire 57 wav of purchaze, exchanae o¢ takina on iease, on hire of oan hire-psurchase; and i Tw Gy 'D ce ib yo Layiy ren a) c an Q Of)Lom on (D s a S 0] fay Das ay Oo) wm £ o ' hh iD n Tt Pe Leuvrt wa Ab ~) a aA ey (a) ba} % ba in 04) re T a =I in) po =) ow wu a My J in] 0] in question do not refer to competit as a test. Assuming that "acquire" in the particular sub-secticans ie fo have an extended meaning to incinde "accepr", it 1s still a question oat what cthis means in the conteaexr af acauirind the services of another person. Presumabiv, what is referred to is an informed acceptance. not simply a passive receipt. The a Dictionary reters ta "consenting mind". -s Shorter Oxford Enalish b The intent of the 5 etions is plainly enough to prohibit oO c a w dealings which require or compel a purchaser to deal with a third party. The arqument before us has proceeded on the footing that a particular supplv of services has been, or is beina, forced on purchasers in the reqion in question. The matter is complicated by the fact that no purchaser 1s a party to the proceedings, - + ay ev have been brought by another carrier, who wishes to obtain contracts for the carriage of the beer. The submission fails at several points. There 15 rélevantly no separate supply of services. The appellant us selling its beer, and delivering 1t. Tt would not be contended raat af out attended to the carriage wutself. through its emplovees, there would be a supply of services, and no practical distinction can be drawn between that situation and the one under eonsiderattion. The licensees do not ask for, of aqtree ta, rhe provision of services, They ask for beer, which they know cand accept) will be delivered to them. They are not asked to saree them, The "service" is supplied by the brewer, who is frae to selact another carrier or carciers, as 1b wishes. Ther? 15 not there should be. The brewer remains in complete control until delivery, and only then does the property in the beer pass. Tf the position were otherwise, industry and trade would wu ib be greatly affected. AC.I.F. contract cin the strict sen would be transformed, as indeed would be F.O.R. and F.O.B. contracts, where a contractor was emploved ta carry the aoads. The matter would qo further back along the line of production: a manufacturer of some part necessary for production of certain moods could not arrange for forward carriage by a particular contractor. The section savs nothing about effect on compenrition, and in my view 1€ is an error fo construe if as 1f 16 did. The policy of the section should be determined by the lanauade 21t muses. In fact, fhe construction soucht to be placed usan ir be Fhe respondent michr well have an adversa affect on camrpetieicn, suppliers, at all levels of oreduction and supely. mazar for practical purposes be compelled to carry themselves, thus azreatlv diminishing the market for indspendent carriers. A brewer 15 free to deliver himself. as LOA storekeeper, or anvone elsa in trade. If the brawer himself makes an arrangement with a third party, so fhat there 13 10 scape for the purchaser making the arrangement, the -ame Situation must obtain. This must at least be 50 when the richt to make the arrangement is ceserved ro the supplier omder the erontract of supple. Whece, as here, the aocds remain tne praperty of the supplier until delivery, rre position us pany iD ean KB awv s uy ot stronger. The brewer is not, by the Act compelled ¢ the brewery, to ome or any number of persons, In my view the appeal should be allowed. Bag on tone | I certify that wees the eight (3) nreceding pizges are a trus copy of the | R?asons for Judgrent herein of his Honour uir. Justice Fo H j ! , . Pehiew. | Associate Sr 3 | pateas 19 DecemAhas (98S -* + ! . _—— ed NO. G 30 or 198° Nhe ae ad cl fier} i en ty i= ) ie} Rel 13} fey I| ad re Qn appeal trom a single judge or the Federal Bd c u ct Vs fu tefu ana ery. LIMITED rc ox, sweeney & Lockhart JT. 19 December 1985 'N fie} ee wy Sydney This if an appeal trom a judgment granting injunctis c@3IYain conduct or the appveliant Vastilemairs Tecoheys © fu - ee Fondent'). w S. ist + 4 sm A 4 moe no Ma am 'ea t uw tub HI at m rade tt oa oe a wel ty 7 pom a ut $. iN 4) ws to rd ha c ty . mH 4 wy wv be Fo $a i ae a tal lag ") om ha Be 84 a 1 ny 4° Spb U ty bas} mn ad 74 cig 7 f° adit th oes moms & ar giom F301 am St &3 (s) st aogn 'HH =) tle Ube d a cn wt mw . 43 Sfrew ag rw ging wy ia: -t 'eat Ht bey Sle ps d G ie '4 ca ze) gi a oa o % rt Qo moO ar trea is) ed " ny bret be a tw stodeyy rly boo wa ny my it Cuoge WM soo ae ee eg OO Pach ae teat ASS Woot rb) 7" 4 Ama ta ma-etod com a "1 WALL hi I diet gn mee Sri yy ama ec Go * Ws tbl ri 4 oat yr ay or h a dita ) qe 4 tp yt u ce Loy fird ' ms eras aH 43 a 4 ] qa lB 4s Ea] emt be o- bow aii dt dom cl q a3 Ot upoii gd A fa ba pe ge S 3 u St a GU ay i) Q rd rt mam A \* rc wh of 4 o@ort het -4 ca uw qe Som at wd a dt St ar ng p a Hw 3 uy et oy qd uw oO ot ims! ¥ ha ay fon] uw bu rt shoyu uw a i] ory ys wo w a " ni had ean . wu Q fu trgnm r) Sa lay 3 4 ee a pany Qo ah mn a} '4 hoot +19 w co oom Go a i cut aoma m Los Om as ae Oe Oa | be ' a dtd ce Sa Bede mud tri Od mn u baa) te 4) 1 9 Moi 4a Sk ot oy »v ot i] mma nga a) a maw inp u 1G ao SP sa oa ht 4 tect Se Maid gw a Go et d ber gy gy Sid wae an So, r diy Leet ME Sa IM Wh tl ta at "H Sr oa) ft) 33 uUu & qQ is ba m rly from Brisbane. In the latter case the vespcraanc sells C.1.r., that is a contract covering tne cost or tha goods, insucance and freight, using the services of a earcler wnewn as North YWueensland Exoress -- ccmmaniy NOX -- to deliver to tne retail ouriet. His Acrou: using the term "c.1.f. contract" as a conven desceripten of the arrangemeanc by Which cerarlers a briled for beer, plus insurance and freight costs, al was mot intencing to suggest that vavment was requ a or cetallers against documents ¢catner than aelivery of beer. The area known to the responaent, for distr parposes, as mnocth Queensiand 13 the area norr line vunning approximately vesterly from & psace coast known as Agnes Waters -- and vhicn Lies Gladstone ani Bundaberg -- 2 @ point ont Tergritery border soutnm west cr Mturt [3 appro: 7 tely oacauze che line is ure south as far as Mungungo ani Tanke ana re north as Merannah. Wzconin That BR, vr.2 tall onceta guesnslan c geazce begional desors, at Po moron, i Alene. [In sacl. 33 tne derer mate it, The ites aA Cranripsct QcLatea Whin Nos Whica Ls itast Exoress ar The reso 1t3 preferred ca coon Tc company rare coresm l2s7e bo €acn of 2 Tour onal se ne LM comtainers rarriena by truck ta ana grt oc the Lona kaw, fALL trucks AND tc are yemen bewve reat Ssicnes Tor Parliways. VCastiaiaine 3S its anly carrier in cespect otic. Frigoan? t2 north wugenslana cuties riers ip norta gueensland are rirse Tl suschass T.iom Jional dept and ac. Uoweves, these 2.3 a avantage in taking £ course. hicence Fosse in e nsland are calculated as & percentage oF the rrst tet tne licenzes er eurchasing the laquce hich is retailed. If a vetailer purcnas Seer from the veerondenr 3 depot at, say, Townsville, Als or her License 3a 13 calculated by veferenca ¢t2 the cost cf tag t sur se; which cest srerlects the fact that the respanden na2 incurfsad supense in tranespecting the beer Feom £& are f£2 Townsville. it, on the others hana, tne of zs purchases er: Prigoans, the JLicteacs ree ais cal ted upon the basis of the Bsishane 2 She cos ir rre:ght and insurances being a1sreg parcentsy ip Ene Dagis that those are delivesy ¢ 22. THR tact of the cost of tha peer 2ztse_7. Az ippcsed, tT. rosT oat Eransperting beer .f57 oe ape reneeen wueensiand -- and 2sp talivy to the rat marta -- 25 considerable; 325 that surchaze at a vegional dispot Signiiicanctly increases che Licence ree m9 be caid oat the and cro tne year. In tne cesalt, 1° Sppears, the r ractice of large velume retailers ais ta resort ta 3 regional depot only at times 32 emergency. In the 7ase of retailers with small turnovers the situation 1s a littis different. For them, the conventence or being able to take small deliveries Irom a nearby agepot as supplies