JUDGMENT No. ARTA SB ae CATCHWORDS Trade Practices - Authorizations and notifications - General matters - Notification of exclusive dealing - Required content of notice. Trade Practices Act 1974 - ss. 46, 47, 93 NETWORK FOODS INTERNATIONAL PTY. LTD. v. CADBURY SCHWEPPES PTY. LTD. No. VG321 of 1988 Jenkinson J. Melbourne 11 August, 1988 23 AUG 1988 F RAL COURT O FEDER YSTRALIA RINCIPAL REGISTRY oo tt nbnnent niet on - yee ae meng ee es a7 aa carey oy —: —_— " IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) No. VG321 of 1988 GENERAL DIVISION ) BETWEEN: NETWORK FOODS INTERNATIONAL PTY. LTD. Applicant AND: CADBURY SCHWEPPES PTY. LTD. Respondent CORAM: Jenkinson J. PLACE: Melbourne DATE: 11 August, 1988 REASONS FOR JUDGMENT Application for a mandatory interlocutory injunction. The applicant is a wholesaler of chocolates and other confectionery. The respondent is a manufacturer of both chocolates and confectionery, to which I shall refer collectively as confectionery. The confectionery products which the applicant has been buying from the respondent provide the applicant with about one third of its confectionery sales revenue. The respondent has recently declared its intention no longer to sell any of its confectionery products to the applicants or to any persons, natural or corporate, who carry on 'a confectionery wholesale business and who are owned or in a business sense controlled by the applicant. The reason given by the respondent 2. un a letter announcing its decision was: t "This decision is taken in view of our policy not to supply products to entities which in our opinion are owned or controlled by producers of confectionery competitive with the products of Cadbury Schweppes Pty. Ltd." The applicant is a company incorporated in Victoria. In November 1986 all its shares were acquired by Grand Central Investments Holding PLC, a company listed on the London Stock Exchange, subsidiaries of which grow cocoa and coconuts and process cocoa beans into cocoa butter, cocoa powder and cocoa liquor and vend other food products. One of these subsidiary companies, called Upali (Malaysia) SDN Berhad, manufacturers chocolate. The applicant has been buying small quantities of chocolate products from that latter company for re-sale in this country and presently proposes to buy from that company, which I will call "Upali", blocks of chocolate which the applicant is negotiating to sell to the proprietors of chain grocery stores, in which the blocks would be sold to consumers in packages distinctive of the chain. The cause of action on which the application for interlocutory injunctive relief is primarily grounded is that which the applicant contends that s.46(1)(a) and Part VI of the Trade Practices Act 1974 affords it. Mr. Williamson Q.C., who appeared with Mr. Whelan for the respondent, did not deny that the evidence adduced on behalf of the applicant establishes, if s.46(6) be ignored, that there is a serious question to be tried as to whether the respondent's refusal any longer to sell to the + aan re EY 3. applicant, and those whom the applicant controls the chocolate it has been selling to those companies would constitute a contravention of s.46(1)(a). But Mr. Williamson submitted that s.46(6) would operate in the circumstances of this case to preclude the application of s.46(1) to such a refusal. Thase circumstances were that on 22 July 1988 the respondent had given to the Trade Practices Commission a notice of the kind for which s.93(1) makes provision, that the notice concerned the refusal alleged by the applicant to be a contravention of s.46(1), that no Notice under s.93(3) has been given by the Commission to the respondent in relation to that refusal and that the notice given by the respondent to the Commission has not been withdrawn. In those circumstances, 1t was submitted by Mr. Williamson, s.93(7){(b) commands that the refusal should not be taken, for the purposes of s.47, to have the purpose or to have or be likely to have the effect of substantially lessening competition within the meaning of s.47, and so by reason of the operation of s.93 the refusal does not constitute a contravention of s.47, and therefore the prohibition of that refusal which s.46(1) would otherwise have expressed is countermanded by s.46(6). The principal answer to Mr. Williamson's submission by Mr. Shavin, who apeared with Mr. Finkelstein Q.c. for the applicant was that the document given by the respondent to the Commission as a notice of the kind for which s.93(1) makes provision was null and void of legal effect because the