Australian Competition & Consumer Commission v Sony Music Entertainment (Australia) Ltd [2000] FCA 646

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v

Sony Music Entertainment (Australia) Ltd [2000] FCA 646

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v

SONY MUSIC ENTERTAINMENT (AUSTRALIA) LIMITED

(ACN 000 033 581) AND OTHERS

N 926 of 1999 HILL J 10 MAY 2000 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 926 OF 1999

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

APPLICANT

AND: SONY MUSIC ENTERTAINMENT (AUSTRALIA) LIMITED (ACN 000 033 581)

FIRST RESPONDENT

SONY MUSIC ENTERTAINMENT HOLDINGS (AUSTRALIA) PTY LIMITED (ACN 008 415 594)

SECOND RESPONDENT

MUSIC INDUSTRY PIRACY INVESTIGATIONS PTY LIMITED (ACN 071 726 906)

THIRD RESPONDENT

ADRIAN FITZ-ALAN

FIFTH RESPONDENT

MICHAEL SPECK

SIXTH RESPONDENT

JUDGE: HILL J

DATE: 10 MAY 2000

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT 1 Before the Court are two motions, one by the Australian Record Industry Association Limited ("ARIA") bought in proceedings number 926 of 1999 in which proceedings Sony Music Entertainment (Australia) Limited and Sony Music Entertainment Holdings (Australia) Pty Limited are parties; the other brought by Music Industry Piracy Investigation Pty Limited ("MIPI") which company is the third respondent in the same proceedings. Each notice of motion deals with a number of matters which have been the subject of debate between the parties and in part before me. 2 The subject matter of the debate is also a live matter in other proceedings to which Warner Music Australia Pty Limited and Universal Music Australia Pty Limited are parties. The parties are in agreement that the resolution of the issues in the two motions in proceedings N 926 of 1999 will resolve the issues in the other proceedings as well. Of the numerous issues debated, only two remain to be dealt with by me now. The first is the matter raised by ARIA in its motion. It relates to the production of minutes of board meetings of ARIA and board papers, so far as those minutes or papers relate to a campaign which ARIA undertook against parallel importing, which campaign senior counsel for ARIA described as a political campaign. 3 The second matter relates to the production on discovery by MIPI of documents which relate to the embodiment of cinemagraphic film or other visual images in sound recordings. I shall deal with each of these matters separately. I should perhaps add at this stage that not all of the matters between the parties have been resolved. For example while the parties have agreed that the categories of documents, of which discovery has been required, should be limited to such documents as may be discoverable, it is likely that there may be a difference of view between the parties as to what documents are discoverable. However, it is impossible for me to deal with that question abstractly and it is for that reason that I do not propose to enter upon it now. 4 Senior counsel for ARIA conceded for present purposes that whatever the strict legal relationship might have been between ARIA and the record companies, which are the respondents in the present proceedings, it acted, if not as agent, at least at the prompting and consent of the record companies in engaging in a political campaign designed to secure changes in the legislation that was proposed to regulate and make legal parallel importing. 5 Senior counsel for ARIA nevertheless argued that the material subpoenaed was not relevant to the proceedings. Rather he said that at the very least the question of what happened during the campaign was of a very tangential nature to the subject matter of the litigation and that the Court should adopt the view that material subpoenaed or otherwise to be produced on discovery should be limited so as to reduce rather than increase costs. 6 Counsel for the Australian Competition and Consumer Commission ("the Commission"), the applicant in all the proceedings, submitted that the documents were relevant and that they went both to the purpose of the respondent companies as well as to the market power which those companies enjoyed in the relevant period with which the proceedings are concerned. 7 It is important to bear in mind what relevance means in the context of subpoenas and discovery but particularly the former. The Court is not concerned, of course, with the question of admissibility and the word "relevance" is not to be seen as having the meaning that it does in the Evidence Act 1995. What is at issue is rather a matter of adjectival rather than substantive relevance and is not to be judged by applying a very narrow view of the concept of relevance. 8 Like senior counsel for ARIA I have some difficulty in understanding the relevance of the material in question to the issue of market power but, be that as it may, it certainly seems to me to be the case that the material in question goes to or is relevant to a fundamental issue in the case, namely the purpose of the relevant respondents in acting as the applicant alleges in a way which had a purpose of substantially lessening competition in wholesale and/or retail markets in sound recordings. 