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Legal Studies Research Paper No. 400 Proof of a Market for the Purposes of the Trade Practices Act 1974 (Cth): A critical examination of the role played by industry evidence Part Two

Caron Beaton-Wells This material was first published by Lawbook Co. in the Australian Business Law Review, Vol 31, 2003 and is reproduced by agreement with the Publishers

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Proof of a market for the purposes of the Trade Practices Act 1974 (Cth) A critical examination of the role played by industry evidence – Part Two Caron Beaton-Wells* This article is the second in a series of two articles published in this journal concerning the role played by industry evidence in establishing the existence of a market for the purposes of Part IV of the Trade Practices Act 1974 (Cth). The first article, published in the previous issue of this journal, addressed the sources and forms of such evidence. In this article, the use that has been made of industry evidence by courts in defining markets is examined. Such evidence is used by courts to make findings of fact concerning principally the sources and degree of competition faced by the firm(s) in question in the proceeding and based on these findings, to reach conclusions regarding the dimensions of the relevant market(s). The subject matter of the evidence concerns largely the behaviour in which the relevant firms engage in the market place. Courts need to be rigorous in their analysis of this evidence, particularly evidence of behaviour at the level of the firm(s) in question, bearing in mind that the object of the exercise is to identify the operation of effective constraints on the decision-making and conduct of those firm(s). In Part One of this series of articles the important role played by industry evidence in proving the existence of a market for the purposes of Pt IV of the Trade Practices Act 1974 (Cth) (the Act) was highlighted.1 “Industry evidence” is an expression used in this context to refer to evidence that is derived from the industry relevant to the case at hand and that concerns, in broad terms, competitive dynamics in that industry. Generally speaking, courts use industry evidence in order to make findings about competition in the relevant industry. In particular, courts rely on this evidence to ascertain the sources and extent of competition that is actually faced by the firm, the conduct of which is in question in the proceeding,2 so as to identify an “area of close competition”3 that constitutes the relevant market. The primary subject matter of the evidence used for this purpose is, generally speaking, the competitive behaviour of firms at the functional level of operation of the firm in question. However, courts also rely on evidence of the behaviour of firms that are either upstream or downstream of the firm; again, this evidence is examined with a view to discerning the nature and degree of competition at the level of operation of the firm in question.

* BA/LLB, LLM, PhD. Lecturer, Faculty of Law, University of Melbourne The author teaches competition law at the University of Melbourne and also practises as a barrister at the Victorian Bar. Her forthcoming book on the evidence involved in proving markets under the Trade Practices Act 1974 (Cth) is to be published by Federation Press. 1 Beaton-Wells C, “Proof of a market for the purposes of the Trade Practices Act 1974 (Cth): A critical examination of the role played by industry evidence – Part One” (2003) 31 ABLR 113. 2 There may well be more than one firm, the conduct of which is under scrutiny, as for example, in cases brought pursuant to s 45 of the Act. Thus, references in this article to “the firm in question” should be read as including all of the firms the conduct of which is in question in the proceeding at hand. 3 Re Queensland Co-Operative Milling Association Ltd [1976] ATPR 40-012 at 17,247.

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In addition to evidence of behaviour, courts have relied on views expressed by persons involved in the relevant industry as to the nature and extent of competition between firms. While not expressly characterised in this way, such evidence may be seen as akin to expert opinion evidence in that it is evidence of the opinions held by the relevant persons based on, and regarded as authoritative having regard to, their experience in the industry. The role that has been played in the cases by evidence of various forms of industry behaviour, as well as evidence of industry views, is examined in this article. The categories of behaviour that have been selected for this purpose are intended to be illustrative, rather than exhaustive, of the types of industry behaviour that play a role in market definition decisions by courts. Aspects of this evidence need to be approached with care, bearing in mind the object of market definition, being the identification of effective constraints on the decision-making and conduct of the relevant firm.4 In particular, it is argued in this article that courts must consider the underlying motivations for and influences on firm behaviour before concluding that it reflects the operation of effective constraints. Literature from the disciplines of economics, business strategy and marketing are drawn on in developing this argument.

1. INDUSTRY BEHAVIOUR The five principal categories of behaviour engaged in by firms and that are the subject of evidence relied on by courts in determining the scope of the relevant market are examined below. They are: • • • • •

monitoring behaviour; pricing behaviour; promotional behaviour; purchasing behaviour; and switching behaviour. The first three of these categories (monitoring, pricing and promotion) relate to behaviour undertaken by the firm in question and other firms at the same functional level of operation – its competitors. There are other types of behaviour at this functional level that are also relied on by courts, but not as commonly. For example, organisational structure has sometimes been relied on. Where there is evidence that the relevant firms organise themselves or have operations on, say, a national basis, such evidence has been relied on in support of defining the market on an Australiawide basis. This approach was applied in Petty v Penfold Wines Pty Ltd [1993] ATPR 41-263 (Penfold Wines), for example, in defining the geographic market for the wholesale supply of alcoholic beverages as a national market on the basis that Penfolds and its principal competitors operated nationally.5 Business development behaviour has also been regarded as relevant where, for example, there is evidence that firms have introduced new product or service lines or expanded their operations into new geographic areas. Such evidence may also be considered by courts as persuasive evidence of a broader market than is otherwise contended for. In Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd [1978] ATPR 40,071 (Avis-Ansett), for example, the Trade Practices Commission, as it was then called, contended that the market should be confined to national car hire operators and should exclude local businesses. Amongst the evidence relied on by Northrop J in rejecting this contention was evidence that Thrifty Rent-a-Car Pty Ltd, a then State-based operator, was seeking to extend its operations throughout Australia. He also pointed to evidence that Avis had introduced the Budget car hire business so as to compete more effectively, at “the lower end of the market”, both with other national operators and local operators.6

4

See Brunt M, “‘Market Definition’ Issues in Australian and New Zealand Trade Practices Litigation” (1990) 18 ABLR 86 at 101, 127. 5 [1993] ATPR 41-263 at 41,550. 6 [1978] ATPR 40,071 at 17,711.

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Proof of a market for the purposes of the Trade Practices Act 1974 (Cth) – Part 2

The final two categories of behaviour listed above (purchasing and switching) relate to behaviour engaged in by firms at the level downstream or upstream of the firm in question and its competitors. Both are forms of behaviour engaged in by downstream or upstream firms vis-à-vis the firm in question and its competitors, as distinct from behaviour engaged in by downstream or upstream firms vis-à-vis each other. There have been occasions on which courts have examined evidence of competitive behaviour as between firms at the downstream level so as to ascertain whether competition at that level affects competition at the level of operation of the firm in question to an extent that necessitates inclusion of both functional levels in the relevant market. An analysis of this nature was undertaken in depth in QIW Retailers Ltd v Davids Holdings Pty Ltd [1993] ATPR 41-226 (QIW) as a consequence of the particular market issues that arose in that case.7 However, more usually, the effect of competition downstream and the impact in that regard of the vertical integration of any of the firms involved are factors considered, once the market has been defined, in ascertaining the degree of market power held by the firm in question.

1.1 Monitoring Courts may rely on evidence that firms are aware of, track and keep records in relation to the activities of other firms in support of a finding that there is close competition between those firms, thereby warranting their inclusion in the market. By the same token, the absence of such monitoring activity may be used as evidence of insufficiently close competition, justifying the exclusion of such firms from the relevant market. Most often, evidence of monitoring behaviour is derived from the business records of the firms in question. However, it is also commonly supplemented by testimonial evidence from officers or employees of the firms concerned. In Trade Practices Commission v Arnotts Ltd [1990] ATPR 41-062 (Arnotts), the evidence of the lengths to which the biscuit manufacturers (particularly Arnotts) went in tracking and documenting the activities of rival biscuit manufacturers played a highly significant role in the decision to define the relevant market as the biscuit market, and exclude from it confectionery and other snack foods. This decision was based, in large part, on the finding that: Generally speaking, as the “competitive activity” reports of the biscuit manufacturers indicate, the members of the industry confine their attention, and their conduct, to the biscuit marketing efforts of other biscuit manufacturers. By and large, biscuit producers do not concern themselves with the activities of the manufacturers of other processed foods.8

Similarly, in QIW, Spender J supported the finding that the grocery wholesalers, Davids and QIW, competed “fiercely” with each other by reference to evidence that Davids watched and compared the pricing and marketing strategies of QIW, while QIW, similarly, closely monitored Davids’s activities, including its pricing and the prices at which it was supplied by manufacturers.9 Evidently Spender J did not take the same view of evidence by the managing director of Davids that he checked the surveys published by the industry magazine, Retail World, to compare how Davids was performing as against, not only QIW, but also the supermarket chains.10 The relevant market was ultimately defined as the market for the supply of groceries by independent wholesalers to independent retailers, thereby excluding the chains.11 As the difference in the approach taken to the evidence of the Davids-QIW monitoring vis-à-vis the Davids-chains monitoring illustrates, the extent to which such behaviour will assist in drawing

7 It was necessary in this case to determine whether to include the vertically integrated supermarket chains in the same market as the independent grocery wholesalers. Spender J considered in this context the extent to which the independent retailers competed with the chains’ retail outlets on the basis that, if there was close competition at the retail level, then that competition would have an effect upstream, such that the independent wholesalers could be said to be in close competition with and hence in the same market as the chains at the wholesale level. 8 [1990] ATPR 41-062 at 51,874. A similar approach was adopted on appeal: (1990) 24 FCR 313 at 330. 9 [1993] ATPR 41-226 at 41,136. 10 [1993] ATPR 41-226 at 41,116. 11 [1993] ATPR 41-226 at 42,142-42,143.