document did not contain the information of which s.93(1) required that the Commission be given notice. The document consisted of four sheets of paper. The first sheet consisted of Form G of the Schedule to wee sye ee \ ane ee eee ered cape corse ep eee " 4. the Trade Practices Regulations, Regulation 9 of which requires that a notice under s.93({1) shall be in accordance with that form. The front of the farst sheet reads: "" COMMONWEALTH OF AUSTRALIA N40191 Trade Practices Act 1974-Subsection 93 (1) EXCLUSIVE DEALING; NOTIFICATION FORM G TO THE TRADE PRACTICES COMMISSION: Notice is hereby given in accordance with subsection 93(1) of the Trade Practices Act 1974, of particulars of conduct or of proposed conduct of a kind referred to in subsection 47(2), (3), (4) or (5) or paragraph 47(8)(a) or (b) or (9)(a), (b) or (c) of that Act in which the person giving notice engages or Proposes to engage. (PLEASE READ DIRECTIONS AND NOTICE ON BACK OF FORM) 1. (a) Name of Person giving notice CADBURY SCHWEPPES PTY LIMITED (See Direction 2 on the back of this Form) (b) Short description of business carried on by that person CONFECTIONERY PRODUCTION (c) Address in Australia for service of documents on that person 636 ST. KILDA ROAD, MELBOURNE, VIC., 2. (a) Description of the goods or services in relation to the supply or acquisition of which this notice relates CONFECTIONERY AND ALLIED PRODUCTS (b) Description of the conduct that would or may constitute the practice of exclusive dealing DISCONTINUANCE OF SUPPLY OR NON SUPPLY OF PRODUCT. NO WRITTEN DOCUMENTATION (See Direction 4 on the back of this Form) nae aay tte ——e 5. 3. (a) Class or classes of persons to which the conduct relates THOSE ENTITIES WHICH IN THE OPINION OF CADBURY SCHWEPPES PTY LTD ARE OWNED OR CONTROLLED BY PRODUCERS OF CONFECTIONERY COMPETITIVE WITH THE PRODUCTS OF CADBURY SCHWEPPES PTY LTD {b) Number of those persons — (1) At present time 7 ; (ii) Estimated within the next year CURRENTLY | NOT KNOWN (c) Where number of persons stated in item 3 (b) (i) | is less than 50, therr names and addresses SEE ATTACHED LIST 4, Name and address of person authorised by the person giving this notice to provide additional information \ in relation to this notice MR. IAN D. JOHNSTON CADBURY SCHWEPPES PTY LIMITED 636 ST. KILDA ROAD, MELBOURNE, VIC., 3004 Dated 22 July, 1988 Signed by/on behalf of the person giving this notice I.D. Johnston (Signature) IAN DAVID JOHNSTON (Full name)" The back of Form G was not reproduced on the copy of the first sheet tendered in evidence. The back of Form G in the schedule is in these terms: "DIRECTIONS i. Where there is insufficient space on this form to furnish the required information, the information is to be shown on separate sheets, numbered consecutively and signed by or on behalf of the person giving the notice. 2. Where the notice is given by or on behalf of a corporation, the name of the corporation is to be inserted in item 1(a), not the name of the person signing the notice and the notice is to be signed by a person authorised by the corporation to do so. 3. In item 1(b), describe that part of the business of the person giving the notice in the course of which the conduct is engaged in. 4. Where particulars of a condition or of a reason of the type referred to in sub-section 47(2), (3), (4) or (5) or paragraph 47(8)(a) or (b) or (9)(a), (b) or (c) of the Trade Practices Act 1974 have been reduced in whole or in part to writing, a copy of the writing 1s to be furnished with the notice. 5. In item 3(a), describe the nature of the business carried on by the persons referred to therein. 6. In item 3(b)(ii), state an estimate of the highest number of persons with whom the person giving the notice is likely to deal in the course of engaging in the conduct at any time during the next year. NOTICE Notification is not available in respect of conduct of a kind referred to in sub-section 47(6) or (7) or paragraph 47(8)(c) or (9)(d) of the Trade Practices Act 1974. With respect to such conduct, Form E (Exclusive Dealing: Application for Authorization) should be used." The second sheet reads: "ANNEXURE TO EXCLUSIVE DEALING NOTIFICATION LODGED ON BEHALF OF CADBURY SCHWEPPES PTY LTD Number of persons to which conduct relates [see clause 3(b)(i) of Notice]. 