NOT_FOR GENERAL DISTRIBUTION IN_THE F AL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G469 of 1986 ) GENERAL DIVISTON ) BETWEEN: AUSTRALIAN CONSOLIDATED PRESS LIMITED Apolicant AND: DAVIDS HOLDINGS PTY. LIMITED Peapandent CORAM: FOX J DATE: 24 OCTOBER 1986 REASONS FOR JUDGMENT (EX TEMPORE) FOX J. This is an application for interlocutory iniunctions. the principal basis for which is 3.46 of the Trade Practices Ack 1974. The matter was heard an affidavit evidence. with some supplementarv oral evidence. all produced on behalf of the applicant. The respondent did ner file an affidavit or cross-examine the witnesses called for the applicant. It velies en deficiencies which it claims exist in the arolicant's evidence. The applicant is a publisher involved in the advertisind business. The respondent ("Davids Holdinas") is aR distributor/wholesaler., with some retail outlets of its own. The applicant has spent a considerable sum of monev. about $800.000. and its officers have spent much time. overa period of a year or go. in preparing a scheme for what is called "Cents-Off Couponina". This scheme is described bv Mr McGeorae, an executive director of the applicant as follows: "The svstem of Cents-Off Couponina involves the following steps:- (a) the publication and distribution of a brochure of coupons.,...Manufacturers of products pav the publisher for the right to have their products featured in the brochure: (b) the brochures are distributed to consumers who take the brochures to retail stores and provide to that store a coupon in respect of a particular product which thev wish to purchase. The store then deducts the discount stated on the coupon from the price of the qoods: (c) the used coupons are forwarded to the publisher of the brochure which on behalf of the manufacturer refunds to the store the face value of the coupon plus a handling fee; (da) the publisher is ultimatelv rewarded for this bv the manufacturer." A trial run of the scheme has been prepared for the Canberra, Oueanbevan and Yass districts of New South Wales tao start bv publication of brochures on 27 October 1986. Section 46(1) provides as follows:- "46.(1) A corporation that has a substantial deqree of power in a market shall not take advantage of that power for the purpose of - (a) eliminatina or substantially damaqing a competitor of the corporation or of a bodv corporate that is related to the corporation in that or any other market: (b) preventing the entrv of a person into that or any other market: or (ec) deterring or preventing a person from enaaqing in competitive conduct in that or any other market." For the purposes of s.46. the applicant presses its case in relation to the Canberra wholesale market. There is no doubt that the respondent participates in that market as a wholesaler of aroceries. The brochures deal largelv with groceries and are directed at the retail market. On the evidence. what has happened in the last month or two is that officers of the respondent have got in fouch with gome manufacturers and at least one retailer and told them that if they participate in the scheme. the reswondent will not stock the manufacturers' products. This has led one manufacturer, Nanda Macaroni Products Ptv. Limited ("Nanda") to repudiate its aqreement or arrangement with the applicant for the insertion in the brochure of an advertisement. Inducing a breach of this agreement is put as a separate around of relief. but I have some doubt at the moment whether such a case is made out, even on an interlocutory basis. and in any event it is not clear that anv relief can or should be aranted at this stage, if there has been a repudiation. I therefore do not consider this claim further. It is submitted on behalf of the respondent that it is not shown that. within the meaning of s.46(1). the respondent "has a substantial deaqree of power in a market". A starting point for an inquiry into that matter is normally to determine the extent and nature of the relevant market. For present purposes. it seems to me to be a permissible method of proceeding to look at the Canberra wholesale market. this being the market to which the applicant has directed attention. The question then is whether the respondent has a substantial dearee of power in that market. I have ruled as inadmissible broad statements. by persons with a qeneral familiarity of the scene. concerning the percentaae of the respondent's market. in Canberra. or over a wider area. Its participation in. and control over the market does however appear. larqelv by wav of inference. from the admitted evidence. There are, for example, the repeated references to the respondent's "warehouse", and the (successful) threat made to Nanda. Nanda is a substantial pasta manufacturer and claims to have 50% of the Australian pasta market. There is also a threat made to Kaleen Foodmaster Supermarket in Kaleen. a Canberra suburb. The evidence is that one of the respondent's representatives said to a foint owner of this store "Davids would not supply anv stock from manufacturers who participate in the couponing programme to