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market boundaries is regarded as a matter of degree. This is quite rightly so. All firms monitor to varying degrees the activities of both actual and potential rivals. Such conduct is part of normal business enterprise.12 However, such behaviour should not automatically be equated with the operation of constraints on or even influence over the relevant firm’s conduct. As the economist Round has observed: All firms need to keep an eye on such potential rivals, most often firms established in other geographical areas selling similar products, or firms whose production processes lend themselves to adaptation to the product in question. However, until the incumbent firm believes these potential entrants to be commercially threatening, it will be unlikely to feel significantly constrained by them, and so there will be no evidence of interaction.13

Indeed, the point is frequently made in the business strategy literature that it is important to distinguish between definition of the market that a firm serves and the process of “competitive surveillance”.14 While it is not necessary that the firm include in its served market every product, customer and region in which competition may arise, it is necessary that the firm’s analysis of competitors takes all of the significant possibilities into account.15 Otherwise, it is warned, the bounds of current activity as reflected in the firm’s market definition will perpetuate “marketing myopia” of the kind referred to in Part One of this article series.16 Thus, for strategic planning purposes, the most successful firms are those adept at predicting long-term opportunities or threats but this does not mean that these firms are practically constrained in any way in the present, or even the foreseeable future, by those opportunities or threats. For such purposes, firms may take what is referred to as a “market” approach to competitive intelligence. Rather than focusing simply on the “industry”, that is the firms making the same or similar products or services, a market approach involves considering other firms that satisfy the same customer need, through different products or services. To take a simplified example, a manufacturer of pencils (having identified the relevant customer need as the ability to write) would monitor not only the activities of other pencil manufacturers but also of pen manufacturers, and possibly even computer manufacturers.17 It follows from these brief observations of business practice that evidence of monitoring behaviour should not generally be considered sufficient, without more, to establish that the firm in question is constrained in its decisions and activities by those of the firms that it monitors. The additional evidence required to support such a finding could include evidence that the firm has acted, for example by matching the lowered prices of a competitor, in response to the results of its monitoring. Equally, there may be evidence that the firm has in fact lost sales to the firms it has been monitoring, perhaps by virtue of having failed to match their lower prices. The need to weigh evidence of monitoring behaviour in the balance, together with other evidence of competition (or lack thereof, as the case may be), has been recognised in several cases. In Trade Practices Commission v Australia Meat Holdings Pty Ltd [1988] ATPR 40-876 (Australia Meat Holdings), for example, there was evidence that Queensland cattle producers kept themselves

12 Best practice in this area dictates that firms establish a “competitive intelligence system” which involves the systematic and continuous collection, evaluation, analysis and dissemination of data from the field (including from the firm’s salesforce, channels, suppliers, market research firms, trade associations and customers), from recruits and competitors’ employees, from people who do business with competitors, from observation of competitors’ activities in the marketplace, from published data and data available from online services: Kotler P, Marketing Management: Analysis, Planning, Implementation and Control (9th ed, Prentice-Hall International Inc, New Jersey, 1997) p 240. However, not all firms have the resources or culture conducive to meet best practice in competitive intelligence gathering. 13 Round D, “Market Definition in Australian Antitrust – Time for a Changed Approach?” (1996) 8 CBLJ 193 at 198. See also Needham D, “Substitutability Criteria for Market Definition” in Calvani T and Siegfried J (eds), Economic Analysis and Antitrust Law (Little, Brown and Co, Boston, 1979) pp 78, 82. 14 Buzzell R, “Note on Market Definition and Segmentation” (1978) Harvard Business School Case Note No 579-083 at 117. 15 Buzzell, n 14 at 117. 16 See Beaton-Wells, n 1 at 132. 17 Kotler, n 12, p 233.

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informed of cattle prices in various parts of the State.18 However, there was also evidence, referred to further below, that producers were not, and were unlikely in the future to be, responsive to price changes and it was based largely on this evidence that Wilcox J treated the northern region of the State as a separate market.19 On appeal, Australia Meat Holdings argued that the purpose of monitoring prices in different regions must have been to consider the possibility of substitution in the event that there was a sufficient price incentive. The argument was rejected by Pincus J who observed: No doubt vendors of products in one part of Australia commonly take an interest in prices being obtained in another part of the country. Traders on the Australian stock exchanges take a keen interest in share price movements in other countries, as the events of October 1987 illustrated, but this is not to say that there is but one world share market, nor that (for example) the Australian and United States exchanges are part of the one market. In the sense in which the Trade Practices Act used the expression “market”, it must commonly happen that price movements in a market are noticed in and affect sentiment in other separate markets. In my opinion, the evidence as to northern producers being interested in prices obtained elsewhere was of little assistance to the appellant.20

In Australian Competition and Consumer Commission v Boral Ltd [1999] ATPR 41-715 (Boral) at first instance Heerey J placed a significant degree of emphasis on evidence, derived from the business records and testimony of representatives of the concrete manufacturers, that was said to show that these manufacturers “regularly monitored products which threatened to take sales away from concrete masonry products”.21 However, on appeal, the finding at first instance that the market should be defined broadly to include construction materials other than concrete masonry was overturned.22 One of the principal reasons for this was that the evidence showed that, despite the monitoring relied on by Heerey J, there was in fact limited substitution between concrete masonry and the alternative materials during the relevant period. During the price war in the construction industry between 1993 and 1996, close competition between concrete masonry and the alternative products would have been evidenced by the diversion of sales away from the alternatives towards concrete masonry in response to the dramatic reductions in the price of the latter. However, there was said to be scant evidence to this effect.23

18

[1988] ATPR 40-876 at 49,491. [1988] ATPR 40-876 at 49,496. 20 [1989] ATPR 40-932 at 50,105. 21 [1999] ATPR 41-715 at 43,215 [37], 43,228 [126]. Heerey J gave several examples in this regard: 37 … For example, in its 1992 Strategic Business Plan prepared by Mr Rawnsley it was noted that significant sections of the market had disappeared to alternative products and that BBM should aim to “elevate the image of concrete brick so as to be an acceptable alternative to clay at a competitive price” and that its concrete brick was estimated to gain three per cent of the present clay market within three years. In July 1994 Mr Cormack sent a memorandum to State managers in his Division. One of the discussion items was stated as follows: “… to get the managers to obtain information about the cost of products which compete with masonry and to consider the future of masonry products in light of the competition faced from substitutable products.” 38 In a response to that request Mr Rawnsley and Mr Vella prepared a document which compared the price of alternative products such as plasterboard, clay, tilt up, asphalt, and concrete to concrete masonry. 39 Again in February 1995 an analysis prepared by BBM indicated that the shares of the total walling market of clay, masonry, tilt-up panels and timber were 77, 11, 10 and 2 per cent respectively. 40 Other concrete masonry manufacturers behaved in the same way. The industry association, the Concrete Manufacturers Association of Australia, in May 1995 commissioned a report to review the position of concrete masonry products, vis-àvis competing products and systems. The report looked at the purchasing process and attitudes towards concrete, masonry and key alternatives. 22 [2001] ATPR 41-803. 23 [2001] ATPR 41-803 at 42,706 [318]-[320] (Finkelstein J). This led Finkelstein J to remark: “Economic theory can be proved by actual market behaviour. Indeed, I cannot stress too highly my view that the court should consider actual patterns of market behaviour, as these are more likely to produce a better market analysis than hypothetical markets and even historical evidence. For example, past sales patterns may have occurred for reasons that are idiosyncratic and may not be repeated.” 19

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The Full Court’s conclusions as to the scope of the relevant market were upheld by the High Court on appeal by Boral.24 In the only judgment in which the issue was discussed at any length, that of McHugh J, it was indicated that the Full Court had been correct in finding that, on the evidence, “truly close competition occurred only amongst concrete masonry products”.25 However, McHugh J went on to observe in that context that: The views and practices of those within the industry are often most instructive on the question of achieving a realistic definition of the market. The internal documents and papers of firms within the industry and who they perceive to be their competitors and whose conduct they seek to counter is always relevant to the question of market definition. BBM looked mainly at its competition within the concrete masonry products market. In its internal plans, management focussed on that market although, as I have indicated, it did keep close watch on products other than concrete masonry products.26

Similarly, in Australian Rugby Union Ltd v Hospitality Group Pty Ltd [2000] ATPR 41-768 (Hospitality Group), there was ample evidence that firms selling corporate hospitality packages monitored and compared prices offered by their competitors.27 The issue concerning the relevant market in that case was whether it should be confined to corporate hospitality packages that involved a rugby union event or whether it should include packages generally without reference to any particular sport(s) or other form(s) of entertainment. The evidence was that, in the course of their normal business, corporate hospitality providers each compared the packages associated with rugby union events to packages associated with other Australian sporting events, including golf tournaments, AFL Grand Finals, the Australian Tennis Open, the Australian Grand Prix and the like.28 However, Gyles J did not find this evidence to have much, if any, bearing on the question of the appropriate market definition. This was because he found that the principal purpose of the monitoring was “to assess, in general terms, what the traffic will bear, rather than to undercut to attract extra custom from other events or avoid losing custom to other events”.29 Gyles J thus took the view (correctly, it is contended) that a comparative pricing exercise by a corporate hospitality provider to ascertain what is feasible in the market in pricing terms does not necessarily mean that all of the various alternatives considered as part of the exercise should be included in the market. It does not mean that the provider regards them as so closely competitive with its own offering as to be constrained in its own decisions and activities by them.