1. Those parties presently within the class or classes of persons to which the conduct relates: (a) Network Foods International Pty. Ltd 70 Raglan Street, Preston, Vic., 3072 (b) F. Meachem & Sons Pty Ltd 70 Raglan Street, Preston, Vic., 3072 ae meee we wee ore 4 : (c) Tsolakkis Bros. (1986) Pty Ltd 155 Johnston Street, Fitzroy, Vic., 3065 (d) Robinsons Confectionery 9 Apex Court, Thomastown, Vic., 3074 (e) Central Wholesalers, Canberra 9 Albany Street, Fyshwick, ACT., 2609 (£) A.M. Johnson Pty Ltd 505 Sherwood Road, Rocklea, QLD., 4106 {g) Network Foods International Pty Ltd (SA) 10-12 Reese Avenue, Richmond, SA., 5033 Companies (a) to (£) above are currently being supplied by Cadbury Schweppes Pty. Ltd. Company (g) has sought supply from Cadbury Schweppes Pty Ltd. It is not intended to supply this company." The third sheet reads: "ADDITIONAL MATERIAL TO ACCOMPANY EXCLUSIVE DEALING NOTIFICATION LODGED ON BEHALF OF CADBURY SCHWEPPES PTY LIMITED This Notification is lodged in relation to confectionery and allied products. This Notification currently relates to the seven parties referred to in the Annexure to the Notification. However, it is lodged pursuant to a policy of Cadbury Schweppes not to supply its products to entities which in its opinion are owned or controlled by roducers of confectionery competitive with the products of Cadbury Schweppes Pty Ltd. It is this class of persons to which the conduct referred to in this Notification relates. Cadbury Schweppes Pty Ltd believes that it has a right to deal with wholesalers of its choice. It believes that it is and will be adequately represented by wholesalers in light of present and projected marketing plans. It does not wish to deal with entities which have been acquired by a roducer of a product competitive with Cadbury Schweppes Pty Ltd and which, for all relevant purposes, are the direct product competitors of Cadbury Schweppes. wee een eee gree gen we 8. Cadbury Schweppes Pty Ltd does not require its wholesalers exclusively to market its product. Independent wholesalers are not affected by the policy of Cadbury Schweppes Pty Ltd. However, the entities referred to are not independent wholesalers. They are companies owned by a competitive producer. Cadbury Schweppes has no intention of changing its present policy of supplying genuine, legitimate, independent wholesalers whose business is the supply of confectionery products to retail outlets. The Cadbury Schweppes Pty Ltd policy is not a new policy. Cadbury Schweppes Pty Ltd ceased supply to Red Tulip when this company sought to actively favour its own brands to retailers, to the detriment of Cadbury products. The entities referred to in this Notification are, in fact, not independent wholesalers at this time,. whatever.their past history. Rather they are wholly owned subsidiaries of Network Foods International Pty Ltd which, in turn, is a wholly owned subsidiary of Grand Central Investment Holdings PLC. Grand Central also wholly owns a confectionery manufacturing company in Malaysia - Upali (Malaysia) Sdn. Berhad. It is present actuality not past history which determines the Cadbury Schweppes Pty Ltd policy. Purely because an entity has been supplied does not entitle such entity to future supply when the fundamental nature of the entity and its fundamental market function and orientation has changed." The fourth sheet reads: ts. The policy of Cadbury Schweppes Pty Ltd is taken for proper commercial reason and cannot he considered anticompetitive. There are many independent wholesalers through which Cadbury Schweppes Pty Ltd and any other producer may market confectionery. Cadbury Schweppes Pty Ltd lodges this Notification in the belief that its conduct in not supplying product to the class of persons referred to in this Notification may be seen by others to be engaged in for anticompetitive purpose or to have anticompetitive effect. Cadbury Schweppes denies this. By lodging this Notification Cadbury Schweppes should not be regarded as making any concessions in relation to its fundamental position that no breach of the Trade Practices Act would be owe 9. involved if this Notification were not lodged. The purpose of this lodgment is purely to obtain the additional protection of the legislation in cases where there may be allegations that anticompetitive effect or purpose is present in the conduct of Cadbury Schweppes. 