AUSTRALIAN COMPETITION TRIBUNAL Seven Network Limited (No 2) [2004] ACompT 6 PRACTICE AND PROCEDURE – application for disqualification of Tribunal member – apprehended bias – whether prejudgment of issues - former member of Australian Competition and Consumer Commission – presided in analogue pay TV arbitrations – proceedings seeking review of decisions relating to digital pay TV services. File No 10 of 2003 RE: APPLICATION FOR REVIEW OF THE DECISION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 12 DECEMBER 2003 ON THE SECTION 152ATA DIGITAL PAY TV ANTICIPATORY INDIVIDUAL EXEMPTION APPLICATIONS LODGED BY TELSTRA CORPORATION AND TELSTRA MULTIMEDIA BY: SEVEN NETWORK LIMITED (ACN 052 816 789) and C7 PTY LIMITED (ACN 082 901 442) File No 11 of 2003 RE: APPLICATION FOR REVIEW OF THE DECISION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 12 DECEMBER 2003 ON THE SECTION 152ATA DIGITAL PAY TV ANTICIPATORY INDIVIDUAL EXEMPTION APPLICATION LODGED BY FOXTEL MANAGEMENT PTY LIMITED (FOR AND ON BEHALF OF THE FOXTEL PARTNERSHIP AND FOXTEL CABLE TELEVISION) BY: SEVEN NETWORK LIMITED (ACN 052 816 789) and C7 PTY LIMITED (ACN 082 901 442) MR R F SHOGREN 15 APRIL 2004 CANBERRA IN THE AUSTRALIAN COMPETITION TRIBUNAL File No 10 of 2003 RE: APPLICATION FOR REVIEW OF THE DECISION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 12 DECEMBER 2003 ON THE SECTION 152ATA DIGITAL PAY TV ANTICIPATORY INDIVIDUAL EXEMPTION APPLICATIONS LODGED BY TELSTRA CORPORATION AND TELSTRA MULTIMEDIA BY: SEVEN NETWORK LIMITED (ACN 052 816 789) First Applicant C7 PTY LIMITED (ACN 082 901 442) Second Applicant File No 11 of 2003 RE: APPLICATION FOR REVIEW OF THE DECISION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 12 DECEMBER 2003 ON THE SECTION 152ATA DIGITAL PAY TV ANTICIPATORY INDIVIDUAL EXEMPTION APPLICATION LODGED BY FOXTEL MANAGEMENT PTY LIMITED (FOR AND ON BEHALF OF THE FOXTEL PARTNERSHIP AND FOXTEL CABLE TELEVISION) BY: SEVEN NETWORK LIMITED (ACN 052 816 789) First Applicant C7 PTY LIMITED (ACN 082 901 442) Second Applicant THE TRIBUNAL: MR R F SHOGREN DATE: 15 APRIL 2004 PLACE: CANBERRA REASONS FOR DECISION The application for disqualification 1 In these proceedings the applicants, Seven Network Limited and C7 Pty Limited ("C7"), have sought a review of decisions of the Australian Competition and Consumer Commission ("the Commission") to grant anticipatory exemption orders under s 152ATA of the Trade Practices Act 1974 (Cth) ("the Act")to Telstra Corporation Limited and Telstra Multimedia Pty Limited (together, "Telstra") and to FOXTEL Management Pty Limited and FOXTEL Cable Television Pty Limited (together, "Foxtel") in relation to certain digital pay TV services. 2 The applicants submit that I ought not be a member of the Tribunal constituted to hear these proceedings on the ground that I may not be able to bring a fresh and impartial mind to the consideration of the issues before the Tribunal or, in the alternative, that a reasonable apprehension may be engendered in the minds of those who come before the Tribunal that a member of the Tribunal may not bring a fair, impartial or unprejudiced mind to the decision. 3 The applicants and the Commission filed written submissions in relation to the application that I not be a member of the Tribunal. The Commission's submissions set out some factual matters relevant to the application. The Commission did not comment on whether or not I should form part of the Tribunal. In the hearing of the application, oral submissions were made by the applicants in support of the application. Foxtel made oral submissions opposing the application. I greatly appreciated the manner in which the issues were presented and argued. 4 During the course of oral submissions, counsel for Foxtel contended that this application should not be decided by me alone, but should be decided by the whole of the Tribunal. The President of the Tribunal has decided that the matter raised by Foxtel as to who should properly decide this application is a question of law to be determined by the President in accordance with s 42(1) of the Act. The President has addressed this issue and I have had the opportunity read the President's draft ruling. The President has determined that I alone should decide whether or not I should be disqualified from the proceedings for reason of apprehended bias. Accordingly, after carefully considering the application, I have concluded that I should not disqualify myself. My reasons follow. Factual background 5 The factual background to the application is contained in the applicants' submission and a supporting affidavit of Desmond Sweeney, solicitor for the applicants. It is fairly straightforward. 