are requiced may outweigh the disadvantage of an increased licence fee. The respondent follows a policy, subject to some exteplions, that cetallers in north gueensland wne wish Co purchase ex Pricbane -- ana thereby to minimise their licence tee -- must do so pursuant to aoc.1.f, contract. This means that, us iv2 of any raat 3 particulac retarler may nave, Ais orqer 25 hanaled sy fRE. The qeograpnaical fr f2n23 policy are quite minor. Theres are towne in The Mli-west or the State -- Longre FCALALNS, Blackall and Winton -- an vélation & of owhita there 15 a lcngstanaing agrangement vit Tarsler {Oo acl as a dustrioutor., In these case foibuces purchases ex Brisrans and wholesales 2 Lota. retailers. Int ase cr Blackali the & rarecied Fecm ErisSane xs azateinaccr, On th rr ootne a bares towns 1 LZ GLepatched oy va :2 ale Zour emali towns on the Flinders Yiagnvay -- eriLani,. Praicie, Richmona and Tulza Osree -- and also Fyrura <2 the south cf VCalia creek, an relation tc wnitn the cesponcent will = iy retailers F.0.b. Brisbane, che yetailers making cwn transport arrangements and paying the ca c. RA has no depot capacis cif serving these 2 fuat2on applied te two smail coastal trxns, St. and oymors. The final emcertian relates to a smail a en t3e TOAST, south of Mackay and including the tow Sacina and Kcumalia. The wetailercs within that ar ve ror many yeacs used aA Local carrier. Campisn Wa 3. AS wid cpald not wtself service this area tas ponderns has been mereparsd to sell beer tye are ott retailers in this area, 7 Wsing Tarp ee; ots nm one cate a firm mamec Jack flebr Tran . fn ali aft the er oF scorch 3a, yersoraent insist all eurchases seer Brisbane oe mace » cantrace." 2 7age8 if a large part of Queensland -- OAET WAS definec in the evidence as be Breage ape Pocknamrpron, Mackav, Proserorine, sh x, Arslisc Seach, Scwen, Usllinsyille, Inakan, raeha ana AtCheston -- the vespondent applies calicy oan gelation to packaged oeer, Williams « Hoagson Transpore Pty Limited, tne apsolicant in tle eroceeding, 15 a transpcrt company operating oniy in Queensland. The company is 3ased in Prisbane. fe runs a tleet of apout 40 trucks, ranging in capacity Trcm Live tennes to 22 tonnes, out their operations are Supplemented by the use of vail transport. In August 5. 1983 the Commissioner for Railways apsoctintec the applicant as a contract carrier to operate From Brisbane to nine centres on the north Queensland coast. The applicant nad already acrangead 23 eurcshase steel containers suitable fer use on both varl and t:caa trucks. The Commissioner agreed to orovide centainer rall trucks to allow the Lransmlssion oF these containers by rail, together with box wagens ror general merchandise and open wagons tor steel. In August 1983 the company already had a depot in one or the nine centres, Townsville. [It opened depots ir two more oF the nominated cantres, Mackay and Cairns. bs has mot yet opened depots in any of the other alx towns, ana 25 currently under pressure tr Pommissioner to do s9. According to Mr A dT Hodgs ctor or the applicant, the company's rallure eather sik depots is related © its failuce BZ fhace cf tne dsliverres or bulk beer ton island, Me Hodgeon desccibed the prctosed ser 135 sar: SB... wu Timpany vehrctles pice 2aatt From toe supelieés; if is tTacen 2A BLALNTT Boe LT 1s leadaed conta ber our star loads ars 328¢ and gecyrate Le zur gidin 238 destinations, 3ucn as MacKay, ans Caiens. JA arrival tne pec ded anc ae reread fo the oc Le 4sicall dees to dear = bas Gevyper tise of tna transocer Tae eneape. wethon oF line Es targe hauling unit such as Q. Your cecmpany 215 tree ta determine 2Lts on caves ror carrinye of gaces tcr tne road' rail method? aA. tt 1s. company pays tne vailvays torr the vse wayon, minzmum f3a2 cevecing the rigst 27 68 S7LT.. OAM ess charge ror Ilsads exceeding 23 terres 5 mena s than ie tonnes. Far Lsaads between : mad 42 tonres -- "ne capacity om the wagons -- the cnar The same s tor ?5 tennes. From the contractor c tT 2D view fois desicacte fo take aavantage cr this eession by GSTALNING Loaas Of maximum Werght. such i 3s can only Se obtained py teansportinge dense water1ais, of chicn seer - in busk or packaged - 28 & PEoPinent eEarple. Inde4d, accsraing to "Mr Prodeson, alconolic liquors ace a TATIY Tomponent cr inward Treeight t2 33 ort ELIn towns in whicn mie ltompany has yet tc ofern its 2s sed depot. None cf them 15 4n industrial centres Mr Hodgsoan estimates thar about ots at the total inp those towns tonsists of Feoa and drincs, Fo owhick nair -- the 4 half -- cons1ste Cf 22685, Wi spirits. shac? of 'that iatte: hast a difficult te obtain sufficient volume te pravide a satisfactory service to the local grccers; and without a share of that heavier material it is difficult to make tne mest economical use of the rail contract. With these matters in mind, the com voomommenced 'ca solicit business trom liquor au £ as north Queensland. [: otfered freight rates fay than these charged oy QRX to the responcent ana gacsed on oy 1c, without adaition of Sugteaction, To 1&3 eetailer customers. The réesponaent cptained some orders for the carriage or beers produced by the cpposition crawer-, Carlton and United Sreweries, at ats rremises in Fortituae Vatley in Sriskans. The applicant aaz beer able, ana continues to ne able, to Fulfil tneze cfders, fn addition the company naz carried some Fourex sackazed beer to towns outside the area in respeck af whien the eespondent 'linits sale of packayed oeer te 2.1.8. cransactilons. However, as Mr s2y3sn ou I, 22 Was neceszacy t2 canvines the hotel to nave ct ecounts . In sesponse re Aarelicant 3 2 rIne pus Sin north Gugerslard claced orae rif ote delavercy or leads whiten includen culls seer, Patootre respondert perused delivery at the bes aan ani gon i384, Mer Hodgson teiephere Me 3 £ m, EAS Fereval sales Manager of Castlemaine Perkins d enquired why mis ccmpany was not permittea ¢ are 22 L n gp hotels ain Mackay. My cla ecine V2 Toohey has ine erght na lev FE c . Arter Furth conveac cedar Ps a2 on -- Me Nolan t Me to tilie 4 modgss toauid we fEques @tarsr fareciers but he aaded: lo only: Caryle:. lthers, Tetal and Bvambles, have Farlea'. Tota. and Brambles ace the tvo cther transport romparis: ceeratirz AQ Yali,ccad Peryv1re ta rin jueens T2oan admitze te tne substance conve ALtacugh ne denies the reference + ana 7 . on Bach of 49 march 1322 ann 4 Prad Jacneon, Manaver ar the Macscay me RTSo godercs vith the apolirranr to aelr La re ES TW1xed Lloaa af bulk ang rackagyed reer. 7 orde Scansmicted ts tne cecpcnien:, Dat 1 vatus net) rhe applicant to take delivery or tne goods. Instead it discatcnsa the order to "er Tacason via UPI, Sy Latter gated 5 April 1924 Mr Jacxsan vratested. He asked that all futuse orders be forwarded via tae applicant. Un li April Ms 165 A MNoetheott, Assistant General Manage. \Macketing: of Castlemaine Perkins, replied tc that letter stating: The will not be cenvenient rer COME ANS TO accept orders from you on the basis set cut in your Letter uncer reply. Castlemaine Parkins will, nowever, be happy cto cersider orders piacea on 3: c.2.2, basic.' On 29 March Me Hrian Sevan, of the Freshwater Hat Freshwater near Cairns, ordered from the responde kegs or bees and directed that 1t be forwvardec usi applicant as carrier, He was told that the beer wou be supplied 'if stocks were available', and answer had never previously received. In tact ¢ delivered by QR. Mr Bevan wrote a letter o dated 3 April in whicn he sought an acknowleddem all future craers would be sent through the ap Mr Nortnacott replied in terms identical to his L Me Jackson. cress rep ToT ib Hotel, Mackay, L ; ad bulx an applicant. the rescon ie al deli wl Wh ny the os & ae 3 und wh ro ot BITldavit ta Siy sett1 Mr No NaS 3woe sases Bult bee hotels Ar? mace . accordance with such £ mace. ana the trans 2h by eespondert. T tel cy eesocondert £2 ser In an answer to an intercogqatory adrini the applicant the respondent stated that 3924, at 'sould onty sell bulk ana a diuvectiy From its Brissane prom Maczay area wishing to purchase = . 