our store or anv store and we should not accept the coupons." There was a similar threat made to the manufacturer of a wide range of cleaning products: "A representative from Davids Holdings has contacted me and informed me that if S.C. Johnson participate in the coupon program. our products will be delisted. He said that other participants in the coupon proaqram will be treated the same wav." There is further evidence to the same effect. I am therefore of the view that there is a _ soundlv arquable case that the opening words of s.46 are satisfied. The applicant relies upon para (b) - "preventing the entrv of a person into that or anv other market". The prevention relied upon relates to entry into another market. This is not the wholesa'* qrocerv market. or anv other market for the sale of aoods. It seems plain that the respondent has an interest in opposing the applicant's Cents-Off couponing scheme. The market relied on is the advertisina market to which that scheme relates. It is the form of advertising, that is bv use of the brochures. to which the respondent obiects. That method cuts across the wholesaler-retailer relationship. and that mav bea reason for the obtection. but whatever underlving reason or reasons there may be. the respondent's campaian has the effect. and is intended to have the effect. of preventing the applicant from advertising by means of the brochures. The idea is to arrest the applicant's scheme. It may be that one is' then looking at a sub-market in the advertising field. but I believe this is covered by the letter and purpose of paragraph (b). The respondent itself. as wholesaler. participates in an advertising proqramme (known as "co-operative advertisina") related to the qoods it sells. This works differently from that proposed by the applicant, but relates also to the discountina of retail prices. There is evidence of potential competition between the applicant's Cents-Off Couponing scheme and co-operative advertising. Mr McGeorae states in his affidavit of 15 October 1986 (paracraph 9):- - "9, The Respondent (and other wholesalers and maior retail chains) are also in the business of providing advertisina services to manufacturers of arocerv products. The Respondent places advertisements in the media which promote partic:'lar products which are on special in a particular week. The Respondent 1s paid for this service by the manufacturer. This is know as "co-operative advertising". The Applicant's Cents-Off couponinag competes with the co-operative advertisina business conducted bv the Respondent and other wholesalers and retail chains." In his oral evidence he savs of a conversation with Mr David, a principal of the Respondent: "Mr David advised me at the time that in his view iust about all the manufacturers in Australia would support fhe coupon concept. but he said fundamentally he and other maior retailers were against it and he said the main reason whv thev were against it was because we would be competing with his companv and other maior retailers for co-operative advertising dollars." IT amof the view . for reasons alreadv stated. that paragraph (c) igs also applicable. In saving this I do not mean to express a concluded opinion on the meanina of "competitive conduct" in that paraqraph. There has been no arqument on the matter, and I have been prepared to assume that it extends to "competitive" with the respondent. Flan > rt Tt Zs oy iy wWw1a b m i) Tk 1s common ground that corsider convenience distinctly favours the applicant. I will sive to the Parties an opportunitv to consider the form of relief. ani the matter 1¢ staod over until next Mondav. at 9.30 a.m. for that matter to be dealt with. Mondav_ 27 October 198A: The parties have handed up agreed orders. based on the reasons aqiven. and a rough draft I handed down, and I have made those orders. which are as follows (thev extend fo Yass ard Nueanbevan on the unopposed application of the applicant):- 1. TIntil the final determination of these proceedings or further Order. the Respondent. bv itself. its servants and agents fa) be restrained from refusing or threatening fo cefuse to distribute products of Nanda Macareni Products Pty. Limited in Canberra. OQueanbevan and Yass bv reason of its varticirpaticor ir the Applicant's Cents-Off Couponina scheme. 'b) be restrained from refusing or threatening to refuse to purchase or supplv aoods in Canberra. Queanbevan and Yass bv reason of the participation bv anv person in the Applicant's Cents-Off Couponing scheme. (c) be restrained from takina advantaqce of the wholesale aroceries market in Canberra. Queanbevan and Yass for the ourpose of: fo" 'iL preventing the entrv of the Fhe market for advertising aroceries bv means of the Applicant's Cents-Off Counoning scheme and (1i) deterring or oreventing the Applicant from enaadina in competitive canduct ur the market for advertisina aroaceries by means of its Cents-Off Couponing scheme. Costs to be Applicants costs in the voroceedinas. F ' kh t that this and tue 29 t esecing sma a teo.a cony of the preceding perss os r ia : Treun of 1.8 .9uI4 Reaco..