10. The above brief details constitute in the belief of Cadbury Schweppes Pty Ltd, adequate reason why the Notification hereby lodged should stand and not be withdrawn either for competition or public benefit reasons." The word "conduct" in s.93(1), as in s.93(7), must in my opinion be understood as comprehending, not only the act or omission to act which satisfies paragraph (a), (b) or (c) of s.47(3), but also the mental activity which is the subject of description in the rest of that sub-section. It is in that sense that the word must be understood in s.47({10), and both the purpose and the structure of the legislative scheme which Division 2 of Part VII manifests in my opinion indicate that that is the meaning to be given the word in Division 2. That being so, the document given to the Commission by the respondent, while it achieves a communication of the respondent's proposal to refuse to supply certain goods to certain persons, fails, in my opinion, to achieve any communication that the proposed refusal is, or will be, for any reason which could be identified as answering, or as possibly answering, the description contained in s.47(3). Whatever be the reach of the words in s.93(1), "notice .... setting out particulars of the conduct or proposed conduct", those words must in my opinion, be understood to require, at least, that enough be communicated by the notice about the conduct to enable an understanding to be formed of the circumstances by reason whereof that conduct may be of a kind referred to in one or other of the nr se aro meyay e merine o . wee ve ee, cat ern Sy er od 10. provisions in s.47 to which reference is made in that sub-section. Mr. Williamson submitted that a document furnished in purported compliance with s.93(1) should not be conned captiously or rejected for inexactness of expression. He undertook a helpful examination of the last two pages of the document to support the submission that acquisition by the applicant of chocolates from Upali, which was a competitor of the respondent, was disclosed in the document to be the reason for the proposed refusal to supply chocolates to the applicant. But I cannot accept the submission. The reason which seems to be alleged is rather that the applicant and those under its control are owned or controlled by Grand Central Investment Holdings PLC and the latter company owns Upali, which makes confectionery, which is sold in competition with the respondent's confectionery, but by whom other than Upali, or where, does not appear. This is not a reason of a description to be found in s.47{(3). The effect which in the circumstances specified therein sub-sec. 93(7) accords the giving of a notice in compliance with sub-sec. 93(1) is important, and may have very serious consequences in trade and commerce. While a notice might not fail of effect as one given under the latter sub-section for imprecision in description of the conduct to which it referred, a notice which fails to indicate circumstances by reason whereof the conduct to which it refers may be understood to be "of a kind referred to" in one or other of the provisions of s.47 to which reference is made in s.93(1) is in my opinion ineffective to attract the operation of s.93. It fails to answer the description in s.93(1), "notice .... setting out particulars of the conduct or are ym rete etn Sa 11. proposed conduct", and therefore it fails, in my opinion, to satisfy the condition upon which the operation of s.93(7) depends: "where a corporation has given notice to the Commission under sub-section (1)". It is, in my opinion, null and void in relation to s.93 and, in my opinion, the respondent's document was in that sense null and void. The interlocutory relief sought is in substance a mandatory injunction - a direction to continue to _ sell confectionery to the applicant. The balance of convenience inclines very much in favour of granting such an order, for the uncontradicted evidence is that an inability to supply confectionery products of the respondent's manufacture will have a disastrous effect on a confectionery wholesaler's trade and goodwill. I do feel that high degree of assurance, to which Megarry J. referred in Shepherd Homes Ltd. v. Sandham [1971] Ch. 340 at 351, that at the trial it will appear that such an injunction was rightly granted. (C£. State of Queensland v. Australian Telecommunications Commission (1985) 59 A.L.J.R. 562; 59 A.L.R. 243). An interlocutory mandatory order will be made upon the applicant's giving the usual undertaking as to damages. I certify that this and the 10 preceding ;ages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Jenkinson. [iP Associate Dated: 11 August, 1988 12. Counsel for the Applicant Mr. R.A. Finkelstein Q.C. and r ; Mr. D. Shavin | Solicitor for the Applicant : Anthony Sdrinis & Co. ; Counsel for the Respondent : Mr. D.S. Williamson Q.c. and ; Mr. S.P. Whelan H F Counsel for Trade Practices : Mr. J.I. Fajgenbaum Q.C. and 1 Commission Mr. P.J. Jopling i 1 we Date Of Hearing : 11 August, 1988 t | 1 N f wer roe ape |