2@sis on the condition tnat such Sec was carrisd by a Sylar on Sucpoze by tna respondent ; 1 06 Se@spon interrogvatory the + inden aid taat Jamuarry 1321, an tk e ay a districts, ara as fr Lat in re RAE@as in nceth Queensland, ne the answers 1625 April 13 eeactice of not accepting nortan Queensland who wish its bteewery ain Srispans earvilerc 1t has @ngaged tc Loo oce veguires tne resp neminated Ey it, Theses applicart ard admittea int In hls evidence before me Me Nolan mace ¢ company continued f cbic in the an Se said tha brewery at Mi "Scr mows DD fy pe] 1b Qo PO od yasu0ae ry beer to ber Fa ane orices he would be refused deliv AS pointed out, any oraer would have € pl the mame of jicensed outlet; 1f that sutlet was in the oc. a ti a would be no delivery even though ne cont & Was to be involved." ) Subject to this section, nm trade or commerce, engage cad Tw ast 5) A corepcration also engages in practize fr exclusive dealing 1f The corporation -- (a) suppiiss, os cifers to supoly, jooce ic FS. VLCSs; (Db) supplies, or offers %3 supply, gecds is Services at a particular write; ar fe) gives or allows, or offers to Jive or alliw, & disecunt, allowance, seabate ct syedit an eelation to ths supply or proposed suprly onr goods of teryvices by the corparatiar, on tre condition that fae person to enom the correc acion Supplies or etfers cr prcposes to supply tne gorads ir services ... wili acquire goods or services oF a particulary "ind or description directly or indirertiy From another person. '7) A corporation also engages in the practice oF exclusive dealing 1f the corporation refuses --- (a) to supely gooas or services £o a person, '5)) to supply goods or services at a mazrticular price to & Derson; of 'c) toe gure or allow a discount, allowance, rebate of credit in zslatien to the supoly rf awecds OL Seryicez £9 a person, . for the reason that the person ... ved, oF has not agreed to acquire, goods er s of a particular kind or descristion directly or indirectly from another person. (B) ... (3) 2. (19) Sub-section ¢:1) does not apply to the eEractice of exclusive dealing constituted by a corporation engaging 1n conduct ar 7 ba in sup-sections (2), '3), | .3) tad) ae th (3) (ad, 1b) 'a) the engaqi conauct ha likely : substantia ,by) 6Uthe ng by The Tan and tne torpe lon, af 47 related ¢t2 cne correc conduct of thea same or together have or are l effect of substant competition. 'il) wo. (12) Sub-section ¢21) dees net agpely witna yesmect ts any conduct engaged in by a body corporat] av 'way of restricting deaiings by another body corporare if those nodes corporates are related tc each other. ii7+ In this sé@cticn -- (4) 4 rererenze ta a candition shai San AS a4 verereice tl any cenditicn, Les dagect te inairact ard whether ale j legal or equitanle force or not, ana includes a reference to & conditior tne axistaence or mature oF whch 1s astertainabl=s only sy inference trop tn4 conduct of persons or Trom cbhney scelavant circumstances; (Db). 10, in respect of conduct witnin subs.(6) or (7), ana that, in any event, no point was taken that there was the appellanc merely leading some evidence as to the reasons for uts policy. Sub-s.tl2Z) permits a sody corporate to restrict the dealings of a "related" body corporate, as that term is aefined by s.4A(5). There was no evidence of the existence of any such company bat the provision was relevant «co the form or any mmqunctions ta be granted. mo evidence oT an actual refusal t2 supply -2ftaly avert, hos gonosuc neid taab at conduct in ceontravent trade of commerce, irom supplying, or from offering ts supoly, beer to any person, Ootner than a body cerporate comalticn that that pessen w1iil accept the services, in velation to the transpert and insurance or the saia beec, OF Queenslara Raillast Express. oe The Acpettant 1ts gervant? anc agents ne castrainea, in trad@ 9¢ commerce, Trom rerusing to supply beer to any B werw =) (3) O t4 uw = pe un mr rt, rt is b 1D a) m fa) Pp 1u 'G Le fu v) Ly ? 1]le Pi + F 'Oos +t - il. rs i the &espondent, for the reason that that person has ne acquired, or has not agreed to acquire, the services, in relation to the transport and ansurance of the said bese, of Queensland Razlfast Judgment for damages be entered in favour of the Applicant against the esponaent in 'the sum of Twenty Thousand Dollars ($20,090.00). The Pespondent pay to the Applicant its casts iF tne proceeding, including all reserved costs. avpellart appealed fron tha whole cf tne judgment of the udge. Its grounds, as get out ain the Notice cr are aS IGllows: "ae The e errtd in nolaing that bec suppliec be suppizea ty the aprellart co any pecso c supplied or offerea ta be supolired n person would acquise BELVLCeS ess. 3. The erreaa 14 sack supply or ly 57 ¢ rhe rondition son SL.pp be surplied t secv at Railfast 4. The learned judge ought t> nave found services of Queensland Railfast Express wer the appellant, and not by any person suppli to pe supplied beer by the appellant, whether _¥ or indirectly. c. Tre facts tcunad oy the learned constitute a contravention of section Peactices Act 1974, 6. The learnea judge sught not nave awarded damages to the respondent. Alternatively, the award or damages was manifestsy excessive," uh iD a aside and that the appellant have judament with costs. prerared to sell beer ex Brisbane to veta:léers in nerth Queeisiand, but 1t is not rrepared to da so if they wish ¢3 use a rayeisr of their choice, fo be pain at a cabe and upon terms to ce In sonstruing 5.4716), his Honeur bore in mind the wide terms 13. retailer was to have 1t available for sale at the place where he . waa licensea to zeil an, To g6ét if thers, ant 74 the considerabie aavantage of a lower licence fee, he had, as a matter ar commercial reaiity, £9 accept tne appellant 4 <ackage deal. This amounted to a sale, or an oorfer to seli, gosrds on the condition tnat he accepted the services of tne appellant's chesen In my opinion, the learned tria. Judge made no error in concluding taat the appellant was in breacnm ar 3.¢7(4), ard tnaat, aciesdingiy, it as a preper case cor the making cr an inqanetiioc Seom of tne rszescondent's accraditaticor py che Jomnissiine: fir Fallvavye &5 2 IOnte act fAaYelers tnAAaAf the "tearrir' te re tanvered oy ic fe tvarific not "preséncivy on rali', and that he shoulda rst nave veacned the conclusion that the vresgendent plist aave rein Sm ey a oad . tween the Cormigsizner and justify the conclusion that he did not have 1¢ in mind. His Honour concluded hit rceazeons For judgment in selaticn 43 daragez Ly saying: "T nave ne information the numersus smaller la ', 14. respondent's policy operates but 26 seems likely th the total profit available rrom the transport ot Fou beer to north Yueensland runs unto millions of dali each year. A very consideranle volume or business denied tc the applicant by the respondent's polic is more than speculation to say that, in a free mark situation, the applicant would -- upon the probabilitie -- Rave won some of that business; but hew much it impossible to say. iI propose to take chis slement account but, in the absence of firm evidence, tc only a toren amcunt. Iorvround the rigures previ menticned -- $232 ani $16,500 -- up te a rotal Ff for damages or $29,900. There will be judgment far applicant in that sum." Mt 73 re fu mor ie c rsi-O te + DD YO th wot twa kor st fn my opinion, the appellant sas failed te show tnat tris uUfement should be ais turbed. Potertify taat 2 preceding thirt 3 are 2 true cory = fo. Jacqment = Honourable "Me, 19 December 1985 © Hy) cr ih fa IN THE FEDERAL COURT OF AUSTRALIA ) ) QUEENSLAND DISTRICT REGISTRY ) No. G80 of 1985 ) GENERAL DIVISION ) ) ON APPEAL FROM A SINGLE JURGE CF THE FEDERAL COURT OF AUSTRALTA BETWEEN : CASTLEMAINE TOOHEYS LIMITED Appellant AND: WILLIAMS & HOLGECN TRANSPORT PIY. LIMITED (wy «<> el De = AM; FOM, SWEENEY AND LOCKHART JJ. 19 DECEMBER 1985 lon fa) ct iD REASONS FOR JULGMENT LOCKHART J. f This appeal concerns the "exclusive dealing" prov BH te n a a a the Trade Practices Act 1974 ("the Act"), in particular sub-ss. 47(6) and (7). A single Judge of this