Recently in competition/antitrust law Category
In October last year I blogged about a funny case, involving an environmental activist who had contaminated (with ham) the feed for a group of sheep due to be shipped to the middle east for halal slaughter. The companies involved in the exporting sued under s 45DB of the TPA - which deals with boycotts affecting international exports. At first instance it was held that the environmental activist came within an exception to the boycott provisions, because the dominant purpose for his conduct was 'substantially related to environmental protection.' At the time, this decision was criticised by the livestock industry as likely to bring about the apocalypse and 'open[ing] the gate for Agricultural Terrorism.'
It's perhaps not surprising then that they appealed. What is somewhat more surprising is that the Full Federal Court (French, Rares & Besanko JJ) unanimously allowed the appeal - Rural Export & Trading (WA) Pty Ltd v Hahnheuser [2008] FCFCA 156. At [24] they say:
This also seems to leave the activities of groups such as PETA - who have called a boycott against Australian wool over the practice of 'mulesing' - under something of a cloud.
Given that this will probably be one of Justice French's last decisions before he is sworn in as Chief Justice of the High Court in five days time, the chances of Hahnheuser getting special leave to appeal appear somewhat remote.
It's perhaps not surprising then that they appealed. What is somewhat more surprising is that the Full Federal Court (French, Rares & Besanko JJ) unanimously allowed the appeal - Rural Export & Trading (WA) Pty Ltd v Hahnheuser [2008] FCFCA 156. At [24] they say:
The expression "environmental protection" in its ordinary and natural meaning does not refer simply to the protection of the natural environment. It also can refer to the built environment, such as a heritage building, streetscape or, perhaps, a particular instance of town planning. Thus, the protection of some artificial aspects of the environment can be within the scope of "environmental protection" in s 45DD(3). But the "environment" referred to in the expression ordinarily will be a particular location, thing or habitat in which a particular individual instance or aggregation of flora or fauna or artifice exists. And the "protection" is to preserve the existence and or characteristics of that environment being that location, thing or habitat which may include, or consist only of, that individual instance or aggregation. For present purposes, it is not necessary to essay an exhaustive definition. It is sufficient to say that the concept does not extend as far as his Honour found, nor as far as the respondent proposed.In short, the Court held that Hahnheuser wasn't trying to protect the environment of the paddock which the sheep were in, nor the environment of the ship (which Hahnheuser believed was inhumane), he was trying to prevent the sheep being moved from the former environment to the latter, to prevent their exposure to the latter environment. This, says the Court, doesn't fall within 'environmental protection'.
This also seems to leave the activities of groups such as PETA - who have called a boycott against Australian wool over the practice of 'mulesing' - under something of a cloud.
Given that this will probably be one of Justice French's last decisions before he is sworn in as Chief Justice of the High Court in five days time, the chances of Hahnheuser getting special leave to appeal appear somewhat remote.
It's official, the ACCC announced late yesterday that they propose to revoke the exclusive dealing notification made by eBay in relation to their plans to force Australian buyers and sellers to exclusively use PayPal for making payments. The ACCC has issued a draft notice to this effect and is calling for further submissions from all interested parties (i.e. eBay, and the several hundred people who made submissions denouncing eBay's plans) on that draft. They may or may not hold a public meeting known as a "pre-decision conference".
It is not yet clear whether eBay will go ahead with the next phase of their plan, which is due to commence on 17 June. Revocation of the notice will remove eBay's immunity from a s 47 action for their plan.
The ACCC's draft decision also includes a number of other interesting tidbits -- although it doesn't address s 46 issues (i.e. misuse of market power), it says that 'the ACCC considers that eBay holds a substantial degree of power in the supply of online marketplaces in Australia' (at [5.74] and [5.80]) and that eBay's plan allows them to leverage that power into the market in which PayPal operates (at [5.80]). Although the draft doesn't explicitly say 'substantial degree of market power' -- which is an essential element of a s 46 contravention -- I think that is the thrust of what the draft says. This could mean that eBay have bigger problems than just a s 47 contravention. Even if their notification was allowed to stand, it wouldn't give them any protection from a s 46 action.
It is not yet clear whether eBay will go ahead with the next phase of their plan, which is due to commence on 17 June. Revocation of the notice will remove eBay's immunity from a s 47 action for their plan.
