AUSTRALIAN COMPETITION TRIBUNAL Qantas Airways Limited [2003] ACompT 4 PRACTICE AND PROCEDURE – Trade Practices – application for leave to intervene pursuant to s 109(2) of the Trade Practices Act 1974 (Cth) – test to be applied in determining whether the parties applying to intervene have an interest warranting intervention – whether any intervention should be subject to conditions. Trade Practices Act 1974 (Cth): s 109(2) Re Alliance Agreement – Application by PK Wakeman (1999) ATPR 41‑675, referred to Telstra Corporation Ltd (2001) ATPR 41‑812, referred to File No 5 of 2003 RE: APPLICATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 9 SEPTEMBER 2003 DENYING AUTHORISATION IN RELATION TO APPLICATIONS A30220, A30221, A30222, A90862 AND A90863 (PROPOSED ACQUISITION BY QANTAS OF ORDINARY SHARES IN AIR NEW ZEALAND AND COOPERATIVE ARRANGEMENTS BETWEEN QANTAS, AIR NEW ZEALAND AND AIR PACIFIC) BY: QANTASAIRWAYSLIMITED(ABN16009661901) and AIR NEW ZEALAND LIMITED (ABN 70 000 312 685) Applicants GOLDBERG J (President), MR G F LATTA and PROFESSOR D K ROUND 23 DECEMBER 2003 MELBOURNE IN THE AUSTRALIAN COMPETITION TRIBUNAL No 5 of 2003 RE: APPLICATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 9 SEPTEMBER 2003 DENYING AUTHORISATION IN RELATION TO APPLICATIONS A30220, A30221, A30222, A90862 AND A90863 (PROPOSED ACQUISITION BY QANTAS OF ORDINARY SHARES IN AIR NEW ZEALAND AND COOPERATIVE ARRANGEMENTS BETWEEN QANTAS, AIR NEW ZEALAND AND AIR PACIFIC) BY: QANTASAIRWAYSLIMITED(ABN16009661901) and AIR NEW ZEALAND LIMITED (ABN 70 000 312 685) Applicants THE TRIBUNAL: GOLDBERG J (President) MR G F LATTA PROFESSOR D K ROUND DATE OF ORDER: 23 DECEMBER 2003 WHERE MADE: MELBOURNE THE TRIBUNAL ORDERS THAT: 1. The Gulliver's Pacific group and SYNERGI Travel Australia Pty Ltd ("the Gulliver's group") be given leave to intervene in the application. 2. On or before 20 January 2004, the Gulliver's group file and serve on the applicants and the Australian Competition and Consumer Commission ("the Commission") a statement of facts, contentions and issues in response to the application. 3. On or before 19 March 2004 the Gulliver's group file and serve on all parties any statement on which they intend to rely from witnesses as to fact. 4. On or before 16 April 2004 statements by expert witnesses to be relied upon at the hearing on any issue by the Gulliver's group are to be filed and served on all parties. 5. On or before 23 April 2004 the Gulliver's group file and serve on the applicants and the Commission a list of documents intended to be tendered or otherwise relied on at the hearing, and provide copies to the other parties. 6. Any document required by the order of 28 November 2003 to be served by the applicants or the Commission shall also be served on the Gulliver's group. IN THE AUSTRALIAN COMPETITION TRIBUNAL No 5 of 2003 RE: APPLICATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 9 SEPTEMBER 2003 DENYING AUTHORISATION IN RELATION TO APPLICATIONS A30220, A30221, A30222, A90862 AND A90863 (PROPOSED ACQUISITION BY QANTAS OF ORDINARY SHARES IN AIR NEW ZEALAND AND COOPERATIVE ARRANGEMENTS BETWEEN QANTAS, AIR NEW ZEALAND AND AIR PACIFIC) BY: QANTASAIRWAYSLIMITED(ABN16009661901) and AIR NEW ZEALAND LIMITED (ABN 70 000 312 685) Applicants THE TRIBUNAL: GOLDBERG J (President) MR G F LATTA PROFESSOR D K ROUND DATE: 23 DECEMBER 2003 PLACE: MELBOURNE REASONS FOR DECISION 1 On 29 September 2003, Qantas Airways Ltd ("Qantas") and Air New Zealand Ltd ("Air New Zealand") applied to the Tribunal to review a decision of the Australian Competition and Consumer Commission ("the Commission") made on 9 September 2003 denying authorisations in relation to the following applications: · An application seeking authorisation for collaborative arrangements between Qantas and Air New Zealand (A30220 and A30221) ("the Strategic Alliance proposal"); · An application seeking authorisation for the acquisition by Qantas of ordinary shares comprising up to a 22.5% voting equity interest in Air New Zealand (A30222) ("the Equity proposal"); and · An application seeking authorisation for a "Cooperation Agreement" between Qantas, Air New Zealand and Air Pacific Limited, which is ancillary to the Strategic Alliance proposal (A90862). 2 On 15 December 2003, an application was made to the Tribunal for leave to intervene in the proceeding on behalf of a number of companies described as the Gulliver's Pacific group and SYNERGI Travel Australia Pty Ltd ("the Gulliver's Group"). The application for leave to intervene was supported by an affidavit of Mr John Bagnall, a director of, and substantial shareholder in, the Gulliver's group. Mr Bagnall has set out a summary of the companies and the nature of the businesses in the Gulliver's group, who have a number of travel‑related businesses in Australia and New Zealand. The main Australian operation is conducted by SYNERGI Travel Australia Pty Ltd, which is said to compete directly with Qantas Business Travel and a number of other competitors in the business travel market. Two companies in the Gulliver's group are registered in Australia, namely SYNERGI Travel Australia Pty Ltd and Atlantic & Pacific Business Travel Pty Ltd. The nature of the Gulliver's group's commercial interest may be described as downstream wholesale, retail and corporate travel distribution in relation to travel within and between Australia and New Zealand. 