Court (Wilcox J.) held that certain conduct of the appellant constituted the practice cf exclusive dealing; granted injunctions to restrain it and awarced damages in favour of the respondent. The appellant appeals from his Honour's judgment. The case arises out of the appellant's eystem of gzale, — te - ween - . a — + vet es - > ae distribution and delivery of ""Fourex" beer in north Queensland. Fourex beer i3 brewed by Castlemaine Perkins. a division of the appellant. at its brewery in Milton, a suburb of Brisbane. This case concerns both bulk and packaged beer. Bulk beer is distributed to retailers in 18 gallon kilderkins or keas. Packaged beer 15 sold in bottles. cans or stubbies. For convenience, I shall refer to both bulk and packaged beer as "beer". Queensland is divided inte varlous districts by the appellant for distributicn purposes. Within the Erisbane Metropolitan Brea beer is delivered to licensed ratail cutlets free of charse. Different systems of distribution are adsrted ky the apreliant in ither areas of Queensland. but it is the area of "north Queensland" Fes) be tua fo ram a ry, fnLi fan low ' which 13 relevant in the present case. This are any geographical boundaries but by an arbitrary line drawn by the appellant for business purposes. It is the area north sf a line running broadly in a westerly direction from Agnes Waters on the coast 'between Gladstone and Bundaberg) to a point on the Northern Territory it border. south-west of Mt. Isa. Within the arsa of north Queensland the appellant maintains four reqional despots, namely, at Rockhampton, Mackay, Townsville and Cairns. Each degot is neac che depot of a transport company known as Yueensland Railfast Expres: or ""QRX", a company the appellant describes as its "preferred carrier" to north Queensland. It engages QRX¥ to transport beer frcm Briskane to regional devoots in north Queensland. For this purpose Q@RX uses containers which are carried by road and also rail trucks which 1t loads pursuant to arrangements between it and the Queensland Commissioner for Railways. e Within the area of north Queensland the appellant sells its beer to licensed outlets in one of two ways. Beer sold by the first method 1s transported from the appellant's distribution centre at Moolabin, Brisbane by QRX to the depots in north Queensland. A licensed retailer may purchase beer in any quantity frem the relevant derot in north Queensland and he may arrange for the transport of the beer from the depot to his premises. The retailer may select any carrisr he wishes for that purpose. The price of the beer sold to the retailer Evy this method includes the cost of the freidght of the beer uu from the appellant's distribution centre at Moclabin in Brisbane ts the particulary depot in north Queensland from which the purchase 153 made. The second method 13 that the appellant 33115 to cust. Qii) r Ww ta K bs] north Queensland by arranging for the beer te be collected from cr rea i) distribution centre at Moolabin by QRX and delivered to the premises of the customers. Beer sold by this method is not appropriated to the sustomec at Moolabin but is appropriated by QP¥ from stocks held at the relevant regional depot. The appellant charges a price which includes the price of the beer, its insurance and freight, but the invoice upon which payment 15 made Ly the customer shows the beer at its price ex-Brisbane for the purpose of calculation of the customer 3 licence fees. Delivery charges and insurance are separately itemised. The Queensland Licensing Commission calculates annual 4. licensing fees payable for a victualler's licence in Queensland on the basis of 8% of the gross amount paid or payable in respect of liquor purchased during the twelve months ended on the last day of June in the preceding year. If beer is purchased by the first method the licence fee is calculated on the sale price of the beer which includes the transport component between Brisbane and the particular depot in north Queensland. Obviously the second methcd is more attractive to customers because it results in savings in its annual licence fees. The appellant will not sell beer to customers carrying on business in north Queensland by any means except one or other of thess two means. Nor will the appellant permit beer to be transported to north Queensland other than by QRX irrespective of the metncd of sale of the beer. The appellant does not supply and never has supplied customers in north Queensland "at the brewery" an Milton or at the distribution centre in Moolabin. It is the zecond method of sale and delivery with which this case is concerned. The evidence is exceedingly sparse as to why the appellant insists on delivery to north Queensland only by QRéM; but there is m om taf) evidence that it does so at least in part because it regards it as being more efficient to have 'the one carrier to deal with for distribution purposes in the large area of north Quecnsland and because services are provided by QRX to the appellant in addition to the delivery of beer, Not only does QRY insure the beer during transit but it collects empty kilderkins from customers' premises and returns them to the appellant in Brisbane. fome @5.000 kilderkins are 5. outstanding at any time. Another service provided by QRX is sometimes to receive, on behalf of the appellant. orders for beer from customers. The operation of the appellant's system of sale and distribution in north Queensland may be summarised as follows:- Retailers in north Queensland order beer from the appellant either directly by communication to the brewery in Milton or toa regional depot in north Queensland or sometimes by orders left with oPX. The beer 13 not allocated to any particular customer when it leaves the brewery. Uoon receipt cof an crder from a retailer the et arpeilant supplies the beer by having QRZ allocate the order out of the stock held at the nearest depot. ORS either delivers to the retailer's premise (the second method) or. aif the first method of Lop) sales 1s emeloyed, the retailer makes his own arrangements for transport to his premises from the depot. It is not very clear az to whether beer 13 delivered to or from the region ra) an depots of the urns on this. The appellant pays QRM cr appellant or QRX; but nothing th o cost of freight from Brisbane to the relevent depot (the first ow method) or to the customer's premises 'the second method), calculated at previously agreed rates, and QRX is paid for its services by the appellant and never by the customer. Payment 15 often made to QRX by the appellant before the customer is invoiced by the appellant for the sale of the beer. Retailers make all payments for theiy purchase of beer to the appellant. 6. The respondent. Williams & Hodgson Transport Pty. Limited, 13 a transport company operating only in Queensland and based in Brisbane. It runs a fleet of about 40 trucks and also uses rail transport. In August 1983 the Queensland Commissioner for Railways appointed the respondent as a contract carrier to operate from Brisbane to nine centres on the north Queensland coast. The respondent arranged to purchase steel containers suitable for use on both rail and road trucks and the Commissioner agreed to provide the rail trucks necessary to allow the transmission of these containers by rail. res) In August 198 ct the respondent had a despot in one of o re) ia centres. namely, Townsville. It has since cpened depots in tw is) m Qa "N fel) oF the nominated centres: Mackay and Cairns. It has not vet opened depots in any of the other six places and is currently under zome pressure frem the Commissioner tc dc 30. Evidence was given by Mr. Hodgson, a director of the respondent that its failure to ofen the other siz depots 15 related to its failure to obtain a share of the deliveries of beer to the north Queensland market. After the agreement was entered into betwean the respondent and the Commissioner the respondent commenced to solicit business from liquor outlets in north Queensland. It offered freight rates lower than those charged by QRZ to the appellant and passed on by