6 In the current proceedings, the Tribunal will decide whether to affirm, set aside or vary the Commission's decision under s 152ATA of the Act to grant anticipatory exemption orders to Telstra and Foxtel from Standard Access Obligations under s 152AR that would apply to certain digital pay TV services in the event that those services were subsequently declared under s 152AL. (A service cannot be declared until it exists; that is, until it is supplied to users.) The purpose of s 152ATA, as I currently understand it, is to provide a mechanism by which an exemption can be given from certain regulatory requirements prior to it being known whether those requirements would, in time, apply. Thus an anticipatory exemption can provide certainty about the regulatory regime that will apply, or not apply, to a service that has not yet been rolled out; that is, prior to final commercial decisions about whether to go ahead with the relevant investment. 7 The Tribunal has not yet heard an explanation of this background to the present proceedings. The description that I have just given appears from the application for review and from the Commission's Final Decisions. 8 The circumstances giving rise to the applicants' concerns about the composition of the Tribunal – that is, that I should not be a part of it – are that I was a member of the Commission for five years until late April 2002 and in that role I presided in arbitrations (heard together, with one other member of the Commission) between the same parties as appear in these proceedings, relating to declared analogue pay TV services. 9 The services now in question – digital rather than analogue – are thus different from those in the arbitration. 10 The nature of the decision to be made by the Commission – and thus by the Tribunal in review – is also quite different. In the arbitration, the analogue service had already been declared and the Commission had to determine whether, under s 152AR, access to the declared service was required to be provided and, if so, the terms and conditions of access (see Div 8 of Pt XIC). In deciding whether anticipatory exemptions should be granted, on the other hand, the question is whether doing so would be in the long term interests of end‑users. (In saying this I am drawing upon my knowledge of the arbitrations and on the applications for review.) Submission regarding apprehended bias 11 The applicants' submission relates not to the (different) matters to be determined in the two processes but to issues to be decided along the way. Those issues relate to terms and conditions of access. 12 In deciding whether exemption would be in the long term interests of end-users, the Commission considered the terms and conditions under which access would be provided under undertakings it had accepted from Telstra and Foxtel. Elements of the terms and conditions considered in the analogue pay TV arbitration are said by the applicants – and there is no disagreement on this point – to be essentially the same as those considered by the Commission, and presumably to be considered by the Tribunal, in deciding on the digital pay TV exemption. 13 The applicants set out a list of issues that were considered in the arbitration and that it appears to be accepted by all parties will need to be considered in these proceedings. While I do not propose to discuss those issues individually, it is useful to give a sense of the nature and number of them: · the appropriateness of the access price, which required consideration of: - the pricing methodology; - parity between C7 and Foxtel; - long run marginal cost; - asset valuation; - installed base acquisition costs; and - the cost of capital; and · the circumstances under which C7's customers can use Foxtel's set top units. 14 The applicants submitted, and I agree, that I considered all these issues in the arbitrations. They say that I "… may unconsciously or consciously be informed or influenced by views [I] formed during [my] consideration of these issues in the pay TV arbitrations, and there is a risk that in the course of these proceedings [I] may unconsciously or consciously tend to be defensive of views [I] formed or approaches [I] took during the pay TV arbitrations." It is this submission that underlies the submission that because of a risk of bias, or a reasonable apprehension of bias I should not be part of the Tribunal for these proceedings. 15 Thus the submission relates to whether, through my consideration of issues in the arbitrations, I have prejudged, or made up my mind about, issues about which I will have to form views in these proceedings. I have had to use the words "the submission relates to whether … I have prejudged" rather than, for example, "the submission is that … I have prejudged", because counsel for the applicants, in oral submission, declined to go as far as arguing that a prejudgment had taken place or that I had made up my mind. Rather, the argument was very much in terms of attachment to views previously formed. 