1.2 Pricing There are principally two forms of behaviour related to pricing to which courts have regard in assessing whether firms are sufficiently competitive with the firm in question as to warrant inclusion in the relevant market. The first is price-setting behaviour and the second is price cutting or discounting behaviour. However, prior to examining the use that has been made of evidence of such

24 Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5 at [134] (Gleeson CJ and Callinan J), [155] (Gaudron, Gummow and Hayne JJ), [256] – [259] (McHugh J), [330] (Kirby J). 25 [2003] HCA 5 at [256]. 26 [2003] HCA 5 at [257]. 27 [2000] ATPR 41-768 at 41,053-41,060. 28 [2000] ATPR 41-768 at 41,053-41,055 [65] – [68]. Gyles J cited extracts from the affidavits of a number of witnesses in this regard. In the extract cited from the evidence of the representative of MBM Corporate Event Management, for example, the witness was recorded as having stated that in setting the prices for a corporate hospitality package he considers “comparable prices of … the prices charged by other corporate hospitality firms for the event I am considering and for other events they market”: at 41,055 [67]. In the extract set out from the affidavit of Mr Read, the Chief Executive Officer of Sports Marketing and Management Pty Ltd, an organisation that arranges golf tournaments in Australia, Read was recorded as having given evidence that “In setting ticket prices for golf events, I thoroughly review prices charged by other sports and events, including: (a) other golf tournaments; (b) international rugby union tests; (c) AFL Grand Finals; (d) Australian Tennis Open; and (e) Australian Grand Prix”: at 41,055 [68]. 29 [2000] ATPR 41-768 at 41,061 [73(6)]. Gyles J’s approach to this evidence was approved by the Full Court on appeal: [2001] ATPR 41-831 at 43,252 [61] – [62], Hill and Finkelstein JJ observing that the findings that the trial judge had been able to make based on the evidence were indeed “equivocal on the issue to be decided”. Special leave to appeal to the High Court from the Full Court’s decision was refused. See Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2002) 23(11) Leg Rep SL4.

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behaviour, it is necessary to make some comments about pricing behaviour in general and the need to examine closely the context in which the behaviour takes place before drawing inferences from it for the purposes of market definition under the Act. It may be assumed that firms will almost always take account of competitors’ prices and likely price reactions when determining how to set and adjust their prices. However, such factors will be only one element of a firm’s thinking when making pricing decisions in the context of its overall business strategy. Other factors will include the effects on its costs and its profits, as well as on demand. Albeit generally of secondary importance, the firm may also consider the likely reactions of distributors and suppliers to its prices. A firm will focus to a greater or lesser extent on one or more of these factors depending on its broader objectives. Indications as to the firm’s objectives and as to whether it is focusing on considerations of costs, consumers or competitors (or a combination thereof) will often be found in the pricing method chosen by the firm. The most elementary pricing method, for example, is one that is entirely cost-oriented. Referred to as mark-up pricing, it involves simply adding a standard mark-up to the product’s cost. Another cost-pricing approach is target return pricing where the firm determines the price that would yield its target rate of return on investment. Perceived value pricing is a method adopted where the firm is focused on managing consumer perceptions of the value of its product offering. This method involves the use of other variables in the marketing mix, such as the promotion and packaging of the product, to build up perceived value in the consumer’s mind and set the price to capture the perceived value. In going-rate pricing the firm pays less attention to its own costs or demand and bases its price largely on competitors’ prices. This method is generally adopted where costs are difficult to measure and competitive response is uncertain. Competitive oriented pricing also tends to occur where firms are tendering for contracts and base their prices on expectations as to how competitors will price rather than on considerations of costs or demand.30 As is evident from these examples, the selection by a firm of one particular pricing method over another may be more or less revealing of the sources and extent of the competition that it perceives depending on whether the chosen method is one that focuses on the pricing of its competitors as distinct from considerations relating to costs or customers. Where, for example, a firm selects a pricing method that is consistent with the strategy of establishing itself as the product quality leader, using high prices as a signal to consumers of high quality, then comparisons between its prices and those of other firms selling the same or similar products may provide limited insight into the extent to which the firm is in fact constrained in its decision-making by those other firms, at least in short to medium term. However, where the firm utilises the going-rate pricing method or is in the situation of determining the price it will set in a competitive tendering situation, the firms against which the firm compares its prices and the extent to which the firm sets a price that is close to or below those prices may well be telling of relevant constraints on its conduct. Pricing in a competitive tendering situation also illustrates the need to have regard to achieved prices rather than desired or target prices. The prices that a firm regards as optimal from the perspective of reaching certain revenue or profit performance targets may not reflect the prices that it is in fact able to achieve in its negotiations with customers. The difference between targeted and achieved prices, and in particular the extent to which a firm is prepared to change its stance on price in order to meet customer demands and/or match competitor prices, may well provide an indication of the degree of competition that exists in the marketplace that may not otherwise be apparent having regard solely to the firm’s pricing targets. It is equally important to recognise that a firm’s pricing behaviour may reflect prevailing market conditions at the relevant time. This is particularly relevant where there is evidence that a firm has engaged in price cutting. Several circumstances may lead a firm to cut its price. One such circumstance is excess plant capacity where the firm needs additional business and cannot generate it through increased sales effort, product improvement or other measures. To boost sales a firm in this situation may initiate a price cut. Another circumstance that may necessitate price cuts is where there is a declining market for a particular product or service. In this situation a firm may lower its price

30

Kotler, n 12, pp 503-508.

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significantly in an attempt to maintain sales.31 Equally, a new product may be priced considerably lower than an existing product because it is yet to become established in the market and the low price is a mechanism for attracting sales. In any of these instances, such pricing action may be taken without conscious or close consideration of the prices and activities of other firms and should not therefore, of itself, be taken to evidence the operation of constraints on the firm’s conduct.

(a) Price-setting Courts rely on evidence that firms consider the prices charged by other firms when setting or adjusting their prices as evidence that indicates close competition between the firms concerned. Thus, in AvisAnsett, for example, Northrop J placed “particular emphasis and reliance” on Avis’s management reports, prepared by senior managers for directors’ meetings, in relation to which he observed: These reports make numerous references to the competition from local operators and how that competition is affecting Avis, the need to consider the rates charged by the local operators when determining the national rates to be charged by Avis and the fact that on occasions Avis was losing part of its market share to local operators.32 (emphasis added)

Based on this and other consistent evidence, Northrop J defined the relevant market so as to include both national and local car hire businesses.33 Adopting a similar approach, in Trade Practices Commission v Nicholas Enterprises Pty Ltd [1979] ATPR 40-126 (Nicholas Enterprises), Fisher J found that city liquor retailers were competing with those in the suburbs (and hence that the market should be defined as the market for packaged beer in the metropolitan area of Adelaide) on the basis inter alia of evidence from a witness that, as a manager of a liquor outlet in the city, he would be concerned about the prices advertised by a suburban hotel, as well as those advertised by city hotels.34 In Regents Pty Ltd v Subaru (Aust) Pty Ltd [1998] ATPR 41-647 (Subaru) it was found that the high prices of Subaru spare parts resulted from the substantial attention that Subaru paid to prices for such parts in relation to other makes of cars.35 According to Nicholson J, this competition in price evidenced the interconnection and complementarity of the parts and cars markets. Notwithstanding that the parts of other car makes could not themselves be competitive with Subaru parts, in pricing its parts, Subaru nevertheless did compete with other car manufacturers to ensure that consumers did not reject Subaru cars because of their expensive parts.36 Hence, it was reasoned, the relevant market should be defined as the market for the supply of cars, parts and ancillary services.37 In Boral there was evidence of the prices being set by concrete masonry manufacturers in tendering for specific projects, of the strategising in which the tenderers engaged and of the price negotiations that took place between customers and tenderers in relation to each project.38 As was found on appeal by the Full Court, and affirmed by the High Court, the evidence highlighted the intensity of competition between the concrete masonry manufacturers and, by comparison, the relative lack of competition between those manufacturers and manufacturers of other walling and paving products. This was particularly so given that, as Finkelstein J pointed out in the appeal, once tenders

31

Kotler, n 12, pp 516-517. [1978] ATPR 40-071 at 17,711. In the context of determining Avis’s degree of power in the relevant market, Northrop J subsequently made findings that there was strong and effective competition between car hire operators and that the presence of competitors of Avis and the rates charged by those competitors inhibited Avis in the determination of its own rates and its freedom to determine its own rates: at 17,724-17,725. 33 [1978] ATPR 40-071 at 17,720. 34 [1979] ATPR 40-126 at 18,357. 35 [1998] ATPR 41-647 at 41,181. There had been testimony by the National Sales Manager (Parts & Accessories) of Subaru that in making recommendations for the pricing of Subaru parts he had regard to the prices of competing car suppliers for similar parts, service parts and smash repair parts; he regarded their costs as forming part of the cost of ownership of a particular vehicle: at 41,179. 36 [1998] ATPR 41-647 at 41,181. 37 [1998] ATPR 41-647 at 41,182. 38 [1999] ATPR 41-715. See, eg, the evidence described at [48] – [103]. 32