the appellant to its customers. The respondent obtained some orders for the carriage of beer produced br an opposition brewery, Carl ct ie BS on United Brewerles. at its premises in Fortitude Valley, Brisbane. The ae respondent has been ableand continues to be able tq fulfil those orders. In addition the respondent has carried Fourex packaged beer to the Cairns area. There is evidence that three retailers in the north Queensland area placed orders with the appellant for delivery of beer to be transported by the respondent. The appellant refused to permit the respondent to take delivery of the goods and, instead, in some cases despatched the order to the retailers via QRX. When two of those retallers protested the appellant said in effect that the beer would be supplied through QRX¥ or not at all. The relevant sub-sections of s. 47 should be set out and they are as follows: "A7(1) Subject to this section, a corporation Zhall not. in trade or commerce, engage in the practice of exclusive dealing. (2) wee 3) eee (4) eee (S) woe (6) A corporation also engages in the practice of exclusive dealing if the corporation - (a) supplies, or offers to supply, goods or services; (b) supplies, oc offers to surply, gocds or services at a particular price; or ic) gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply cf goods or services by the corporation, on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person 14 a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or descrigtion directly or indirectly from another person. (7) 3B corporation also engages in the practice of exclusive dealing if the corporation refuses - (a) to supply goods or services to a person; (Bb) to supply goods or services at a particular price to a person; or (c) to give or allow a discount. allowance, rebate or credit in relation to the supply of goods or services to a person, for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person. (3) . tO}. .10) Sub-section «(1) does not apply to the yactice of exclusive deaing constituted by a Pp 9 corgoraticn engaging in cenduct of a kind referred to in sub-sections (2), (3), (¢4) or (5) or paragraphs (8)(a) of (b) or (9)(a), (bd) of (c) unless - ,a)} the engaging by the corporation in that conduct has the purpose, or has cor 12 likely to have the effect. of substantially legsening competition; or (>) the engaging by the corporation in that conduct, and the engaging by the corporation, or by a body corporate related to the corporaticn, in other conduct of the same or a similar kind, together have or are likely to have the effect or substantially lessening competition. (11) eee (12) Sub-section (1) does not apply with respect to any conduct engaged in by a body corporate by way or restricting dealings by another boed7 corporate if those bodies corporate are related to each other. (13) In this section - (a) a reference to a condition shall be read as a reference to any condition, whether direct or indirect and whether having legal 9. or equitable. force or not. and includes a ~--- reference to a condition the existence or nature of which is ascertainable only by inference from the conduct of persons or from other relevant circumstances; (b) ... (c) ..." The expressions "corporation", "trade or commerce", "practice of exclusive dealing", "supply", "goods", "services" and "acquire" are defined in s. 4 of the Act. See also s. 4C. The case was conducted before the learned primary Judge and before us on the basis that the relevant sub-section was sub-s. 47(6) and that nothing of significance turned upen any differences between s. 47(6) and (7). ub- tu ur Hig Honour posed the question on which he saw the case turning as whether the appellant supplied, cy cffered to supply, beer on the condition that the relevant retailer in nocth Queensland would accept transport services directly or indirectly from QPX. His Honour answered that question in the affirmative and therefore held that the conduct of the appellant fell within the descripticn of "exclusive dealing" contained in sub-s. 47(6). The trial Judge held that at no stage was there any contractual relationship between QRX and any of the the north Queensland retailers of the appellant's preducts. His Honour found that the language of sub-s. 47(6) does not include any requirement that there be a contractual relationship between the person to he 10. supplied with services and the person whose services are to he acquired. His Honour referred to the definition in s. 4 of the word "acquire" which states that where the word is used in relation to services it includes "accept". He said that one may "accept" services not merely without contracting to receive them but even without taking any positive action in advance. His Honour said that there had not yet been a refusal to supply a person unwilling to accept the services of QR¥, but only because no customer of the appellant had pressed the matter to that point. In view of the appellant's attitude that it would prefer to cefucée supply rather than permit a customer to arrange his or her own transport his Honour said that there was a threat to contravene suk-s. 47(7) so that an injunction of a quia timet nature should be granted. On the queation of damages, being the gacond issue in this case, his Honour referred to the well eztablished principle that a person who has suffered loss or damage i3 entitled to be compensated for it notwithstanding that it is not possible for the court frecisel7 to calculate its extent. His Honour awarded a Figure cf $20,009 damages to the respondent. Of this amcunt. $382 was awarded fsr the profits which the respondent would have made if the "trial orders Placed with it by the three retailers had been allcwed by ths appellant to be fulfilled. An amount of $16,500 was awarded for ths loss of profits the respondent would probably hav made from continuing business dealings with those three retailers. His Honour said that it was impossible to attempt a calculation of the 11. respondent's losses arising from being denied the chance to attract business from other retailers but nevertheless allowed a "token" amount to give effect to this third head of damage. His Honour rounded off the first two amounts to $20,000. I turn first to what was accepted by the parties as the primary question on the appeal, namely, whether the relevant conduct cf the appellant contravenes sub-s. 47(6). Counsel for the appellant submitted that there 12 no contractual nexus between QPX and the customer or indeed any relevant nexus at all. All relevant dealings take place between the aprellant and the customer and between the appellant and QRZ, the role of QRX being simply the carrier engaged by the appellant itself and for whose services the appellant. not the customer, pays. Counsel submitted that the "supply" contemplated by sub-s. 47(5) is not a supply which cccurs in the abstract. The appellant does not "supply" or "offer ts supply" customers in north Queensland with beer at the brewery, 1t offers to supply them either at a regional derot or at the customers premises The supply contemplated by paras. 47(6)(a) and (b) is not complete until the delivery of the beer to e1ther of these destinations. There 1s nothing which the customer is required az a condition of supply to "acquire" or "accept" froma third person. Alternatively, it was submitted on behalf of the appellant that if it be correct to divide the transaction between the appellant and the customer into one of supply of beer and supply of scervices (transportation), 1t is the appellant which offers to supply each. It 12. does so by itself selling the beer and by engaging on its own account a carrier, OR, to carry it to the agreed destination. Hence there is no room for the imposition of a condition of the nature contemplated by sub-s. 47(6). Section 47 is concerned with a particular type of restrictive conduct, namely, restrictions imposed by traders at one level of the chain of distribution of goods and services on other traders at different levels in the chain of distribution. This conduct is referred to as exclusive dealing. Exclusive dealing and some other t re) wa pes cf restrictive conduct such as resale price maintenance is. 49) and price discrimination (3. 