$ for Tudrmsns Lite J ur, Justice fox ssociate Dated: 214 Orhalar, (786 | | ATC NOT _FOP_ GENERAL DISTPIBUTTON IN THE FEDERAL COUPT OF ANSTRALIA } \ NEW SONWTH WALES DISTRICT REGISTRY } No. G469 of 1926 y ) GENERAL DIVISTON BETWEEN : AUSTRALIAN CONSOLIDATED PPESS CIMETED Apoiztant AND: Baeeoondent DATE: 24 OCTOBER 1986 REASONS FOR JUDGMENT tai re (EX TEMPOPE) wel FOx J. This is an application for interlocutory iniunctions. the orincipal basis for which 13 3.46 of the Trade Practices Act 1974, The matter was heard on affidavit evidence, with some zupplementary oral evidence. all esroduced on behalf of 'he applicant. The respondent did not file an affidavit or qrosg-examine the witnesses called for the apolicant. Tr vralias "n defictencies which ztooclaims exist in the asplitant'= Ww evidence. The applicant is a publisher involved in the advertising business. The respondent ("Davids Holdinas") is a distributor/wholesaler, with some retail outlets of its own. The applicant has spent a considerable sum of monev. about $800.000. and its officers have spent much time. overa period of a year or so. in preparina a scheme for what is called "Cents-N£f Couponina". This scheme is described bv Mr McGeorae. an executive director of the applicant as follows: "The svstem of Cents-Off Couponing involves the followind steps:- (a) the publication and distribution of a brochure of coupons... . Manufacturers of products pav the publisher for the riaht to have their products featured in the brochure: (b) the brochures are distributed to consumers who take the brochures to retail stores and provide to that store a coupon in respect of a particular product which thev wish to purchase. The store then deducts the discount stated on the coupon from the price of the aoods; (c) the used coupons are forwarded to the publisher of the brochure which on behalf of the manufacturer refunds to the store the face value of the coupon plus a handlindg fee; (d) the publisher is ultimatelv rewarded for this bv the manufacturer." A trial run of the scheme has been prepared for the Canberra. QOueanbevan and Yass districts of New South Wales ta start bv publication of brochures on 27 October 1986. Section 46(1) provides as follows:- "46.01) A corporation that has a substantial deqree of power in a market shall not take advantage of that power for the purpose of - fa) eliminating or substantially damaqindg a competitor of the corporation or of a body corporate that is related to the corporation in that or anv other market; (b) preventing the entrv of a person into that or any other market: or (c) deterring or preventing a person from enaadindg in competitive conduct in that or anv other market." For the purposes of s.46, the applicant presses its case in relation to the Canberra wholesale market. There is no doubt that the respondent participates in that market as a wholesaler of aroceries. The brochures deal larqelv with qroceries and are directed at the retail market. On the evidence. what has happened in the last month or two is that officers of the respondent have qot in touch with some manufacturers and at least one retailer and told them that if thev participate in the scheme, the respondent will not stack the manufacturers' products. This has led one manufacturer, Nanda Macaroni Products Ptv. Limited ("Nanda") to repudiate its agreement or arrangement with the applicant for the insertion in the brochure of an advertisement. Inducing a breach of this agreement is put as a separate around of relief. but I have some doubt at the moment whether such a case is made out, even on an interlocutory basis, and in anv event it is not clear that anv relief can or should be qranted at this stage, if there has been a repudiation. I therefore do not consider this claim further. It is submitted on behalf of the respondent that it is not shown that, within the meanina of s.46(1), the respondent "has a substantial dearee of power in a market". A starting point for an inquirv into that matter is normallv to determine the extent and nature of the relevant market. For present purposes, it seems to me to be a permissible method of proceeding to look at the Canberra wholesale market. this being the market to which the applicant has directed attention. The question then is whether the respondent has a substantial deaqree of power in that market. I have ruled as inadmissible broad statements. bv persons with a aeneral familiarity of the scene. concerning the percentawe of the respondent's market, in Canberra. or over a wider area. Its participation in. and control over the market does however appear. laragelv bv wav of inference. from the admitted evidence. There are, for example, the repeated references fo the respondent's "warehouse", and the (successful) threat made to Nanda. Nanda is a substantial pasta manufacturer and claims to have 50% of the Australian pasta market. There i3 also a threat made to Kaleen Foodmaster Supermarket in Kaleen, a Canberra guburb. The evidence is that one of the respondent's representatives said to a fioint owner of this store "Davids would not