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were called the decision as to whether to use concrete masonry or some other form of building material had already been made.39 If, as illustrated by these cases, the evidence is that a firm sets and adjusts its prices to ensure that they are and remain competitive with the prices of other firms, then it may be feasible to conclude from that evidence that the firms concerned are in close competition with each other. Harking back to the point made previously, such evidence provides a stronger indication of constraint on the firm’s conduct than evidence simply that the firm is aware or even keeps record of the prices charged by other firms. As was recognised in Australia Meat Holdings and Hospitality Group, referred to above, evidence of price monitoring should not of itself be treated as establishing that the firm in question is subject to competitive constraint. This distinction did not appear to be appreciated in News Ltd v Australian Rugby Football League Ltd [1996] ATPR 41-466 (Superleague). Burchett J there placed considerable emphasis on the business records of sporting organisations in which comparisons of admission prices charged by a range of sports and other forms of entertainment were recorded.40 He regarded the mere fact of compilation of these comparisons as evidence of the perception of competition between the various sports.41 The fact of this perception was pointed to by Burchett J as one of the principal reasons for concluding that the market could not be confined to rugby league. The League saw itself in competition with other sports and hence was “as a matter of fact constrained in its commercial conduct from acting in the manner of monopolist”.42 However, there was no evidence of actual constraint – no evidence of the League setting or adjusting ticket prices so as to maintain competitiveness with other sports and no evidence of fans changing allegiances from rugby league to other sports in response to higher ticket prices. In the absence of any such evidence, the use made by Burchett J of the evidence of price awareness was arguably misplaced. In addition, Burchett J pointed to evidence that the Queensland rugby league club, the Broncos, was charging admission prices lower than those charged by other sports, finding that this spoke “loudly of vigorous [ticket price] competition with other sporting attractions in Brisbane”.43 With respect, this was not necessarily so. To the extent that the Broncos had to find a niche in the market, they to that end could have been seen as employing a penetration price strategy. The low admission prices might have suggested that the judgment of the Broncos’ management was that they could not be competitive, at least initially, at comparable prices to existing sports and hence had to charge prices that would enable them to establish a following. If this represented the rationale for the prices charged by the Broncos, then the fact of those lower prices by itself did not establish that the Broncos were likely to compete closely with or be constrained in the long run by the other sports.44 Burchett J was also influenced by evidence that the Broncos proposed to increase ticket prices, “in relative terms”, by only $2 from $18 to $20 per ticket.45 He regarded the smallness of the increase

39

[2001] ATPR 41-803 at 42,705 [312]. On appeal to the High Court, see Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5 at [134] (Gleeson CJ and Callinan J), [155] (Gaudron, Gummow and Hayne JJ), [256] – [259] (McHugh J), [330] (Kirby J). 40 In particular, Burchett J pointed to the 1994 Marketing Strategy drawn up for Queensland Rugby Union, intended as a draft for discussion of the future of rugby union in that State, which included a comparison, in tabular form, of general admission charges for Queensland rugby union matches, the Broncos rugby league matches, the Brisbane Bears Australian rules football matches, the Brisbane Bullets basketball matches and the Queensland Bulls cricket matches, followed by a statement of charges for cinemas, concerts, theatres and miscellaneous places of entertainment: [1996] ATPR 41-466 at 41,680. 41 Burchett J commented in relation to the table of general admission charges prepared for Queensland Rugby Union that its “real significance …. lies in the fact that it was compiled in the first place. It plainly shows that the Queensland Rugby Union saw itself as in competition, as the provider of a spectator sport, with Rugby League and with the other sports listed”: [1996] ATPR 41-466 at 41,680. 42 [1996] ATPR 41-466 at 41,685. 43 [1996] ATPR 41-466 at 41,680. 44 See Round, n 13 at 214-215. A similar point could be made in relation to the court’s reliance on evidence that the Broncos used complimentary tickets and half-time entertainment, regarded by Burchett J as evidence of active competition designed to attract people away from other sports in favour of rugby league and hence as an indication that rugby league administrators regarded themselves as constrained by those other sports. 45 [1996] ATPR 41-466 at 41,684.

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as indicative of sensitivity on the part of the Broncos to the prices being charged by other sports. However, there was no evidence that the size of the price increase had been determined having regard to the risk that a greater increase would lead to a loss of rugby league followers, defecting to other sports.46 Rather, there was evidence which was more consistent with a finding that the price increase had been determined having regard to what was fair and affordable given the “working class” profile of rugby league fans.47 Burchett J acknowledged this evidence but discounted it. In doing so, he failed to examine carefully the underlying motivations or reasons for the Broncos’ behaviour but rather misguidedly, it might be said, assumed it to evidence the operation of the actual and effective constraint imposed on the club by other sports. Even evidence that a firm sets its prices having regard to their competitiveness with other firms must be assessed as a matter of degree. As was observed by Spender J in QIW: The mere fact that prices charged by sellers of similar products affect pricing decisions of the seller in question does not necessarily indicate that all the activity occurs within the one market.48

Thus, the “Mason perspective”,49 as referred to in that case, cannot be too literally applied in determining which firms to include in the relevant market.50 Only those firms “whose existence significantly restrains” the power of the firm in question should be included.51 On the evidence before Spender J, it was shown that the independent retailers did compete with the chains on price but not significantly so.52 On that basis it was held that competition at the downstream level would not exert sufficient pressure at the wholesale level to justify including the chains in the market.53 On appeal it was submitted that Spender J had misunderstood or misapplied the so-called “Mason perspective” because he had failed to define the market “so as to include, literally, every buyer and seller of groceries whose action the merged entity would consider to influence its volume of sales”.54 In answer to this, von Doussa J noted that the approach to market definition enunciated in the authorities, and endorsed by the trial judge, does not involve such a literal application of Mason’s analysis; rather, it involves a consideration of matters of degree. That is to say, it involves identifying those entities the existence of which “significantly restrains the defendant’s power”.55

46 As Round has pointed out, in his analysis of ticket prices, Burchett J appeared to confuse own-price elasticity with crossprice elasticity. The former is concerned with changes in demand for a firm’s product in response to changes in its price; whereas the latter is concerned with changes in demand for a firm’s product in response to changes in the price of other products. See Round, n 13 at 215. 47 [1996] ATPR 41-466 at 41,684. 48 [1993] ATPR 41-226 at 41,132. 49 [1993] ATPR 41-226 at 41,133. 50 This is a reference to the American economist, Edward Mason, who, in an oft-cited passage in a 1939 article, emphasised that: “the market, and market structure, must be defined with reference to the position of a single seller or buyer. The structure of a seller’s market, then, includes all those considerations which he takes into account in determining his business policies and practices. His market includes all buyers and sellers, of whatever product, whose action he considers to influence his volume of sales”: cited in Brunt, n 4 at 104. 51 This point was made in a passage from Areeda P and Kaplow L, Anti Trust Analysis (4th ed, Little, Brown and Co, Boston, 1988) p 572 and was cited with approval by Pincus J in Davids Holdings Pty Ltd v Attorney General of the Commonwealth [1994] ATPR 41-304 at 42,087, by French J in Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1992] ATPR 41-159 at 40,173 and, most recently, by the Full Court in Rural Press Ltd v Australian Competition and Consumer Commission [2002] ATPR 41-883 at [112]. 52 In finding that the independent retailers did not compete closely with the chains on price, Spender J relied on evidence as to the existence of pricing zones or fields provided by the independent wholesalers and used by the independent retailers to set prices by selection of a retail margin. The margin reflected the nature of the store which in turn was a function of its size, product range, trading hours, physical location and so on. Independent retailers selected a pricing zone which reflected a profit margin significantly greater than would be the case if the retailer competed closely with the chains on price. This was said to be possible because, as had been acknowledged in the evidence, customers patronised independent retailers for a combination of factors including convenience, service, location, trading hours and so on and price was only one but by no means the sole determinant of the customer’s choice of store: [1993] ATPR 41-226 at 41,107-41,121. 53 [1993] ATPR 41-226 at 41,143. 54 [1994] ATPR 41-304 at 42,087. 55 [1994] ATPR 41-304 at 42,087.

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(b) Price-cutting Courts also rely frequently on evidence of price cutting by firms as evidence of close competition between them relevant to discerning the proper scope of the market. In most cases this has been evidence of discounting on an ad hoc basis to win business. Such evidence was relied on in the context of market definition in Aut 6 Pty Ltd v Wellington Place Pty Ltd [1993] ATPR 41-202 (Aut 6), for example.56 The contest as to the scope of the relevant market in that case was between luxury cars (priced at not less than $80,000) and high quality passenger cars in a lower price bracket.57 There was industry evidence that luxury car dealers engaged in substantial price discounting when launching a new model onto the market.58 The reason given for the discounting was to achieve high volume sales in a market that had been successfully penetrated by lower priced options which, on non-price attributes such as image, would not otherwise have been included in the luxury car market propounded by the applicant. Thus, in this case, there was clear evidence of the purpose of the pricing behaviour which in turn would have supported a conclusion that luxury car dealers were constrained by the activities of high quality passenger car dealers.59 Evidence of more systemic price cutting is not as common. However, where there is such evidence, as in Boral, it may also be relied on in connection with definition of the relevant market. There was evidence in that case of a campaign by BBM to cut prices below costs with the express purpose of driving smaller concrete masonry manufacturers out of business. There was also evidence that BBM would agree to match the prices of rival tenderers on construction projects over the period of the price war that gripped the industry from 1993 to 1996. It was this “detailed evidence of head-tohead competition for the supply of CMP [referring to concrete masonry products] throughout the relevant period” that led to the conclusion by the Full Court, affirmed on appeal to the High Court, that the market should be confined to the market for the supply of concrete masonry products.60