3 The power of the Tribunal to allow intervention is found in s 109(2) of the Trade Practices Act 1974 (Cth) ("the Act"), which provides: "The Tribunal may, upon such conditions as it thinks fit, permit a person to intervene in proceedings before the Tribunal." There is no particular test or condition found in the subsection upon which the discretion to allow intervention is predicated. It is useful to note that in applications for review found in s 101 of the Act, a "person dissatisfied" with a determination by the Commission may apply to the Tribunal for a review of the determination, and if the Tribunal is satisfied that the person has a "sufficient interest" in the subject matter, the Tribunal must review the determination. However, no criterion of "sufficient interest" is found in s 109. 4 There have been a number of cases which have considered the threshold to be overcome in determining whether leave should be given to intervene. It was considered in Re Alliance Agreement – Application by PK Wakeman (1999) ATPR 41‑675, and in Telstra Corporation Ltd (2001) ATPR 41‑812, a more recent decision analysing similar concepts, albeit under different legislation. There has been some divergence of view in relation to the threshold to be overcome. It is variously expressed that there has to be a "real and substantial interest" in the subject matter, that there has to be a "sufficient interest" in the subject matter, or that the interest must be sufficient to justify the cost and inconvenience of having an extra party in the proceeding. 5 Qantas and Air New Zealand submitted that the test is that there has to be a real and substantial interest and that the Gulliver's group had not, on the evidence, distinguished its position from any other intermediate or end user of the services purported to be affected by the proposed alliance between Qantas and Air New Zealand. The Gulliver's group submitted that all that was required was a sufficient interest. The Gulliver's group submitted that the question to be asked is whether the Gulliver's group ought to be given leave to intervene, not whether the Gulliver's group is somehow distinguished from other competitors who have not sought to intervene. 6 The Commission supported the intervention of the Gulliver's group and submitted that the Gulliver's group had a sufficient interest and should be permitted to intervene in the review. 7 The Tribunal is satisfied, whether the test be a real and substantial interest, a sufficient interest, or an interest which needs to be sufficient to justify the cost and the inconvenience of an extra party, that the Gulliver's group should be given leave to intervene in the application. The extent of that intervention remains to be determined. The Tribunal will shortly address the issue of conditions, but it may be that the issue is one that will need to be reviewed from time to time, both as the preparation for the hearing of the application progresses and also during the hearing of the application. 8 The Tribunal should point out that it does not consider that the issue of expedition is one which bears upon the application for leave to intervene. It was submitted on behalf of Qantas and Air New Zealand that expedition was a statutory requirement for the disposition of the application, and that the joinder or the intervention of the Gulliver's group would inhibit such expedition. The Tribunal does not accept that this should be a matter of real concern, as the extent and involvement of the Gulliver's group in the proceeding is a matter that can be supervised and controlled by the Tribunal. 9 The Tribunal considers that the commercial interests and activities of the Gulliver's group, and the knowledge of the relevant industry and markets as set out in Mr Bagnall's affidavit, are such that the Gulliver's group is in a position to provide relevant evidence and to respond to matters in respect of which it has a relevant interest. Although it was submitted that these matters should be able to be advanced through the Commission, the Tribunal is of the opinion that the nature of the Gulliver's group interest, its commercial activities and the expert evidence that it says it is preparing, are such that it is more appropriate that they be dealt with and presented by the Gulliver's group, albeit on the basis that its participation may, at particular points in time, be restricted. 