Re VFF Chicken Meat Growers' Boycott Authorisation [2006] ACompT 2

AUSTRALIAN COMPETITION TRIBUNAL Re VFF Chicken Meat Growers' Boycott Authorisation [2006] ACompT 2 TRADE PRACTICES – authorisation of collective boycotts – comparison of benefits and detriments – whether confined to anti-competitive detriments

Trade Practices Act 1974(Cth) s 90(8) Jones v Australian Competition and Consumer Commission (2003) 200 ALR 234 cited Media Council of Australia (No 2) (1987) ATPR 40-774 at 48,406 not followed 7-Eleven Stores Pty Ltd (1994) ATPR 41-357 at 42,654 not followed EFTPOS Interchange Fee Agreement (2004) ATPR 41-999 at [25] cited QANTAS Airways Limited (2005)ATPR 41-985 at [144]-[149 cited Australian Association of Pathology Services Practices Inc (2004) ATPR 41-985 at [93]-[94] followed Scott v Commercial Hotel Merbein Pty Ltd [1930] VLR 75 cited Pearce and Geddes, Statutory Interpretation in Australia,5th ed, 91. RE: VFF CHICKEN MEAT GROWERS' BOYCOTT AUTHORISATION JUSTICE HEEREY (DEPUTY PRESIDENT) DR W J BEERWORTH (MEMBER) PROFESSOR C WALSH (MEMBER) 21 APRIL 2006 MELBOURNE

IN THE AUSTRALIAN COMPETITION TRIBUNAL

File No 2 of 2005

RE: VFF CHICKEN MEAT GROWERS' BOYCOTT AUTHORISATION

TRIBUNAL: JUSTICE HEEREY (DEPUTY PRESIDENT)

DR W J BEERWORTH (MEMBER)

PROFESSOR C WALSH (MEMBER) DATE OF DETERMINATION: 21 APRIL 2006

WHERE MADE: MELBOURNE

THE TRIBUNAL DETERMINES THAT: Australian Competition and Consumer Commission authorisation A90931 is set aside.

IN THE AUSTRALIAN COMPETITION TRIBUNAL

File No. 2 of 2005

RE: VFF CHICKEN MEAT GROWERS' BOYCOTT AUTHORISATION

TRIBUNAL: JUSTICE HEEREY (DEPUTY PRESIDENT)

DR W J BEERWORTH (MEMBER

PROFESSOR C WALSH (MEMBER) DATE OF DETERMINATION: 21 APRIL 2006

WHERE MADE: MELBOURNE

REASONS FOR DETERMINATION THE TRIBUNAL: CONTENTS Par 1.0 INTRODUCTION [1] 2.0 THE ISSUES [10] 3.0 THE RELEVANT MARKETS 3.1 The markets for chicken growing services in Victoria [14] 3.2 The wholesale processed chicken meat market [17] 4.0 CHICKEN GROWING SERVICES 4.1 Growers' role [24] 4.2 Contractual performance incentives for Growers [31] 4.3 Density, batch rates and turnaround [34] 4.4 Tunnel ventilation [35] 4.5 Contractual terms [38] 4.6 Capacity [39] 5.0 THE CHICKEN MEAT PRODUCTION PROCESS [41] 6.0 DEREGULATION OF THE CHICKEN MEAT INDUSTRY [49] 7.0 SOME RECENT DEVELOPMENTS [55] 7.1 The South West Productivity (SWP) Group [56] 7.2 Rural Funds Management (RFM) [58] 8.0 ECONOMIC EXPERTS: AREAS OF AGREEMENT [59] 9.0 LEGAL ISSUES 9.1 The test under s 90(8) [63] 9.2 Whether exclusionary arrangement [71] 10.0 APPLYING THE STATUTORY TEST 10.1 Background [73] 10.2 The future with and without test. [79] 11.0 THE COUNTERFACTUAL 11.1 Introduction [85] 11.2 Do Processors have market power in the markets for chicken growing services? 11.2.1 Grower's case [89] 11.2.2 Processors' case [93] 11.2.3 ACCC's case [101] 11.2.4 Tribunal's view [105] 11.3 Are Processors exercising market power in the markets for chicken growing services? 11.3.1 Growers' case [127] 11.3.2 Processors' case [136] 11.3.3 ACCC's case [140] 11.3.4 Tribunal's view [149] 11.4 What implications follow for the counterfactual if Processors exercise market power in the markets for chicken growing services? 11.4.1 Growers' case [170] 11.4.2 Processor's case [175] 11.4.3 ACCC's case [176] 11.4.4 Tribunal's view [178] 11.4.4.1 Monopsonistic behaviour [179] 11.4.4.2 Opportunistic behaviour [190] 11.4.4.3 Overall conclusions about the counterfactual [198] 12.0 THE FACTUAL: LIKELY OUTCOMES WITH A BOYCOTT AUTHORISATION [203] 12.1 Expected outcomes in the factual [205] 12.1.1 Under what circumstances would the threat of a collective boycott be credible? 12.1.1.1 Processors' case [207] 12.1.1.2 ACCC's case [209] 12.1.1.3 Tribunal's view [210] 12.1.2 Would the parties be likely to "game" the collective boycott authorisation? 12.1.2.1 Processors' case [215] 12.1.2.2 Growers' case [220] 12.1.2.4 Tribunal's view [221] 12.1.3 What other factors might influence the exercise of a collective boycott power? 12.1.3.1 Growers' case [240] 12.1.3.2 Processors' case [250] 12.1.3.3 ACCC's case [251] 12.1.3.4 Tribunal's view [252] 12.1.3.4.1 Factors that constrain the extent of Growers demands [254] 12.1.3.4.2 The length of any proposed boycott [259] 12.1.3.4.3 Processors' responses to minimise the effect of a collective boycott [261] 12.1.4 Likely impact of a collective boycott authorisation on contract negotiations between Processors and Growers 12.1.4.1 Growers' case [267] 12.1.4.2 Processors' case [280] 12.1.4.3 ACCC's case [286] 12.1.4.4 Tribunal's view [287] 12.1.4.4.1 Would a Growers' threat of boycott be credible? [289] 12.1.4.4.2 Is a boycott likely to occur? [292] 12.1.4.4.3 Will authorisation lead to a change in market outcomes? [296] 12.1.5 Implications for various market participants 12.1.5.1 Processors' case [308] 12.1.5.2 Growers' case [311] 12.1.5.3 Tribunal's view [317] 12.2 Benefits from a collective boycott 12.2.1 Growers' case [325] 12.2.2 Processors' case [333] 12.2.3 ACCC's case [337] 12.2.4 Tribunal's view [339] 12.3 Detriments from a collective boycott [358] 12.3.1 Anti-competitive detriments 12.3.1.1 Processors' case [360] 12.3.1.2 Growers' case [370] 12.3.1.3 ACCC's case [376] 12.3.1.4 Tribunal's view [379] 12.3.2 Animal welfare detriments 12.3.2.1 Processors' case [396] 12.3.2.2 Growers' case [397] 12.3.2.3 ACCC's case [400] 12.3.2.4 Tribunal's view [401] 13.0 COMPARING THE COUNTERFACTUAL WITH THE FACTUAL [404] 13.1 Sources of market power [407] 13.2 The role of monopsony power [410] 13.3 The role of sunk relationship-specific costs [427] 13.4 Overall conclusions [433] 14.0 SUMMARY [441] 15.0 ACKNOWLEDGEMENTS [455]