16 The applicants provide considerable detail regarding the way in which the issues identified above were considered in the arbitrations. They note that in the Commission's consideration of the exemption applications they (the applicants) relied, among other material, on material that was before me in the arbitrations. Especially in their written submission, they give weight to the fact that expert reports submitted in the arbitrations were among the material subsequently before the Commission, and are thus before the Tribunal in these proceedings. My decisions in the arbitrations 17 Before turning to the test for whether I should disqualify myself, it is necessary to explain the broader circumstances of the arbitrations, which appear to be accepted by all the parties. They are partly to be found in Mr Sweeney's affidavit and the applicants' submission, and also in the Commission's submission, which dealt largely with the procedures and degree of finality of the arbitrations, and hence is of relevance to my role, decisions that I made, and my thought processes. 18 The arbitrations began in September 2000 and were conducted principally by way of written submission from the parties. C7 requested that the Commission (ie the two arbitrators) make an interim determination under subs 152CPA(1). We agreed to do so. 19 A draft interim determination was made, and following further submissions and a hearing, an interim determination was made in April 2001. The oral submissions of counsel for the applicants and Foxtel on the question of my possible disqualification made it clear that the interim determination was expressed in careful language to emphasise that the Commission (ie my fellow arbitrator and I) had not reached final views on any of the matters considered. 20 As I recall, the interim determination was made in the context of an accepted need to consider first the question whether the access seekers, C7, had a right to access and, if so, to try to ensure that they obtained it as quickly as possible, rather than waiting until the terms and conditions of access were considered in detail, a process which it was envisaged would take some time. Having decided, for the interim determination, that access should be granted, we had to set terms and conditions of access in that interim determination to apply on a temporary basis while the matter was considered further with a view to making a final determination. The terms and conditions included issues of pricing and of access to Foxtel's set top units. 21 Further processes took place after the making of the interim determination. During this period until I left the Commission in April 2002, I would have seen, and to some degree considered, various submissions, and probably had discussions with Commission staff regarding at least some of the issues identified as being common to the arbitrations and these proceedings. 22 However – and I go now beyond what I believe is accepted by all the parties to my personal beliefs and recollections – the matter did not reach any degree of finality. There seems no reason why my thinking on the issues would have reached any degree of finality, and my recollection is that it did not. The nature of my thinking on such issues in the Commission was that I made my mind up when I had to make a decision and put my reasons in writing. I did that in the interim determination on the basis of materials and arguments put to me to that point, reserving the right to reconsider those views in the light of further information and argument. To the extent that I considered subsequent material and discussed it with Commission staff, the process of reconsideration of the issues had begun. I did not get to the point, or near to the point, of finalising that reconsideration or reaching firm conclusions because I did not get close to another decision‑making point. 23 Nothing in the applicants' submissions suggests that this characterisation of my thought processes is incorrect. 24 The applicants' submission describes the arbitrations as effectively having been placed on hold from July 2002. It states that in June 2002 the Commission sent a letter to the parties advising that it intended to issue a paper on its preferred approach to pricing by mid August. This suggests that no firm conclusions had been reached about the approach to pricing by June 2002, which is consistent with my recollection that I had reached no conclusions myself by the time I left the Commission that April. The test for disqualification 25 The President of the Tribunal has determined that the legal principles relevant to the issue of apprehension of bias are questions of law to be determined by the President pursuant to s 42(1) of the Act. I have had the opportunity to read the President's draft ruling in relation to these principles. I adopt and apply the principles relating to reasonable apprehension of bias set out in paragraphs 19 to 25. 