10 The Tribunal has some hesitation about the evidence to be led about the counterfactual. The Tribunal expects that there may be differences in the counterfactual propounded by Qantas and Air New Zealand and the Commission, and presumably by the Gulliver's Group. The Tribunal is concerned that three counterfactuals and economic models may be propounded. If this situation arises, it may need to be addressed before the hearing commences, by seeking agreement between any relevant witnesses, whether expert or otherwise, on common issues involved in the counterfactual, which should also assist in identifying those issues in the counterfactual which are controversial. This is a matter that the parties may wish to consider, and which can be addressed at a later directions hearing. 11 At this stage, the Tribunal expressly reserves the extent to which the intervention by the Gulliver's group should be subject to conditions. Qantas and Air New Zealand have submitted four conditions, but at this stage the Tribunal is not disposed to impose those conditions. 12 The first condition sought by Qantas and Air New Zealand is that the Gulliver's group only be permitted to file lay and expert evidence and make submissions in relation to the effect of the proposed arrangement between Qantas and Air New Zealand on the travel distribution and ticket agency business of the Gulliver's group. This condition may be unduly limiting on the material to be filed and presented by the Gulliver's group, depending upon the nature of the material filed by Qantas and Air New Zealand. 13 It seems to the Tribunal at this stage that there should be no limitation on the issues in respect of which the Gulliver's group can file evidence and make submissions. It may well be that after all the lay and expert evidence is filed and served, conditions may have to be considered as to the manner in which that material is presented on behalf of the Gulliver's group, and the extent to which the Gulliver's group may be permitted to cross‑examine on other material. That matter is best left open at the moment. 14 The second condition sought by Qantas and Air New Zealand is that the Gulliver's group seek the leave of the Tribunal prior to being permitted to cross‑examine any witness. At this stage, the Tribunal is not disposed to impose such a condition, although it foreshadows that once all the material is in, it will be rigorous to ensure that there is no unnecessary duplication of cross‑examination. If there is to be any cross‑examination by the Gulliver's group, the probability is that it will have to demonstrate the need for such cross‑examination. 15 The third condition sought is that the Gulliver's group undertake to the Tribunal and to each of Qantas and Air New Zealand, to pay their costs in such amount as the Tribunal sees fit. The Tribunal is not disposed to impose such a condition. The question of costs is, on one view, an open one, although all the parties adopted the position that the Tribunal has no power to order costs. That position may well be. It has not been fully argued, and at this stage, the Tribunal proposes simply to reserve the question of costs involved in relation to the intervention of the Gulliver's group, including the question of whether there is any power for the Tribunal to make any order for costs. 16 The final condition sought to be imposed by Qantas and Air New Zealand is that the applicants have leave to apply to the Tribunal, at four stages, for an order that the Tribunal review and, if the Tribunal thinks fit, revoke the permission of the Tribunal for the Gulliver's group to intervene in these proceedings: first, following the filing by the parties of lay evidence; secondly, following the filing by the parties of expert evidence; thirdly, following the filing by the parties of their respective submissions; and fourthly, during any stage of the hearing of the proceeding. 17 It seems to the Tribunal that there is no need to have the extent of the Gulliver's group's intervention reviewed following the filing of the lay and expert evidence. At that stage the full range of material which will ultimately be before the Tribunal, will not be completed. It may well be that following the filing by the parties of their respective submissions, and when the lay evidence and the expert evidence and the submissions are viewed as a whole, there may be issues as to the nature and extent of the Gulliver's group's intervention. That is a matter that can be addressed either very shortly before the hearing, or on the morning of the first day of the hearing, and the Tribunal, if it be necessary, reserves that position, although it regards its supervision and control of the proceeding as sufficient to govern the situation should it arise at that later stage. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Decision herein of the Tribunal. Associate: Dated: 13 January 2004 Counsel for Qantas Airways Limited: Mr JRJ Lockhart Counsel for Air New Zealand Limited: Mr R A Dick Counsel for the Australian Competition and Consumer Commission: Mr A I Tonking Solicitor for the Australian Competition and Consumer Commission: Australian Government Solicitor Counsel for Gulliver's Travels and SYNERGI Travel Australia Pty Ltd: Mr C M Scerri QC Solicitor for Gulliver's Travels and SYNERGI Travel Australia Pty Ltd: Allens Arthur Robinson Date of Hearing: 23 December 2003 Date of Reasons for Decision: 23 December 2003