1.3 Promotion Courts regularly have regard to evidence of promotional activity engaged in by firms in the context of defining the relevant market in the proceeding. The fact that certain products are advertised together, for example, has been used as evidence that they belong in the same market. This occurred in Penfold Wines where evidence that the advertisements of liquor retailers promoted a range of alcoholic beverages was found to be against the proposition that there was a separate market for wine or for wine and champagne.61 Similarly, the fact that products are advertised separately has been pointed to as evidence that they belong in separate markets. This occurred in Australia Meat Holdings where evidence of practice in the industry to advertise cattle sales either as “fat cattle” sales or “store” sales was amongst the evidence relied on by Wilcox J in finding separate markets existed for each category of cattle.62 The fact that a firm advertises its products over a certain geographic area has also been relied on to justify including that entire area within the bounds of the relevant market. Thus, in Nicholas Enterprises Fisher J noted the evidence that the Royal Oak Hotel engaged in substantial advertising in newspapers throughout the State and in particular the metropolitan area. This evidence was

56

Evidence of discounting was also referred to in connection with market findings in Trade Practices Commission v TNT Management Pty Ltd [1985] ATPR 40-512 at 46,125 and Petty v Penfold Wines Pty Ltd [1993] ATPR 41-263 at 41,548, 41,554. 57 [1993] ATPR 41-202 at 40,829. 58 [1993] ATPR 41-202 at 40,838. 59 In the result French J considered that there was insufficient evidence to enable him to draw firm conclusions about the extent to which there was substitutability between cars in the luxury range and cars outside that range. However, he did observe that the evidence suggested greater price volatility in the luxury car range than had been contended by the applicant: [1993] ATPR 41-202 at 40,839. 60 [2001] ATPR 41-803 at 42,680 (Beaumont J). On appeal to the High Court, see Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5 at [134] (Gleeson CJ and Callinan J), [155] (Gaudron, Gummow and Hayne JJ), [256] – [259] (McHugh J), [330] (Kirby J). 61 [1993] ATPR 41-263 at 51,549. 62 [1988] ATPR 40-876 at 49,482.

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confirming of his view that liquor retailers competed with each other throughout the metropolitan area and that it should represent the area covered by the relevant market for the supply of packaged beer in that case.63 The constraining influence of rival firms may equally be evident where a firm engages in comparative advertising, either expressly through reference to another firm or its product by name in its advertising or impliedly, through the drawing of comparisons between the attributes of the firm’s product and the attributes of a rival product. Constraint may also be reflected in the timing of an advertising campaign where, for example, a firm has launched a new campaign shortly after, and therefore it might be inferred, in direct response to the launch of new products or a change in the promotion of existing products by another firm. Such competitive influences may be obvious on the face of the promotion, having regard to its content and timing. Admittedly, such instances may be relatively rare. However, analysis of media scheduling or share of voice data provided by media monitoring firms may also highlight correlations from which competitive influences, which might not otherwise have been obvious, can be inferred. The use of evidence of advertising in these instances is fairly unobjectionable. However, as with evidence of monitoring and pricing activities, courts should be alert to the possibility that promotional practices may in fact say little or nothing about competitive dynamics in the relevant industry, depending on the factors underlying the decisions made about these matters. Decisions made by a firm to give promotional emphasis to its corporate brand name (the family brand) or the brand name of the particular product (the sub-brand) illustrate the point. The Full Court in Arnotts treated as evidence against the notion of separate biscuit markets the fact that Arnotts’s advertising focused principally on the brand name of Arnotts in connection with biscuits, rather than on particular varieties of biscuits.64 It is true that Arnotts’s brand strategy was and still is evidently one of promoting the family brand (Arnotts) rather than the sub-brand (say, Monte Carlos or Mint Slices). However, other biscuit manufacturers do not adopt the same strategy. Westons emphasises sub-brands, such as Chocolate Wheatons, over the family brand, as does Nabisco, as seen in the emphasis given to the sub-brand Oreo, as does Lanes, as exemplified by the emphasis given to the sub-brands, Premium Crispbread and Captain’s Table Crackers. It is unlikely, given the findings made in that case in support of the existence of a biscuit market, that the branding choices of Westons, Nabisco and Lanes would have been seen as indicating the existence of separate biscuit category markets. This suggests a weakness in the logic applied by the Full Court in its use of Arnotts’s advertising practices. However, it also highlights the difficulty with which a court is faced where, as in Arnotts, the officers and employees of the firm, being those who could be expected to explain the thinking behind such practices, are not called to give evidence in the case. As the Arnotts brand example demonstrates, except in obvious situations, a court should not regard evidence of the promotion decisions or activities of a firm as necessarily indicative of competitive dynamics without some investigation into the factors influencing those decisions or activities. The need to apply a “degree of caution” when “referring to advertising or marketing techniques as an aid of market definition” was observed by French J in Aut 6 [1993] ATPR 41-202.65 In support of the contention that the relevant market should be limited to luxury cars selling for not less than $80,000, evidence was led as to the degree of emphasis placed in luxury car advertising on the prestigious image associated with the purchase of such a car and the relative lack of emphasis placed on attributes relating to functionality or price. French J did not regard this as persuasive evidence of a lack of competition between luxury cars and cars in a lower price bracket. Pointing out that it may be misleading to rely on evidence of a firm’s promotion decisions and techniques for the purposes of establishing the true nature and extent of competition that it faces, French J said:

63

[1979 ATPR 40-126 at 18,357. (1990) 24 FCR 313 at 334. 65 [1993] ATPR 41-202 at 40,838. 64

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Proof of a market for the purposes of the Trade Practices Act 1974 (Cth) – Part 2 While image and prestige may be highly persuasive factors today, safety, performance and environmental concerns may be more persuasive tomorrow. Indeed there may be a marketing benefit in breaking away from the pack of luxury vehicles with advertising emphasising function more, and emotional benefits less. Particular advertising and marketing techniques would need to be shown not to be short run phenomena before they could be safely relied upon in market definition.66

Similarly, in Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1992] ATPR 41-159 (Taprobane), French J was careful in his treatment of evidence which showed the promotion of holiday packages to the Maldives as a distinctive holiday experience in determining whether or not these packages should be defined as a single market or whether packages to other island destinations should be included in the market. At first instance, Lee J had drawn on this evidence in support of a finding that there was a “clearly delineated area of competition for the supply of wholesale tour packages to the Maldives”.67 French J was more circumspect, concluding that “the promotional emphasis on the distinctive features is more convincingly characterised as an attempt to differentiate one product from potential substitutes than as an indication of a distinct product market”.68 There is less difficulty in relying on evidence of promotional sales activity as reflective of competitive dynamics than there is with reliance on evidence of advertising. Attempts by a firm to win customers away from competitors through the approaches made by salespersons is good evidence of active competition between the firms concerned. Evidence of this nature was relied on, for example, in QIW in which Spender J pointed to evidence from Davids’s executives that Davids targeted particular QIW stores to change wholesaler from QIW to Davids and that retail proprietors of those stores were visited by Davids’s representatives, invited to Davids’s trade functions and offered incentives such as extended credit terms, reduced service fees, special promotional advantages and so on.69 Similar evidence was relied on by Franki J in Trade Practices Commission v TNT Management Pty Ltd [1985] ATPR 40-512 (Freight Forwarders) in support of his findings regarding competition between transport companies. He referred in particular to the number of salespersons employed by these companies and the persistence with which they would pursue potential customers offering to provide competitive quotations on work.70 At first instance, the lobbying of customers (architects and builders) in an effort to persuade them in favour of the use of concrete masonry was relied on in Boral. However this evidence was discounted on appeal given that the evidence also showed that once tenders were called the decision as to whether to use concrete masonry or some other form of building material had already been made.71 In a slightly different use of evidence of sales activities, in Arnotts the Full Court pointed to the fact that salespersons engaged by manufacturers to sell biscuit products were generally not responsible for the sale of their employer’s non-biscuit products and did not take into account non-biscuit products when selling biscuits.72 This evidence was used, not as evidence of competition, but rather as evidence of a lack of competition between biscuit manufacturers and manufacturers of other processed foods.

1.4 Purchasing Courts frequently rely on evidence of the decision-making criteria and processes applied by downstream firms in purchasing products or services from firms at the level of operation of the firm in question. Generally speaking, courts use this evidence to assist in assessing the degree of competition between different firms at that level and hence in determining which of those firms to include as close competitors of the firm in question in the relevant market.