26 In my view, the applicants in these proceedings have fallen well short of firmly establishing that there is a reasonable apprehension of bias by reason of prejudgment. This conclusion follows from the following facts and circumstances, all of which I consider would be known to the fair‑minded observer whose view determines this issue: · There is no evidence to suggest that I reached final conclusions on the matters that were identified by the applicants as common to the arbitrations and these proceedings. This was made clear by counsel for the applicants. · Lest there be any concern that "absence of evidence is not evidence of absence", there is, on the other hand, evidence that I did not reach firm conclusions. Such evidence is to be found in the wording of the interim determination and in the state of the arbitration proceedings at the time I left the Commission. · The material on which I made up my mind in the arbitrations – to the extent I did make up my mind and with the caveats about the interim nature of the decision and tentative nature of the conclusions – is a subset of the material that will be considered by the Tribunal. At the least, the Tribunal will be considering further argument about those matters. It should be clear to all that I will need to reconsider any conclusions I did reach, in different circumstances, in the arbitrations. · Members of the Commission, as I was, experienced in administrative decision-making are well aware of the tenets of procedural fairness, and are used to taking part in many decisions that return to a core set of regulatory issues over and over, such as issues involving pricing methodologies. They face pressures to maintain their integrity and impartiality. · The decision-making framework in these proceedings is quite different from that in the arbitrations. The ultimate decisions to be made are to be made under different statutory criteria, regarding different services. 27 To sum up, there is no reason why a fair-minded observer with knowledge of the actual circumstances would reasonably apprehend that I would be unable to alter any tentative conclusions I had previously reached in the light of further facts and arguments and in the context of a different decision-making framework in respect of different services. A fair-minded observer would not conclude that I had prejudged the issues in this case such that I could not bring a fair, impartial and unprejudiced mind to the decision. 28 It is clear from the principles stated by the High Court in Livesey v New South Wales Bar Association (1983) 151 CLR 288 and Mason J in Re JRL; Ex parte CJL (1986) 161 CLR 342 that I should not too readily disqualify myself, even if doing so would at first appear to be an easy way of removing a concern of one of the parties and any possibility of there being a cloud over the Tribunal's ultimate decision. Doing so would impose additional costs on parties and, in the end, run the risk of allowing a party to influence the composition of the Tribunal so as to improve its chances of achieving the outcome it desires. 29 While this may be a worst-case scenario, apparently far removed from the no doubt genuinely felt concerns raised by the applicants in these proceedings, nevertheless, too acquiescent compliance with parties' requests to disqualify members must, over time, lead towards such an outcome. In that event, an exaggerated willingness to respond to claims that justice may not be seen to be done could be inimical to justice actually being done. 30 However, the policy that a request for disqualification on the ground of apprehension of bias not be acceded to too readily has not been central to the view that I have come to. I consider that the evidence leads to only one conclusion. Nevertheless, partly because my view is that this matter is clear-cut, I need to be very careful not to put too much weight on my certainty that I have not prejudged this matter and my confidence in my ability to decide it in an unbiased manner. The test for apprehended bias does not require that the facts prove actual bias. Appearances matter. Indeed, they are crucial. 31 The sheer volume of references to material I considered in the arbitrations, regarding some issues that are essentially the same as are now for consideration in these proceedings, could, in my view, initially arouse some concern in an observer as to whether I could decide those matters in these proceedings in an unprejudiced manner. 32 The claim that I would be defensive of views I had previously formed may have some resonance with some people. They may see that as a reasonable expression of one element of human nature. 33 However, I consider that a fair-minded observer, made properly aware of the actual circumstances, would not further entertain such a concern. While an informed and fair-minded observer would not share my inner personal convictions, I am convinced that he or she would, with an understanding of the circumstances, take the view that I would do my duty in these proceedings without undue difficulty. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Decision herein of Mr R F Shogren. Associate: Dated: 15 April 2004 Counsel for the applicants: Mr BW Walker SC with Mr JRJ Lockhart Solicitors for the applicants: Freehills Counsel for FOXTEL Management Pty Limited and FOXTEL Cable Television Pty Limited: Mr NJ O'Bryan SC with Mr MH O'Bryan Solicitors for FOXTEL Management Pty Limited and FOXTEL Cable Television Pty Limited: Allens Arthur Robinson Counsel for the Australian Competition and Consumer Commission: Ms MAC Painter Solicitor for the Australian Competition and Consumer Commission: Australian Competition and Consumer Commission Date of Hearing: 8 March 2004 Date of Submissions: 15 March 2004 Date of Reasons for Decision: 15 April 2004