49) are vertical restraints. The various vertical restrictions overlap each other. The legisiaturs has provided specially for exclusive dealing practices in 3. 47 w ty cH o c pon ron notwithstanding that many, if not all. of those peactic otherwise be covered by s. 45 which regulates conduct restricting dealings in trade or commerce or affecting ccmpetition. The language and mould in which 3. 47 1 cast dd not mM facilitate the task of construction, but I have some sympathy for the draftsman because the notions with which the section 15 concernea fo ts oO not easy to express. Stephen J. said of s. 47: "The statutory description cf these conditions and reasons. replete with double negatives and proliferating alternatives, defies accurate synopsis": TPC 7. Tocth & Co. Limited 1.1979) 142 C.L.R. 397 at p. 109. Notwithstanding the 13. daunting task and mindful of the words of Stephen J. I shall nevertheless attempt to divide the various proscribed practices of exclusive dealing broadly into different categories, namely:- i. Restrictions imposed by suppliers of yoods or services on their customers limiting the customers' freedom to acquire goods or services from competitors of the suppliers (para. 47(2)(d)); a. Restrictions imposed by suppliers on their customers limiting their vight to re-supply goods acquired from competitors of the suppliers (para. 47(2)(2)); 2. Refusal by suppliers to supply goods or services to a percen for the reason that the person has acquired or has not agreed not to acquire goods or services from a competitor of the supplier or has re-supplied cr has not agreed not to re-supply goods acquired from a competitor of the supplier (paras. 47(3)(d) and (2)); 4. Restrictions imposed by suppliers on their customers limiting the customers' right to re-supply the suppliers' goods te particular customers or in particular places (para. 47(2)(f)); 5. Refusal by suppliers to supply goods to a person fer the eeason that the perzcon has re-suppliec or not agreed not to re-supplr the supplier's goods to particular customers or in particular places (para. 47(3)(f)); 14. 6. Restrictions imposed by customers on their suppliers, restricting the suppliers from supplying goods or services to particular persons or in particular places (sub-s. 47(4)); Refusal by persons to acquire goods or services for the reason that the proposed supplier has supplied or has not agreed not to supply to particular persons or in particular places (sub-s. 47(5)); g, The practice of third line forcing with which this case 1: concerned, This occurs when a supplier supplies goods or services on condition that the person to whom supply is offered will acyuire azcoods or gervices of a particular kind from another person .zub-s. 47/6)); wo . Refusal to supply qoods or services toa person for the reagon that such person has not acquired or has not agreed to acquire gocds or services of a particular kind from another person (sub-s. 47(7)). This too is the practice of third line forcing; 1Q. The grant or refusal of leases or licences of property in circumstances which include the imposition of restricticns on the lessee or licensee of the same nature as most of the kinds of exclusive dealing mentioned earlier (sub-ss. 47(8) and (9)). ia) All these restrictions. except third line forcing or restrictions which include third line forcing (see sub-ss. 47/8) and (9), must have the purpose or effect of substantially lessening 15. competition to be unlawful: sub-s. 47(10). "Competition" means competition in one or more of the markets defined in sub-s. 47(13). Third line forcing is unlawful irrespective of its effect on competition. It thus reflects the view expressed by the Swanson Committee in the Swanson Committee Report at para. 4.103 that forcing another persons goods or services would in virtually all cases have an anti-competitive effect and therefore should continue to be capable of justification only upon the ground of public benefit. All types of exclusive dealing have at least one feature in zommon. namely, each seeks to place an impediment upon freedom cf action in a market. Each has e¢¢ a w trictive trade practices umplications, but the lagislature has treated third line forcing restrictions especially severely, presumably on the hypothesis that they force persons tc acquire goods cr services they may not 'vant in order to acquire goods or services they desire. They are unlawful per se because they permit a supplier ain one market to curtail access to, and his customers free choice in. a second market. They inherently Le) suppress competition in the marxet for the tied goods or service Third line forcing conduct is to be distinguished from the practices of "second line forcing" and "full line forcing". Tying or second line forcing arises where the supplier agrees to sell one product to a buyer, but only if the buyer buys a second product from the seller. The supplier's market fower with respect to the first product is exploited to force the purchaser to acquire a second product. Full line forcing is the term commonly given to the tying 16. arrangement that requires the purchaser to acquire the seller's entire (or almost entire) line of goods in order to obtain a desired product from the seller. Learned academic writers. the Swanson Committee in its report and United States cases concerned with United States anti-trust law (especially s.3 of the Clayton Act, 5s. 1 of the Sherman Act ands. 5 of the Federal Trade Commission Act) differ in their definition of the terms third line forcing, second line forcing and full line forcing and with respect to their relationship to each other: see, for example, the Swanson Committee Report paras. 4.94 and 4.95, Donald & Hevdon, Trade Practices Law para. 6.1.1; Taperell, Jermeesch & Harland, Trade Practices and Consumes Protection Ind Ed. paras. 701 and 710: "Third Line Porcina" by F.H. Callaway (1979) 52 A.L.d. 125: Yan Falinowski, Anti-Trust Lays and Trade Regulation, Ch. 6G "Exclusionarv Buving Arrangements: Exclusive and Reciprocal Dealings: Requirements and Tying Contracts". In my view third line a rorm of tu forcing iz not separate from tying arrangements. It i tying and I agree with the view of Mr. Callaway in his article that third line forcing is "tying in favour of third parties". There may be circumstances where third line forcing conduct is permissible. This possibility is recognised by the legislature permitting authorisation to be obtained. sub-section 3813) and sub-para. 90(8)(a)(iil) of the Act enable the Commission to grant authorisation in relation to such conduct on grounds of public benefit. The supplier is denied the advantage of the notificaticn procedure in s. 93. 17. Singling out third line forcing as the object of statutary prohibition irrespective of any anti-competitive purpose or effect and denying the advantage of the notification procedures in s. 93 has been criticised in the academic literature with, if I may say 50, some force; but the desirability of that action by the legislature {5 not a matter appropriate for consideration by the courts. Third line forcing, as expressed in sub-ss. 47(6) and (7) may arise in many circumstances. I shall mention a few. Its primary application is to prohibit A from supplying goods or services to B on condition that B acquires other goods or services from C. An example where a petrol company requires that another company's tyres, on ta batteries and accessories be carried bry its dealers: Atlantic Refining Co. v. C 381 U.S. 357 (1965); ETC v. Texaco Inc. 293 U.S. 222 6(1 In TPC v. Legion Cabs (Trading) Co-Operative Ssciest; 968). Limited (1978) 35 F.L.R. 372 taxi drivers. az a condition for access to the respondent's radio service, had to buy a qucta of petrol either from the respondent or from a service station of its choice. In Re Ku-ring-gai Co-Operative Building Soctety 'No. 12) Limited and Others (1978) 36 F.L.R. 1234 the Full Court of the Federai Court was