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[1993] ATPR 41-202 at 40,839. Taprobane Tours WA Pty Ltd v Singapore Airlines Ltd [1990] ATPR 41-054 at 51,704. [1992] ATPR 41-159 at 40,177. 69 [1993] ATPR 41-226 at 41,136. 70 [1985] ATPR 40-512 at 46,125. 71 [2001] ATPR 41-803 at 42,705 [312]. The finding by the Full Court as to the scope of the relevant market was upheld by the High Court, as to which see Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5 at [134] (Gleeson CJ and Callinan J), [155] (Gaudron, Gummow and Hayne JJ), [256] – [259] (McHugh J), [330] (Kirby J). 72 (1990) 24 FCR 313 at 331. 67 68

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Use of evidence of the criteria that downstream firms apply in evaluating purchase options is illustrated by three cases in which the issue as to the proper scope of the market involved consideration of the purchasing practices of advertisers – Eastern Express Pty Ltd v General Newspapers Pty Ltd [1991] ATPR 41-128 (Eastern Express), General Newspapers Pty Ltd v Australian and Overseas Telecommunications Corporation Ltd [1993] ATPR 41-215 (General Newspapers) and Australian Competition and Consumer Commission v Rural Press Ltd [2001] ATPR 41-804 (Rural Press).73 In Eastern Express [1991] ATPR 41-128 it was agreed that the relevant market was a market in which real estate agents, predominantly in the eastern suburbs, acquired services by way of display of real estate advertisements. The contest was as to whether the market should be restricted to advertising in local newspapers circulating in the eastern suburbs or whether to include State and national newspapers in the market.74 Wilcox J resolved the issue in favour of the narrower market without much ado by simply pointing to the “unchallenged evidence of numerous agents as to the importance of locally advertising properties intended to be presented at auction, using display advertisements”.75 In General Newspapers [1993] ATPR 41-215 the issue facing the same judge was whether, for the purposes of assessing the degree of market power possessed by Telecom, to confine the relevant market to directories or define it more broadly, as contended by Telecom, as the advertising market. In deciding to adopt the more limited definition, Wilcox J pointed to evidence in the form of statements made by Telecom officers regarding concern over competition from a rival directory publisher. However, he also examined the interchangeability in function of different forms of media advertising, from the point of view of advertisers: It appears that, regardless of the waxing and waning of advertising campaigns, there remains a need for suppliers to proclaim the availability of their goods and services in a less ephemeral way; in publications that people will keep handy for reference purposes. This is understandable. Not all potential customers will instantly respond to an advertising campaign. Some may consider a purchase for a long time, or require time to save the necessary money or otherwise be ready to proceed. The purchaser’s perception of a supplier’s goods or services may be unrelated to an advertising campaign. To cover these situations it is desirable, from the supplier’s viewpoint, that reference material always be readily available to potential customers. Under these circumstances, it seems to me incorrect to speak of the Yellow Pages being in competition with, say, television advertising. Although the extent of its Yellow Pages expenditure may be affected by the amount it has spent on television advertising any national advertiser will think it essential also to be represented in the Yellow Pages, or some similar directory. The same comment applies to other media advertising. Media advertising and directory advertising are not alternatives. They fulfil different purposes. For most suppliers of goods and services both are essential. Except in the most general sense, one form of advertising is not substitutable for the other. That there is competition in the general sense of dollars being finite, is not enough.76

73

Other cases in which evidence of this nature has been used include the Superleague case [1996] ATPR 41-466 in which there was evidence as to the criteria that affect sponsors’ decisions about which sports to sponsor and about television broadcasters’ decisions about programming. This evidence was relied on by Burchett J in determining that the relevant market could not be confined to rugby league and had to encompass various other sports. Similarly, in Hospitality Group [2000] ATPR 41-768 there was evidence accepted by Gyles J about the criteria that firms that purchase corporate hospitality packages use in evaluating the packages on offer. 74 [1991] ATPR 41-128 at 52,891. 75 [1991] ATPR 41-128 at 52,891. Wilcox J went no further than expressing a preference for defining the market excluding national newspapers given that he was of the view that it would make no difference to the outcome of the case which of the definitions contended for by the parties was selected, provided the market referred to real estate in the eastern suburbs of Sydney, as distinct from in Sydney generally or some wider geographic area. This was so given that Eastern Suburbs Newspapers would have a substantial market share in that market regardless of whether or not national newspapers were included. The approach taken by Wilcox J to definition of the market and, in particular, to reliance on the perceptions of the real estate agents was approved on appeal: [1992] ATPR 41-167 at 40,298. 76 [1993] ATPR 41-215 at 40,954.

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The source(s) of evidence relied on by Wilcox J in making the findings contained in this passage are not apparent from the judgment. Indeed, it was quite conceivably an analysis based entirely on commonsense and perhaps the judge’s personal experience as a consumer given his apparent recognition that, in making choices between different forms of advertising, advertisers are influenced by the purchasing practices of the consumers to whom advertising is directed. More recently, in Rural Press [2001] ATPR 41-804, a similar issue arose, the principal point of contention being whether to restrict the product market to the supply of information, news and advertising by regional newspapers, or whether it should be extended to encompass the provision of those services by commercial radio stations operating in the Murray Bridge area.77 In deciding to confine the market to regional newspapers, Mansfield J had regard to evidence of a number of advertisers indicating preferences for advertising in regional newspapers or on local commercial radio, and identifying the factors dictating their preferences and the circumstances in which advertising revenue might be directed from one form of media to another.78 He also made note of evidence by the former general manager of the local radio station regarding the differences between radio and newspapers as a form of media and the consequent lack of direct competition between them for advertising revenue, as well as evidence “at almost the opposite extreme” by the general manager of a local newspaper and by the President of the Country Press Association of SA Inc as to the competition between regional newspapers and other forms of media for advertising revenue.79 Having reviewed this evidence Mansfield J found that the nature of the information, the manner in which it was presented and the way in which it was used by the audience differed as between the local newspaper, the Standard, and the local radio station, Radio 5MU. He further found that the target audience of these two media was different. There was nothing to suggest that readers of the Standard, if its price were increased, would cease purchasing the newspaper by reason of a choice then made to obtain information from Radio 5MU rather than the Standard. Effectively, there was no real competition for readers or listeners between the Standard and Radio 5MU.80 There was competition between the newspaper and the radio station for advertising revenue; however, that competition was not close or direct competition because it was not price-sensitive, but rather was driven by the perception of advertisers as to the nature and effectiveness of the communication and the scope of the targeted market. There was no evidence to suggest that a change in advertising rates in the Standard would result in any local commercial radio station starting itself to supply advertising through the written medium of a regional newspaper, or that the reverse situation might also arise. There would be significant capital expenditure and resources required to be able to do so.81 In addition to evidence of attitudes towards purchase options, evidence of the negotiating process that downstream firms employ in purchasing products or services from the firm in question and its competitors is also used, as illustrated by Freight Forwarders and Boral. In Freight Forwarders [1985] ATPR 40-512, evidence from eight witnesses employed by firms that purchased transport services was cited by Franki J. The evidence concerned not only the criteria by which these firms evaluated the services of different freight companies but also their practices of obtaining quotes from a range of companies, negotiating discounts off the schedule rate, negotiating the terms and conditions of carriage, and, in some instances where a large volume of freight was involved, calling for tenders.82 Franki J relied on this evidence, together with consistent evidence from

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[2001] ATPR 41-804 at 42,736 [102]. [2001] ATPR 41-804 at 42,737 [107]. 79 [2001] ATPR 41-804 at 42,737 [107]. 80 [2001] ATPR 41-804 at 42,736-42,738 [106] – [108]. This particular finding was challenged on appeal, but unsuccessfully so: Rural Press Ltd v Australian Competition and Consumer Commission [2002] ATPR 41-883 at [117]. 81 [2001] ATPR 41-804 at 42,738 [108]. 82 [1985] ATPR 40-512 at 46,126-46,128. 78

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the freight companies, in finding that the defendants competed actively with each other83 and that the relevant market should not be confined to national freight operators.84 Similarly, in Boral [2001] ATPR 41-803, there was evidence of the calling of tenders for large construction projects by builders or blocklayers in which BBM would regularly be asked to match the price of other concrete masonry manufacturers tendering for the work and would do so in order to win the contract. This was, in large part, the evidence of “head-to-head competition” which was found by the Full Court to justify confining the relevant market to the market for the supply of concrete masonry products.85 There was found to be no evidence of competition of an equivalent intensity as between these products and other walling and paving alternatives.86

1.5 Switching Evidence that downstream firms switch their custom between suppliers is considered strong evidence of competition justifying definition of the market so as to encompass all those firms between which the substitution occurs. In Avis-Ansett [1978] ATPR 40-071, for example, evidence from its business records that Avis had lost custom to local operators played an important role in Northrop J’s decision to define the car rental market as including both national and local operators.87 Similarly, in Freight Forwarding, there was evidence that the large freight companies frequently gained and lost customers not only to other large operators but also to smaller carriers.88 This evidence was instrumental in Franki J’s rejection of the proposition that the market should be confined to national freight companies.89 In Dowling v Dalgety Australia Ltd [1992] ATPR 41-165, the evidence that cattle producers switched between different methods of selling their stock was relied on by Lockhart J in support of his finding that the relevant market should encompass the range of livestock selling services that were available and should not be limited to sales by auction.90 In some cases, the possibility of switching has been enough. In Subaru [1998] ATPR 41,647, for example, Nicholson J declined to define the market as the wholesale market for Subaru spare parts because he found on the evidence adduced from various persons in the industry that if the price of Subaru parts was to be raised it would be possible for parts suppliers to switch to selling non-genuine parts or to parts for other makes of car. This was said to be supported by evidence of actual substitution at the retail level between Subaru parts and non-genuine parts and between their respective sources of supply.91 Evidence that switching is unlikely to occur may be just as effective as evidence of its likelihood, as exemplified by the approach taken by Wilcox J in Australia Meat Holdings [1988] ATPR 40-876. In determining that the relevant geographic markets in that case were markets confined to distinct regions in Queensland, rather than there being than a single market comprising the whole of the State, Wilcox J was influenced significantly by the evidence of numerous cattle producers, agents and dealers to the effect that they were generally unwilling to sell their cattle outside of their local area.92

83 [1985] ATPR 40-512 at 46,124. This finding was made for the purposes of determining the issue in the case of whether or not the understandings or arrangements found to have been entered by the defendants would have a significant effect on competition between them for the purposes of s 45(4), in the form in which it existed prior to 1 July 1977. However, Franki J referred to the same evidence also in the context of determining whether there was competition in a market for the purposes of s 45(2)(b) after 1 July 1977: at 46,145. 84 [1985] ATPR 40-512 at 46,145. 85 [2001] ATPR 41-803 at 42,680. This finding was affirmed on appeal to the High Court, as to which see Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5 at [134] (Gleeson CJ and Callinan J), [155] (Gaudron, Gummow and Hayne JJ), [256] – [259] (McHugh J), [330] (Kirby J). 86 [2001] ATPR 41-803 at 42,706 [318] – [320] (Finkelstein J). 87 [1978] ATPR 40-071 at 17,711. 88 [1985] ATPR 40-512 at 46,125-46,128. 89 [1985] ATPR 40-512 at 46,145. 90 [1992] ATPR 41-165 at 40,267. 91 [1998] ATPR 41,647 at 41,181. 92 [1988] ATPR 40-876 at 49,483.