supply anv stock from manufacturers who participate in the couponing programme to our store or anv store and we should not accept the coupons." There was a similar threat made to the manufacturer of a wide range of cleaning products: "AR representative from Davids Holdinas has contacted me and informed me that if 5.C. Johnson participate in the coupon proaram. our products will be delisted. He said that other participants in the coupon program will be treated the same wav." There is further evidence to the same effect. I am therefore of the view that there is a soundiv arqmuable case that the oveninag words of s.46 are satisfied. The applicant relies upon para (b) - "preventing the entrv of a person into that or anv other market". The prevention relied upon relates to entrv into another market. This is not the wholesa'® qrocery market. or anv other market for the sale of aoods. It seems plain that the respondent has an interest in opposing the applicant's Cents-Off couponina scheme. The market relied on ts the advertising market to which that scheme relates. Tt is the form of advertising. that is by use of the brochures. to which the respondent obiects. That method cuts across the wholesaler-retailer relationship. and that mav be a reason for the obfection. but whatever underlving reason or reasons there mav be. the respondent's campaian has the effect, and is intended to have the effect. of preventing the applicant from advertising by means of the brochures. The idea is to arrest the applicant's scheme. It mav be that one is then looking at a sub-market in the advertisina field. but I believe this is covered bv the letter and purpose of paragraph (b). The respondent itself, as wholesaler. participates in an advertising proaramme (known as "co-operative advertisina") related to the goods it sells. This works differentlv from that proposed by the applicant, but relates also to the discounting of retail prices. There is evidence of potential competition between the applicant's i Cents-Off Couponing scheme and co-operative advertising. Mr McGeorge states in his affidavit of 15 October 1986 (paraaqraph 9):- - "9, The Respondent (and other wholesalers and maior retail chains) are also in the business of providinda advertising services to manufacturers of arocerv products. The Respondent places advertisements in the media which promote partic'lar products which are on special in a particular week. The Respondent is paid for this service by tne manufacturer. This is known as "co-operative advertising". The Applicant's Cents-Off couponina competes with the co-operative advertisind business conducted bv the Respondent and other wholesalers and retail chains." In his oral evidence he savs of a conversation with Mr David. a principal of the Respondent: "Mr David advised me at the time that in his view just about all the manufacturers in Australia would supoort the coupon concert, but he sgaid fundamentallv he and other maior retailers were against it and he said the main reason whv thev were aaqainst it was because we would be comveting with his companv and other maior retailers for co-operative advertising dollars." TI am of the view . for reasons already stated. that earaqraph (c) is also applicable. In savinao this I do not mean tea aypress 2 concluded ovinion on the meaning of ""comoetitiv ny) conduct" in that voaracraph. There has been no arqument on the matter, and I have been prepared to assume that it extends toa "competitive" with the respondent. By t p re)rH T D ty w ay iwda bh i) it) Tk is common ground that considerat eenvenience distinctly favours the anpelicant. I will give ca the carties an opoortunity to consider the form of ralief. ani the matter 1¢ steod over until next Mondav. at 9.39 a.m. for that The oarties have handed uo agreed orders. based an the reasons given. and a rough draft I handed down, and I have made those orders. which are as follows 'they extend tao Yase and Nueanbevan on the unopeosed acplication of the applicant):- 1. Until the final determination of these proceedings cr further Order. the Pespvondent, by itself. its servants and aqents fa) be restrained from refusing or threatening co Peoducts Ptv., Limited in Canberra. QOueannevan and Vage d+ reason of uts varticicatior in the ie] me) Apolicant's Cents-Off Couponina =cheme. 'b) be restrained from refusing or threatenina to refuse to purchase or supplv caoods in Canberra. Queanbevan and Yass bv reason of the varticipation bv anv person in the Applicant'>s Cants-Off Couponina scheme. (c) be restrained from taking advantage of its power in the wholesale aroceries marki'. in Canberra, OQueapbevan and Yass for the ourpose of: (i) preventing the entrv of the Applicant int> Fhe market for dvertisina araceries bv w scheme and fri) deterring or oreventirg the Applizant from enaaging ir competitive conduct ain the market for advertising groceries hy means of its Cents-Off Couponing scheme. Costs to be Applicants costs in the proceedings. at this and the 2g hh a certify * eony of the a Quo a nls Note petenet : : 1 ; a ssociateé | - Dated: 274 Ooholar, (286