concerned with the rules of the relevant building scc1ety which provided that, when moneys were lent tc members, the society would effect insurance on the property to be mortgaged in the joint names of the society and the member, with an insurer specified by the society. The rules also provided that the member shall reimburse the society for the premium. However, the special case which was before 18. the Court defined the requirement imposed by one of the societies as being a requirement that the member himself effect insurance on the property to be mortgaged, the insurance to be effected with a nominated insurance company in the joint names of the member and the society as owner and mortgagee respectively and for their respective rights and interests. Brennan and Deane JJ, held that sub-s. 47(6) was infringed. Bowen C.J. did not consider this question and dissented on the ground that, even if the building societies were trading corporations, they did not lend to members "in trade or commerce". S.W.B. Family Credit Union Ltd. v. Parramatta Tourist Services Pov. Limited (1980) 48 F.L.R. 445 and Queensland Aggregates Pty. Limited v. T.P.C. (1981) 57 F.L.R. 314 are other illustrations of the application of sub-as. 47(6: and (7). The strength of the appellant's arazument iz that this 15 not a case of the appellant saving to a north Queensland retarler "if you want my beer you must engage and pay for the services of QR as carrier", If those were the facts it would be a plain case of unlawful conduct under sub-s. 47(6). But here the retailer is not required to engade R¥ to do anything. There 1s no contract between QRX and the retailer. The role of QRX iz as carrier engaged by the appellant. The customer buys beer from the appellant on the basis that he pays for it after delivery to his premises (the second method of sale and delivery), the burden of the insurance and freight (and therefore the risk) presumably remaining with the appellant until 19. , delivery to the door of the retailer. As ageneral rule, traders are free to do business with whomever they wish. There is no obligation upon a trader to deal with everybody. Accordingly, the Act does not declare unlawrul every refusal to supply or every restriction imposed upon a trader's channel of distribution. There may be legitimate cases of such refusal or restriction which concern, for example:- - the number of dealers to be appointed within a particular area; - the fundamental level of the déaler 'for ezamrls, a wholesaler may aecide to gupply only to retailers and not directly to consumers); or - the financial stability, qualifications ce integrity of a dealer or reseller (for example, where the goods are highly precisioned or technologically complex or the reselling osoperaticn requires large amounts of working capital). It is where in certain circumstances the freedom cf the trader to carry on business as he wishes conflicts either with the competing claims of other traders to be free to carry on their businesses without interference from the restrictive trading practices of others or with the interests cf consumers in lower prices. improved quality of goods or more efficient means of distribution that led to 20. the intervention of the legislature. It is' true that. if the appellant itself owned and operated its distribution system and thus it stood in the shoes of QRX, there would be no unlawful practice of exclusive dealing under s. 47. Whether the appellant would in those circumstances contravene any other provision of Part IV of the Act is a difficult matter and is not the concern of this case. A manufacturer or supplier who owns and operates a fully integrated distribution system can exercise a larze measure of control a ef th fi be] wt aw omron ic) ta over the buying and selling patterns of the varicu = wo a ctr ? ayatem. The competitive advantages that accrue to a manu urer or i) supplier in those circumstances are considerable. However, cwnership of a fully integrated distribution system is not always feasible for various reasons including the large capital investment required: see Kessler and Stern "Competition, Control and Vertical Integration" (1959) 69 Yale L.J. 1. The appellant "prefers" the carrying WM ervices of QRY and, as the facts of this case reveal, will not supply tc a retailer in the north Queensland district ctherwise than through QRX as carrier. There may be reasons underlying this policy of preferment which are not only sound in the eves of the appellant but result in sucha benefit to the public that the conduct should be allowed to take place. There is, of course, little evidence of these matters because they were either irrelevant or at best peripheral to the case. 2i. Matters which were mentioned briefly in the evidence such as the orderly and co-ordinated picking up and delivery of beer from the appellant's premises, return of empty kilderkins, and the collection of orders from customers may bear on questions of public benefit. These considerations may be relevant to any application by the appellant to the Commission for authorisation under sub-s. 88(3). I am not impressed with the argument that to hold that the conduct in question falls within sub-ss. 47(6) or (7) constitutes an unwarranted interference with C.I.F. contracts. C.1I.F. contracts are contracts where goods are sold at a price which 1ncludes their cost, freight to destination and the premium on a policy or in a urance > covering the transit. The duty of the buyer is t ay the price on a ie] delivery, not of the goods, but of documents covering them which include at least the bill of lading, policy of insurance and invoice. Under a C.I.F. contract the duty of the seller, so far as the physical handing over of the goods themselves 1s concerned, is accomplished once the goods are put on board the ship or other means of carriage for the purpose of the transit. The zeller is, in addition, obliged to make a contract of affreightment with the carrier whereby the goods will be taken to their contractual destination and there delivered, to effect an insurance available for the buyer and to forward the bill of lading, policy of insurance and invoice to the buyer. Upon tender of these documents the buyer's liability to pay the price arises. The contract is thus in a commercial sense an agreement for the sale of goods to be performed by delivery of 22. documents. its essential characteristic in law being that the property in the goods not only may but must pass by delivery of the documents against which payment is made: Johnson v. Taylor Bros. & Co. Limited £1920] A.c. 144; Be Denbigh, Cowan & Co. (1921) 90 L.J.K.B. 836. In my opinion, if the application of the Act did involve an intrusion into the mercantile law governing C.I.F. contract so be it: but this ig not the consequence in this case. Although the evidence is interspersed with references to C.I.P. and F.0.B. contracts, neither is an accurate description of the commercial dealings in this case as exposed by the evidence. Indeed. the essential elements of a um C,I.F. contract are absent from the dealings between tnes2 parties. There is, in my opinion, an inherent vice in the transactions impugned in this case. The appellant does not distribute its cwn beer to north Queensland retailers. It engages the services of QRX tc deo G. The effect of the relevant conduct upon retailers in north w Queenaland is to prohibit them from acquiring beer from the appellant (where it is sold by the second method) unless it is delivered by ORM from Brisbane to the retailers' premises. It 213 true that the retailers have no contract with QRX and that the appellant engages 1t= services and pays for them itself, oftan before delivery has taken place to the retailers and presumably before the retailers have been invoiced for the goods. But. if a retailer in north Queensland wishes to buy "Fourex" beer, he is forced to buy it from the appellant at a price which inevitably includes a delivery content (a substantial one) and the delivery is necessarily undertaken by a carrier whose services 23. the retailer does not wish