The ACCC's draft decision also includes a number of other interesting tidbits -- although it doesn't address s 46 issues (i.e. misuse of market power), it says that 'the ACCC considers that eBay holds a substantial degree of power in the supply of online marketplaces in Australia' (at [5.74] and [5.80]) and that eBay's plan allows them to leverage that power into the market in which PayPal operates (at [5.80]). Although the draft doesn't explicitly say 'substantial degree of market power' -- which is an essential element of a s 46 contravention -- I think that is the thrust of what the draft says. This could mean that eBay have bigger problems than just a s 47 contravention. Even if their notification was allowed to stand, it wouldn't give them any protection from a s 46 action.
Some time ago, eBay announced a new policy which would force all buyers and sellers in Australia to use PayPal to pay for their purchases. PayPal is a wholly-owned subsidiary of eBay, and charges commissions on transactions processed through it, so this was seen by many as a cynical and anti-competitive money grab.
Recognising the possibility that this new policy would contravene the exclusive dealing provisions in s 47 of the Trade Practices Act 1974, eBay made a 'notification' to the ACCC under s 93 of the TPA. The effect of the notification is that while it remains in force, the conduct described in the notice cannot contravene s 47(1), but if the ACCC is satisfied that the conduct has the purpose or likely effect of significantly lessening competition, and the public benefits of the conduct will not outweigh the public detriments, it can revoke the notification.
The ACCC called for submissions from the public, and invited a number of 'interested parties' to make submissions. I think it's safe to say that they were overwhelmed by the response. The ACCC received over 500 submissions, the majority from irate eBay users. I understand that this is the highest number of submissions that the ACCC has ever recieved on an exclusive dealing notification, by a large margin. A number of organisations also made submissions, including EFA, American Express, the Australian Securities and Investment Commission, the Reserve Bank of Australia, Commonwealth Bank of Australia, and others. Not a single submission supported eBay's proposal.
The ACCC has said they will advise their decision before the new policy is supposed to take effect, on the 17th of June. I think the ACCC is likely to revoke the notification, unless they drink the market-definition koolaid which eBay's tame economists wrote in the annexure to their notification -- an annexure which the public wasn't allowed to see. eBay can then do one of three things:
Recognising the possibility that this new policy would contravene the exclusive dealing provisions in s 47 of the Trade Practices Act 1974, eBay made a 'notification' to the ACCC under s 93 of the TPA. The effect of the notification is that while it remains in force, the conduct described in the notice cannot contravene s 47(1), but if the ACCC is satisfied that the conduct has the purpose or likely effect of significantly lessening competition, and the public benefits of the conduct will not outweigh the public detriments, it can revoke the notification.
The ACCC called for submissions from the public, and invited a number of 'interested parties' to make submissions. I think it's safe to say that they were overwhelmed by the response. The ACCC received over 500 submissions, the majority from irate eBay users. I understand that this is the highest number of submissions that the ACCC has ever recieved on an exclusive dealing notification, by a large margin. A number of organisations also made submissions, including EFA, American Express, the Australian Securities and Investment Commission, the Reserve Bank of Australia, Commonwealth Bank of Australia, and others. Not a single submission supported eBay's proposal.
The ACCC has said they will advise their decision before the new policy is supposed to take effect, on the 17th of June. I think the ACCC is likely to revoke the notification, unless they drink the market-definition koolaid which eBay's tame economists wrote in the annexure to their notification -- an annexure which the public wasn't allowed to see. eBay can then do one of three things:
My money is on options 2 and/or 3.
- Back down and abandon the change. I don't think this is likely, especially since eBay apparently want to introduce this policy globally;
- Appeal the ACCC's decision to the Australian Competition Tribunal; or
- Go ahead with the policy change regardless. Given that the ACCC can't revoke the notification unless they're satisfied that eBay's policy change would contravene s 47(1) of the TPA, eBay would effectively be saying 'we'll see you in court' to the ACCC.
Earlier today, somebody at QUT asked my opinion about Labor's 'Fuelwatch' scheme, and whether or not it would 'work' - i.e. lower prices and/or improve competition. The scheme itself has been getting a lot of media attention lately.