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The reasons for this attitude were related principally to high transportation costs, the indirect costs associated with loss of stock and condition during transportation, loss of the opportunity to visit the abattoir to inspect the carcasses and thereby acquire valuable information as to the condition of their stock, and difficulty in dealing with problems when they arose in transit.93 Overall, the effect of the evidence was to lead Wilcox J to the view that substitution between the regions was, in the minds of the cattle producers, neither feasible nor likely. Having reviewed this evidence, Wilcox J concluded that: This attitude is so entrenched, and supported by such cogent factors, that, in my opinion, it is unlikely to be affected by anything short of a major change in present purchasing policies. It is significant that, although the difference between southern prices and northern and central prices not infrequently rises above freight cost, there is no evidence that producers in these regions “chase” the southern prices by sending their cattle south. No doubt there may come a point where northern and central producers would become interested in sending cattle south. Perhaps some would react to a major rise in southern prices. But I think that, for many producers, more than a price rise would be required. They are perhaps more likely to respond to a changed form of agreement, whereby the risk and responsibility of the journey is cast on the purchaser. But such a change would be contrary to the recent trend towards weight and grade purchase.94

On appeal the Full Court rejected the argument that Wilcox J had erred in failing to give sufficient weight to evidence that there could be substitution between the regions if a sufficiently high price incentive was on offer. In rejecting this argument, Davies J stressed that “[t]he existence of a market, a concept of economics and commerce, ought not to be determined by reference to theoretical possibilities.”95 Similarly, Pincus J downplayed the utility of the price incentive test in circumstances such as these.96 He rejected the contention that an “emotional or traditional attachment to a local market” is not a relevant factor and in an approach consistent with that of Davies J emphasised the importance of taking a “pragmatic factual approach” to defining the market and ensuring that it corresponds “to the commercial realities of the industry”.97 Finally, courts may form the view that, while there is some evidence in relation to switching, it is not sufficient of itself to allow firm conclusions about market parameters to be drawn. This was the situation in Hospitality Group [2000] ATPR 41-768. Gyles J noted that there was evidence of substitutability between different events provided as part of a corporate hospitality package. This was seen in the evidence given by the firms selling the packages that clients would take packages involving more than one event and would transfer to another event if their favoured event sold out.

93 See the evidence set out at [1988] ATPR 40-876 at 49,484-49,486. That evidence was summarised, in part, by Wilcox J as follows: The perception and attitude of the producer witnesses can be summarised by making short quotations from the evidence of three of them. Mr R J Schmidt, managing director of King Ranch Australia and a man with 35 years experience in the industry, said in his statement: “it is my considered opinion that northern-based producers including King Ranch are effectively constrained to selling to north based purchasers and that there is in effect a discrete livestock selling market there.” Mr Ian Barrett, who has been in the industry since 1956, said: “From my experience and knowledge of the local industry I can say that very few cattle are ever sent by local producers to saleyards or meatworks in southern Queensland. The only time I would consider selling cattle in southern Queensland would be in desperate times such as severe drought.” Mr K H Power, a producer near Cloncurry, put the matter in this pithy manner: “I am a firm believer that to go past the first set of weighting scales is only foolhardiness as cattle lose weight, bruising increases and returns diminish.” 94 [1988] ATPR 40-876 at 49,486. 95 [1989] ATPR 40-932 at 50,092. 96 [1989] ATPR 40-932 at 50,103, citing the statement by Dawson J in Queensland Wire Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 200 that “important as they are, elasticities and the notion of substitution provide no complete solution to the definition of a market”. 97 [1989] ATPR 40-932 at 50,105.

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However, he found that there was “no reliable evidence of customers moving from event to event because of price”.98 There was evidence by way of the results of a survey of businesses that bought corporate hospitality showing a small but statistically significant relationship between price and the purchase of packages involving rugby tests; but the survey had not been designed to measure cross price elasticity in demand for packages involving other tests. Hence Gyles J regarded it of limited utility.99 The paucity of the evidence on this subject, combined with the adverse inference that Gyles J drew from the failure of the cross-claimants to call any of their own officers or employees or clients as witnesses, led him to find that the market pleaded had not been established on the evidence.100

2. INDUSTRY VIEWS As indicated at the start of this article, courts may rely on the views expressed by persons involved in the relevant industry on issues that are ultimately for the court to decide with respect to the question of market definition. These views are most often expressed in the testimony of such persons called as witnesses. However, they may also be expressed in business records. Examples of cases in which courts have relied on the views expressed by industry participants on issues such as the scope of the market or the extent of competition between particular firms include: • Avis-Ansett [1978] ATPR 40-071 in which Northrop J recorded his acceptance of the evidence of several Avis representatives that “competition exists not only between the national operators but also between the national operators and local operators”;101 • Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd [1987] ATPR 40-809 in which Wilcox J had regard specifically to the evidence of the general manager of the Australian distributor of Nordica equipment that, in his view, Nordica and Salomon are “competing at all price levels”;102 • Australia Meat Holdings [1988] ATPR 40-876 in which Wilcox J relied on evidence of the Chief Executive Officer of Queensland’s largest cattle producer, Griffith, who was also a qualified economist and had experience in researching cattle marketing systems, of his opinion that there is a distinct “northern market and probably a central-southern market combined”;103 • Taprobane [1992] ATPR 41-159 in which French J, on appeal, had regard to the evidence of the former Marketing Development Manager of Singapore Airlines in relation to a “general tourist market”;104 • Penfold Wines [1993] ATPR 41-263 in which Lockhart J accepted the evidence of a witness with extensive experience in the liquor retailing industry that the relevant retail market was a market “for at least all alcoholic beverages”.105 In each of these instances the court appeared to treat the evidence in a manner akin to expert opinion evidence. Thus, the view that had been expressed appeared to have been regarded by the court as both relevant and persuasive merely because it was a view held by a person well-positioned by experience in the industry to express such an opinion.106 There was apparently no objection raised on the grounds that the evidence was directed towards the ultimate issue.107

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[2000] ATPR 41-768 at 41,060. [2000] ATPR 41-768 at 41,061. 100 [2000] ATPR 41-768 at 41,063. 101 [1978] ATPR 40-071 at 17,711. 102 [1987] ATPR 40-809 at 48,799. 103 [1988] ATPR 40-876 at 49,495. 104 [1992] ATPR 41-159 at 40,167. 105 [1993] ATPR 41-263 at 41,549. 106 If such evidence is to be treated as a form of opinion evidence then it may be necessary to bring it within the exception to the opinion rule that is available for lay opinions under s 78 of the Evidence Act 1995 (Cth). Section 78 provides that “the opinion rule does not apply to evidence of an opinion expressed by a person if: (a) the opinion is based on what the person saw, heard or otherwise perceived about a matter or event; and (b) evidence of the opinion is necessary to obtain an adequate account or understanding of the person’s perception of the matter or event.” It has been held that s 78 permits a lay opinion to 99

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In Superleague [1996] ATPR 41-466, Burchett J took the view that the relevance of the statements made in the business records of various sports organisations was that they reflected the perception of those organisations as to the sources of the competition facing their sport. For example, Burchett J relied for this purpose on the statement recorded in a Queensland Rugby Union document that “[r]ugby competes in the larger relaxation market against all sorts of recreational alternatives, including social events, outdoor concerts, fun parks and of course other sporting attractions”.108 There is support for reliance on evidence of industry views or perceptions on the grounds that they are likely to affect behaviour, regardless of whether or not they are well-grounded in fact.109 Generally such perceptions are taken to be reflected in evidence of actual behaviour. However, there is no reason why evidence in which the perceptions or views of industry witnesses on issues relevant to the scope of the market are directly stated may not also be persuasive, particularly where they have been expressed previously in business records or are expressed in the testimony of a “neutral” witness, that is a witness not aligned with either party in the case. However, their persuasiveness in this regard must be tested against the kinds of considerations identified in Part One of this article series.110 Generally speaking, evidence of industry views is not relied on in isolation but rather is noted to be consistent with or confirming of other sources and types of evidence, particularly evidence of actual industry behaviour. Notably, in two cases in which the courts made findings contrary to the views expressed by industry witnesses as to the appropriate market definition, Boral and QIW, a different conclusion was subsequently reached consistently with those views, on appeal in the former and by the Tribunal in Re Queensland Independent Wholesalers Ltd [1995] ATPR 41,438 (Composite Buyers) in relation to the latter. In Boral [1999] ATPR 41-715 there was specific evidence given by BBM’s Victorian Sales and Manufacturing Manager that: In my mind there’s two markets, there’s the wider market, which includes tilt-up, clay brick and plasterboard and AAC block and then there’s the inner market, if you like, the direct market that we compete with which is the masonry market.111