to engage; the retailer wishes to retain an independent carrier of his choice and at his own expense. The restriction of the retailer's freedom of choice to engage the services of a carrier of his selection and to pay for those services himself is an anti-competitive detriment to which sub-ss. 47(6) and (7) are opposed. There is another and probably more serious anti-competitive detriment to which the conduct in question gives rise. Carriers are excluded from access to the market for carriage of the appellant's the beer to the north Queensland district. That mark ole fety ct ol a a prerogative of one carrier nominated by the appellant (QRZ) because the appellant has power or leverage 1n its primary market for the sale of Fourex beer. This tie-in between the appellant and @RX denies competitors in the transport industry access to the markst far carriage of the appellant's beer in a large area of Queengland. Thus, the conduct under challenge in this case produces a twofold detriment: First. it restricts competition in the market for the t1red services. being the delivery oF "Fourex" beer from Brisbane fo north Queensland, and second, it denies retailers cf "Foures" beer in that area freedom to choose the carrier of beer from Brisbane tc wi their premise - along distance giving rise to large cost of transport. It inherently suppresses competition. This case is concerned with the appellant's distributicn system in north Queensland; but what if that system were introduced by it throughout the whole of Queensland or, for that matter, the whole of Australia? All retailers who wish to buy Fourex beer would be required to accept delivery on the basis that only one company, selected by the appellant, could deliver Fourex beer throughout the land. Such conduct is, in my opinion, struck down by sub-ss. 47(6). The method of sale and delivery of beer with which this case is concerned answers the description, for the purposes of sub-s. 47(6). of supply of goods on the condition that the customer will acquire, at least in the sense of accept, the services of another company. "Condition" ig obviously not a term intended to have a connotation determined by reference to the doctrines of the common lav and equity relating to preperty or contract. This i m the WM plain fr oO nature and fpurposes of the Act in general and s. 47 in particular, including the definition of "condition" in sub-s. 47(13), namely, that a reference to a condition shall be read as a _r ao ference to any condition whether direct or indirect and whether having legal or equitable force or not and includes a reference to a condition the existence or mature of which is ascertainable only by inference from the canduct of persons or from Dther relevant circumstances. "Acquire" is defined in 3. 4 in relation to services as including ""accept". Even without that inclusive statutory definition the word "acquire" in 1ts ordinary and natural sense would include the receipt of services notwithstanding the absence of contractual or 25. other commitment between the persons providing and receiving the services. I reject the appellant's argument that there is nothing which the north Queensland customer is required to acquire from QRX asa condition of supply of beer because the supply contemplated by paras. 47(65)(a) and (b) is not complete until delivery of the beer to the customer's premises. If the operation of s. 47 were to be determined solely by reference to the terms of contracts between traders there would be much force in the arqument; but the <ection is not 30 constrained. It is concerned with markets for goods and services and the furtherance of competition. The terms of contracts between traders are obviously relevant when considering the application of s. 47; but the section operates in the real world of business. The central consideration is alwars the actual conduct of the rarties in their business dealings in which contractual terms or other forms of commitment play a part. The supply of goods will usually be made pursuant to a contract for sale, leases, hire purchase or zome other form of agreement; but it is the act of supply to which the statutory prohibition is directed and this includes the process of furnishina, providing or delivering goods. "Supply" is a word of wide import. The subject matter of the Act and its evident purposes do not call for any reading down of its ordinary meaning. Neither s. 4C nor the definition of "supply" in s. 4 call for any restrictive interpretation. The prohibited supply is essentially the supply of goods or services pursuant to business ee ee ee tt re in ere . wenn nee tee mene 26. transactions: see The Commonwealth v. Sterling Micholas Duty Free Pty. Limited (1972) 46 A.L.J.R. 241. The beer is supplied by Castlemaine to its north Queensland customers in the sense contemplated by sub-s. 47(6) notwithstanding that it is sold on terms that delivery is made to the customers' doors and that the property in the beer presumably does not pass until then. There remains the question of damages. I mentioned earlier the approach taken by the trial Judge in assessing damages at Ur ta © far] 909. , ca) wm Ai w Counsel for the appellant submitted that in awarding damag Honour erred in leaving out of account the fact that it was at w rm cf a the respondent's accreditation by the Commissioner for Railways as a contract carrier that the "traffic" to be conveved be trartfic not eresently on rail". It was submitted that all the damages awarded in the case relate to "traffic presently on rail" and that ¢9 atvara damages on the basis that the respondent might have ccntinued unimpeded to carry the goods for some 16 to 17 months was incorrect. Only the $382 agreed as profit in respect of the "trial orders" should have been allowed. It is clear from correspondence passing between the Commissioner for Railways and the respondent that it is a condition that the traffic to be conveyed be traffic "not presently on rail" and that if this condition is breached the Commissioner may regard it as being contrary to the agreement. The Commissicn has indicated that failure to observe this and other conditions will "leave no 27. alternative but to discontinue the supply of wagons to handle your traffic". In addition the Commissioner has expressed dissatisfaction that the respondent has not complied with the conditions under which it was accepted as a freight forwarder by failing to stablish at least nine depots. The expression traffic "not presently on rail" is not defined in the evidence: nor is it suggested that it is a technical expression having a particular or special meaning in the relevant trade or industry. It may mean goods of a kind not presently being conveyed within Queensland by rail, but to so hold would be perilousiy close ¢9 engaging in speculation in view of the very limited evidence bearing on this question. I raferred earlier to the evidence concerning the relations between the Queensland Commissioner for Pailways and the respondent including the evidence given by Mr. Hodgson, a director of the respondent, that its failure to open the six depots as required by the Commissioner is related to its failure to cbtain a share of the deliveries of beer tc the north Queensland market. This evidence does not appear to have been contested, although the trial Judge made no findings with respect to it. It has not been shown that his Honour failed to have regard to the evidence concerning the eéxpressicn "not presently on rail" notwithstanding that he made no reference to it. Assuming the relevance of that evidence. 1t would be. in my view. permissible to ae - a Me an meee aoe _— wee ee wee —-+- - se 28. discount its effect by taking into account the evidence of Mr. Hodgson. In my opinion it has not been established that his Honour erred in his assessment of damages. I would dismiss the appeal with costs. Pd 1 certify that this and the Tuer ~ 202% (27) preceding pages are a true copy of the ' WA Reasons for Judgmont herein of his Honour ' Mr. Justice Lockhart. ¥ Rowten Da r ke, . Associate if Dated: 9 Decerber / OSS, eon