Fuelwatch is designed to address problems of imperfect information, a/k/a information asymmetry, in relation to pricing in the market for retail petrol. Consumers basically have two ways of finding out the current price of petrol - they can drive past a service station and look, or they can try looking on the Internet. However, not all service station's prices are on the Internet, and there is no guarantee that the prices on the Internet are accurate - the service station in question could have recently increased their prices. In Brisbane, I've seen price hikes at the same service station of up to 15c/l from morning to evening on the same day. Consumers also have no way of knowing what the prices will be in the future, except for general trends such as prices being higher later in the week and on weekends, and holiday periods being generally higher.
Suppliers on the other hand, have better information. They know what their current prices are, and they probably know what the current pricing of their competitors is. They also know what their future pricing will be, and they may even know what the future pricing of their competitors will be. Petrol retailers can -- and in some cases, have -- called their competitors and said things like 'I have spoken to some [other competitors] and they are going up to X cents per litre at Y time. Will you support it?' (i.e. 'will you also raise your prices?'). See, e.g. ACCC v Leahy Petroleum [2007] FCA 794 at [913] where the ACCC sued, alleging unlawful price fixing, and failed because the trial judge found there wasn't a 'contract, arrangement or understanding' to fix prices.
The Fuelwatch scheme, as I understand it, will require all retailers of petrol to notify the ACCC (or whoever runs the scheme) the price at which they will sell petrol on the following day. The prices will be available on the Internet, and the retailers can only sell at that price. If the petrol station down the road is undercutting them, they can't drop their prices until the following day.
Whether Fuelwatch will 'work' will depend on whether the pro-competitive effects of consumers having access to better information about pricing (and thereby being able to make better purchasing decisions), and any consequential price competition which this encourages, will outweigh the anti-competitive effects of retailers being unable to engage in very-short-term discounting, possible stagnation of longer-term discounting (i.e. it has been suggested that the weekly 'cycle' of ~15c/l might drop to ~10c/l or lower), and increased compliance costs being passed onto consumers.
Opinionated as I am, I don't know whether it will 'work' or not. There are too many uncertainties, and I can't even make an educated guess.
Fuelwatch is designed to address problems of imperfect information, a/k/a information asymmetry, in relation to pricing in the market for retail petrol. Consumers basically have two ways of finding out the current price of petrol - they can drive past a service station and look, or they can try looking on the Internet. However, not all service station's prices are on the Internet, and there is no guarantee that the prices on the Internet are accurate - the service station in question could have recently increased their prices. In Brisbane, I've seen price hikes at the same service station of up to 15c/l from morning to evening on the same day. Consumers also have no way of knowing what the prices will be in the future, except for general trends such as prices being higher later in the week and on weekends, and holiday periods being generally higher.
Suppliers on the other hand, have better information. They know what their current prices are, and they probably know what the current pricing of their competitors is. They also know what their future pricing will be, and they may even know what the future pricing of their competitors will be. Petrol retailers can -- and in some cases, have -- called their competitors and said things like 'I have spoken to some [other competitors] and they are going up to X cents per litre at Y time. Will you support it?' (i.e. 'will you also raise your prices?'). See, e.g. ACCC v Leahy Petroleum [2007] FCA 794 at [913] where the ACCC sued, alleging unlawful price fixing, and failed because the trial judge found there wasn't a 'contract, arrangement or understanding' to fix prices.
The Fuelwatch scheme, as I understand it, will require all retailers of petrol to notify the ACCC (or whoever runs the scheme) the price at which they will sell petrol on the following day. The prices will be available on the Internet, and the retailers can only sell at that price. If the petrol station down the road is undercutting them, they can't drop their prices until the following day.
Whether Fuelwatch will 'work' will depend on whether the pro-competitive effects of consumers having access to better information about pricing (and thereby being able to make better purchasing decisions), and any consequential price competition which this encourages, will outweigh the anti-competitive effects of retailers being unable to engage in very-short-term discounting, possible stagnation of longer-term discounting (i.e. it has been suggested that the weekly 'cycle' of ~15c/l might drop to ~10c/l or lower), and increased compliance costs being passed onto consumers.
Opinionated as I am, I don't know whether it will 'work' or not. There are too many uncertainties, and I can't even make an educated guess.