Heerey J was evidently not persuaded by this evidence at first instance, relying instead on the interchangeability in function between concrete masonry products and alternative products, on evidence of some substitution between them and on evidence of some concern expressed by concrete masonry manufacturers in regards to the competition from them. However, on appeal, the Full Court made findings consistent with the view expressed by BBM’s witness, namely that close competition was evidenced only as between concrete masonry manufacturers and not between those manufacturers and firms supplying the alternative products.112 In QIW [1993] ATPR 41-226, as previously indicated, Spender J concluded that, as a matter of degree, the independent retailers were not in sufficiently close competition with the supermarket chains and hence, the chains did not exert a significant restraining effect on the wholesalers so as to justify including them in the market. This conclusion was reached notwithstanding that “many, if not most, of the independent retailers who gave evidence or who were included in the survey evidence”

be admitted under the conditions specified in that section without there being evidence of the primary facts upon which the evidence is based. See R v Harvey (unreported, New South Wales, Court of Criminal Appeal, Beazley J, 11 December 1996). 107 At common law this is a rule of evidence that has traditionally rendered evidence on ultimate issues inadmissible. However, for the purposes of Federal Court proceedings it has been abrogated by s 80(a) of the Evidence Act 1995 (Cth). 108 [1996] ATPR 41-466 at 41,680. 109 See the comments by the Full Court on this issue in Arnotts (1990) 24 FCR 313 at 354-355 and Walker G, “Product Market Definition in Competition Law” (1980) 11 FL Rev 386 at 416-417. 110 See Beaton-Wells, n 1. 111 [1999] ATPR 41-715 at 43,227 [123]. According to the judgment of Beaumont J, on appeal, there has been similar evidence given by a witness from another concrete manufacturer, Rocla. That witness had spoken of the alternative products as part of a “wider market” whereas the real competition was in concrete masonry: [2001] ATPR 41-803 at 42,665. 112 [2001] ATPR 41-803 at 42,680, 42,686, 42,704-42,706. The Full Court’s view as to the scope of the relevant market was affirmed on appeal to the High Court, as to which see Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5, [134] (Gleeson CJ and Callinan J), [155] (Gaudron, Gummow and Hayne JJ), [256] – [259] (McHugh J), [330] (Kirby J).

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identified the chains as their competitors,113 as well as evidence from those in the independent wholesale trade to the effect that they aim to be price competitive with the chains114 and that they were concerned that the independent retailers not lose market share to the chains.115 On appeal Davids complained that Spender J had “failed to have regard to the views of the wholesalers, as to who are their competitors, and as to market ambit”.116 In support of this submission, the Full Court was taken to internal QIW reports concerning aspects of its marketing strategy and it was argued that these documents demonstrated that QIW executives and senior management regard QIW as in competition with the retail chains with whom it shares “the market”, along with Davids.117 Von Doussa J rejected this argument, saying: The documents referred to on analysis do not establish the submission. They show that QIW (and in some instances Davids) consider that the independent retailers are in competition with the chains, and that QIW and Davids are acutely interested in knowing what percentage share of retail sales the retailers supplied by them are achieving. The submission does not recognise that the relevant perception, if it is to be of use, must be of competition at the functional level under consideration. It is not correct, in any event, to say that the trial judge has not had regard to the perceptions of business people in the industry. His Honour has found that “Many, if not most, of the independent retailers who gave evidence or who were included in the survey evidence, identify the stores from the national chains as their competitors”, and he has referred to the evidence that Davids and QIW are concerned not to lose the share of the retail market serviced by their customers to the chains. Although his Honour has not referred expressly to this, the evidence of the independent retailers contains a forceful body of evidence that they consider Davids and QIW to be the only competitors in the wholesale market upon which they depend for supplies.118

However, two years later when the same issue arose in Composite Buyers [1995] ATPR 41-438119 the Tribunal held that the independent sector (comprising wholesalers and retailers) were in close competition with the chains, having regard inter alia to “the independents’ own perception that their competition is driven by the chains”.120 There had been evidence from a number of witnesses from the independent sector in that case (as there had been in the QIW) from which it was plain that competition by the chains was perceived by that sector as the greatest threat to the sector’s continuing commercial viability. As the Tribunal pointed out in its review of the evidence, “independent wholesaler and retailer alike believe that the major retail chains are competing with them for public custom”.121

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[1993] ATPR 41-226 at 41,136. [1993] ATPR 41-226 at 41,119 referring to the evidence of Mr Tysoe, the Marketing Manager of the Queensland division of Davids and Mr Vincent, the Davids Queensland Advertising Manager. 115 [1993] ATPR 41-226 at 41,118. 116 [1994] ATPR 41-304 at 42,093. 117 [1994] ATPR 41-304 at 42,093. 118 [1994] ATPR 41-304 at 42,093-42,094. 119 In this case QIW sought a review of the Commission’s decision to authorise Davids’s acquisition of another independent wholesaler, Composite Buyers Ltd (CBL). The Tribunal took a different view of the market to that of Spender J and the Full Court in QIW, defining the relevant market to include both the independent sector (that is, both independent wholesalers and retailers) and the national supermarket chains in the distribution of groceries to consumers: [1995] ATPR 41-438 at 40,952. In reaching this definition, there seemed to be little question in the Tribunal’s mind that competition at the retail level in the grocery distribution industry drove competition at the wholesale level. Having made this finding of competition at the retail level, it appeared to be seen as self-evident that the independent wholesalers were in competition with the wholesale operations of the chains, although this issue was not examined in these exact terms. Rather, the evidence which was accepted was to the effect that the “independent sector”, that is the independent retailers and wholesalers together, were having to work virtually as a partnership to ward off competitive inroads by the chains. As the Tribunal observed, they were having “to stand together and compete as a business system against the chain supermarkets that they consider to be the common commercial enemy”: at 40,945. Thus, the question of whether the independent wholesalers were constrained by the activities of the chains, having regard to the impact which the latter had on retailers’ business, was not considered to arise in the same way as had been the case in QIW. 120 [1995] ATPR 41-438 at 40,950. 121 [1995] ATPR 41-438 at 40,944-40,945. 114

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3. CONCLUSION The major role played by industry evidence in relation to the issue of market definition under the Act has been depicted in this series of articles. Part One in the series dealt with the sources and forms of such evidence and Part Two with the use that is made by courts of industry evidence in defining markets. In terms of its sources, industry evidence is derived from a range of firms, organisations and persons. It is primarily derived from the firm, the conduct of which is the subject of the proceeding, and from other firms operating at the same functional level in the industry and which compete, to varying degrees, with the firm in question. However, it is also derived from firms that are either upstream or downstream in the industry and, to a lesser extent, from firms or organisations that advise or represent the industry in some capacity. In terms of its forms, industry evidence is adduced through the testimony of witnesses, usually senior officers or employees of the firms concerned, and through the business records of those firms, admitted into evidence. The contents of business records, in particular, have been treated by courts as a highly probative and reliable (given their contemporaneity) source of evidence on market issues. However, as was argued in Part One, in a range of respects, this evidence needs to be examined with care before it is relied on as demonstrating the existence of effective constraints on the activities of the firm in question. As shown in this article, industry evidence is used by courts to assist them in identifying the sources and assessing the extent of competition faced by the firm in question in the proceeding. Courts have regarded as particularly persuasive in this regard evidence that may be characterised broadly as evidence of pricing, promotion and monitoring behaviour by firms. At the downstream level, courts have focused on purchasing behaviour, as well as any evidence that is available of switching behaviour. Like the views expressed in business records, evidence of this nature is valued because it is contemporaneous in the sense that the behaviour considered for this purpose is generally behaviour that was engaged in prior to, and for purposes unconnected with, the litigation. It is seen therefore as evidence of how the firm actually perceives its market in practice. That perception can then be compared with the market that has been pleaded for the purposes of the proceeding. However, as in the case of business records, courts must be rigorous in their analysis of this evidence, particularly evidence of the behaviour of the firm in question, bearing in mind that the object of the exercise is to identify the operation of effective constraints on the decision-making and conduct of that firm. Evidence of the behaviour engaged in by a firm in the market place must be examined carefully before it is accepted, at face value, as evidence of constraint or lack thereof. Firms make decisions related to their pricing and promotion, for example, for a range of reasons not all of which can automatically be said to indicate close concern with their competitors. Clearly the inferences that may be drawn from evidence of business behaviour are also a matter of degree. It is normal business practice to engage in a certain amount of competitive surveillance, for example. Hence the mere fact that a firm is aware or even that it keeps a record of the activities of another firm should not of itself be sufficient to prove the existence of an effective constraint. More should generally be required – perhaps by way of evidence that the firm undertaking the surveillance has formulated strategies to counter any effects of the rival activities that it has been monitoring. The observations made in these two articles concerning the lack of rigour displayed in some cases in the analysis of industry evidence cannot be attributed entirely to laxness on the part of the courts. In the adversarial system, courts rely to a significant degree on the parties and the processes of examination, cross-examination and submission engaged in by their legal representatives in reaching a proper understanding and being able to analyse critically the evidence before them. Hence, those responsible for preparing, presenting and testing the evidence in cases brought under the Act must be held, at least, equally responsible for any failings identified in this regard. It is hoped that the guidance provided in this series of articles will assist in reducing their recurrence. If so, markets should be defined both more purposively and more efficiently in the future. Such a result can only contribute positively towards the proper enforcement of the important provisions of this Act.

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