9 Purpose, so far as it is alleged in a particular period, cannot always be determined by reference to acts which are complained of and which took place in that period. It will seldom be the case that a respondent to the proceedings brought under the Trade Practices Act 1974 (Cth) will have made admissions of purpose in documentary material available either on discovery or on subpoena. Rather, the question of whether the applicant has been able to prove the existence of the relevant purpose will ultimately depend on inferences that are made by reference to acts which the respondents have carried out, not merely in or during the period where the acts complained of took place, but also at times earlier than that period and by reference to acts which took place at times earlier than the acts complained of. 10 It seems to me that it could be relevant to the present proceedings to know what ARIA, acting as conceded at the instigation of and with the approval of the respondents, did in the campaign that it conducted to prevent legislation being enacted by the Commonwealth Parliament which would for the first time permit importing of copyright works into Australia without the consent of the Australian owner of the copyright, otherwise referred to as parallel importing. It is for this reason that I am of the view that the documents sought are relevant and for this reason I would dismiss the application brought by ARIA to have the subpoena addressed to it struck out so far as it related to the documents to which I have referred. 11 The second issue is somewhat more difficult. The Commission seeks discovery of documentary material described in the notice of discovery in the following terms: "Documents created since 1 January 1998 evidencing or recording communications between or within MIPI, ARIA, the other major record companies and/or any of the overseas affiliates of the major record companies in relation to the embodiment of cinematograph films or other forms of visual images in articles containing recorded music." 12 It is submitted again that the category of documents is far too wide and comprises documents having no relevance at all to the present proceedings. It is necessary therefore to say something about the proceedings as pleaded in the amended statement of claim filed on 10 December 1999. What follows is to some extent a rather abbreviated summary of the pleading but is probably sufficient for present purposes. 13 In essence it is pleaded that there exists a market or markets, be they wholesale or retail, for sound recordings as defined in s 10(1) of the Copyright Act 1968 embodied in records such as CD's. It is also alleged that the various companies that are party to the proceedings are major players in that market with substantial market power. It is alleged that the various parties believed that parallel importing would be likely to have a significant effect on competition in the market and that in essence the companies took various steps as pleaded in paragraphs 34 and following in a way which substantially affected competition. So it is alleged that arrangements or understandings were entered into between various companies to hinder or minimise the availability of parallel importing and this in a period which finished towards the end of 1998 and commenced roughly at the beginning of that year. The steps taken as pleaded are said to constitute arrangements or understandings having a purpose or substantial purpose or the effect or likely effect of substantially reducing competition in the markets pleaded. 14 There is no reference directly in the pleading to any acts which directly concern embodying non-musical images on CD's which also contained music. 15 It seems to me as presently advised, and no one has submitted to the contrary, that to the extent that the various companies took steps to prevent the importation into Australia of CD's on which there was embodied music but on which there was also embodied, for example, visual images, those steps would fall within the general purview of the statement of claim. However, I have great difficulty in seeing how what might have been done by the respondents in Australia to embody images on CD's in which there was music could fall in any way within the purview of the statement of claim. 16 On the face of it, it is difficult to see what particular paragraph of the statement of claim this could relate to, and I say this without disrespect to counsel for the applicant. He has not been able to persuade me which paragraph does apply. That may be my fault rather than his. What is more important is really that while it is possible that the material sought to be discovered is in part discoverable in the sense that CD's with film embodied in them in one sense are to be treated in no way differently from CD's without images embodied in them. The material sought to be discovered goes much wider than that and indeed is unlimited, save as to time. It may be noted that the notice of discovery refers to a period from 1 January 1998 presumably to date. 17 I am of the view that as currently expressed in the notice of discovery paragraph 30 complained of is too wide. It does not seem to me, however, to be impossible to frame a paragraph that could be limited to the matters which are pleaded. Accordingly I would, so far as is necessary to make a formal order, strike out paragraph 30 of the notice of discovery dated 1 May 2000. The orders then made on the two motions would be that the motion brought by ARIA be dismissed. I have already indicated the orders to be made with respect to the motion bought by MIPI. 18 In the ARIA matter I would order that ARIA pay the costs of the motion. 19 I will order the applicant to pay MIPI's costs limited to the costs only of this morning. The remaining costs on the motion will be costs in the proceedings. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.