This posting began life as a reply to a comment from Bingo Bango Boingo (BBB) to my previous posting. It got too large, and was promoted to a posting in its own right :)
I'm in Australia, and don't physically have an iPhone or access to one, so my information on their operation is necessarily second-hand. That said, in the course of preparing the article, I solicited information from different people who actually used iPhones in the US to find out more information about the 'activation' process.
My information -- confirmed from more than one source -- is that the iPhone will not work at all (with the exception of making emergency calls) without being activated. That is, no WiFi, no iPod-like functionality, nothing. I don't think that such a situation would have a problem getting over the futurity/compulsion hurdle, unless people are purchasing iPhones for expensive paperweights.
If BBB is correct, and the iPhone functions as everything else except a phone, I still think it would get over the futurity/compulsion issue. If people are buying the iPhone and intending not to activate it (and not to bypass the activation), wouldn't they get the same kind of functionality out of an iPod Touch? I don't know enough about the functionality of each to be able to answer this question, I'm not a Mac expert.
Continue reading More on Third-Line Forcing, Economics, and per-se contraventions.
It's taken me a while to get around to blogging this, because I've been sick as the proverbial dog for the past week -- which is unfortunate, because the media has been going slightly nuts over a journal article of mine which was recently published in the QUT Law and Justice Journal.
Some of the reporting of the article has been less than entirely accurate. News Limited, in their wisdom, have awarded me an honorary doctorate. ("The finding comes from an analysis of the iPhone under Australia's competition laws by Dr Clapperton and fellow QUT law expert Professor Stephen Corones"). I'm not exactly comfortable with them describing me as a 'fellow law expert' with someone as eminent as Professor Corones, either. I am but a 'umble research peon.
The Australian Personal Computer piece is better than most of the coverage, because they actually read the article instead of parroting a story which was distributed on the AAP wire.
Professor Joshua Gans in his blog seems less than impressed with our article. Which is fine, I wasn't expecting everybody to agree with it, but I think he may have missed one of the important points of our article. Professor Gans writes:
A very simplistic explanation of third-line forcing is where a company (Apple) won't sell you something that you want (an iPhone) unless you buy something else (which you may or may not want) from somebody else (who you may or may not want to deal with, like AT&T, or Telstra). So if Apple doesn't sell the iPhone, they're off the hook, right? Not necessarily. Third-line forcing usually involves two contracts -- one between the consumer and each supplier. If Telstra sell the iPhone, and it's technologically tied to Telstra's services, there's no contract with Apple, right?
Wrong. There's the EULA for the iPhone software, which is expressly a contract between Apple and the end-user ("The software ... are [sic] licensed, not sold, to you by Apple Inc.").
The TPA deals with third-line forcing in ss 47(6) [supply on condition] and (7) [refusal to supply unless condition agreed to]. The legislation talks in terms of 'supply' of goods or services. A software licence almost certainly falls within the TPA definition of 'services'.
So, if Apple:
And yes, Professor Gans correctly makes the point that Apple could try and obtain permission (technically, an exclusive dealing notification) from the ACCC. Actually obtaining that permission is not a given. I think that the ACCC might well object, which they can do if they are not satisfied that the public benefits of the third-line forcing would outweigh the public detriment, and I think that balance would be weighing against Apple.
Anyhow, I encourage people to read the article and make up their own mind.
Some of the reporting of the article has been less than entirely accurate. News Limited, in their wisdom, have awarded me an honorary doctorate. ("The finding comes from an analysis of the iPhone under Australia's competition laws by Dr Clapperton and fellow QUT law expert Professor Stephen Corones"). I'm not exactly comfortable with them describing me as a 'fellow law expert' with someone as eminent as Professor Corones, either. I am but a 'umble research peon.
The Australian Personal Computer piece is better than most of the coverage, because they actually read the article instead of parroting a story which was distributed on the AAP wire.
Professor Joshua Gans in his blog seems less than impressed with our article. Which is fine, I wasn't expecting everybody to agree with it, but I think he may have missed one of the important points of our article. Professor Gans writes:
The only serious legal issue might come in relation to Third Line Forcing which says that one company cannot sell a product that makes it a condition of sale that the consumer purchase a product from another company. However, Apple need only sell the iPhone through a carrier's retailers and it is likely to be fine. In any case, it can obtain permission from the ACCC for any arrangement it might propose.At page 362-3 of our article, we advance what is, so far as we know, a novel argument that Apple may still engage in third-line forcing regardless of whether the phone is only sold through a carrier's retailers or not.
A very simplistic explanation of third-line forcing is where a company (Apple) won't sell you something that you want (an iPhone) unless you buy something else (which you may or may not want) from somebody else (who you may or may not want to deal with, like AT&T, or Telstra). So if Apple doesn't sell the iPhone, they're off the hook, right? Not necessarily. Third-line forcing usually involves two contracts -- one between the consumer and each supplier. If Telstra sell the iPhone, and it's technologically tied to Telstra's services, there's no contract with Apple, right?
Wrong. There's the EULA for the iPhone software, which is expressly a contract between Apple and the end-user ("The software ... are [sic] licensed, not sold, to you by Apple Inc.").
The TPA deals with third-line forcing in ss 47(6) [supply on condition] and (7) [refusal to supply unless condition agreed to]. The legislation talks in terms of 'supply' of goods or services. A software licence almost certainly falls within the TPA definition of 'services'.
So, if Apple:
- Supply you with services (the licence to use the iPhone software);
- On the condition that you acquire services from somebody else (the carrier that's paying them kickbacks)
And yes, Professor Gans correctly makes the point that Apple could try and obtain permission (technically, an exclusive dealing notification) from the ACCC. Actually obtaining that permission is not a given. I think that the ACCC might well object, which they can do if they are not satisfied that the public benefits of the third-line forcing would outweigh the public detriment, and I think that balance would be weighing against Apple.
Anyhow, I encourage people to read the article and make up their own mind.
The Sydney Morning Herald is reporting that Australian TV stations are using their copyright over programming information (i.e. what shows will be on, and when) to demand concessions from manufacturers of digital video recorders.
The TV stations' representative group Free TV Australia sent a letter to the representative group for DVR manufacturers, saying that:
It's a pity that Australia doesn't have a doctrine of copyright misuse. We do however have a statutory prohibition against misuse of market power -- perhaps the TV stations should read up on the Magill case?
The TV stations' representative group Free TV Australia sent a letter to the representative group for DVR manufacturers, saying that:
Broadcasters are not authorising the use of the programs listing data in PVRs where 'ad-skip' functionality goes beyond a maximum fast forward speed of x60; broadcasters reserve their rights with respect to those suppliers
and that
There you have it. If you want the program data, you have to nobble the fast-forward ability of your products, and use DRM, or they sue you.In addition, the PVR's [sic] which display the EPG [Electronic Program Guide] must employ adequate copy protection measures to prevent the redistribution of free to air content outside the home or on the internet... Broadcasters reserve their rights subject to the Commonwealth Copyright Act 1968, to take legal action at any time for copyright infringement where program listings are used in contravention of these terms.
It's a pity that Australia doesn't have a doctrine of copyright misuse. We do however have a statutory prohibition against misuse of market power -- perhaps the TV stations should read up on the Magill case?
For an article I'm currently writing, I need some information on iPhones, especially what functionality they have or don't have if they're not 'activated'. If any readers have one and can help me out, please email me.
You read some funny things in court judgments.. Like the recent decision of the Federal Court of Australia in Rural Export & Trading (WA) Pty Ltd v Hahnheuser [2007] FCA 1535, in which two agricultural companies sued an environmental activist (Hahnheuser) for feeding ham to a number of sheep, thereby preventing them from being exported to the middle east for halal slaughter.
They sued under s 45DB of the TPA -- boycotts affecting international trade or commerce. They lost, despite the fact that Hahnheuser withdrew his instructions to counsel at the last minute and didn't appear at the trial. Gray ACJ held that the trade and commerce of one of the applicants was not affected, and in any case it was not international trade or commerce.
Significantly, Gray ACJ held that the conduct of Hahnheuser was for the subjective purpose of preventing the suffering and cruelty of sheep in live export, and that such animal welfare concerns fall within the meaning of 'environmental protection' in s 45DD(3) (which deals with permitted boycotts). Therefore, Hahnheuser's actions could not contravene s 45DB. Section 45DD not only qualifies the scope of s 45DB, it qualifies the secondary boycott provisions in s 45D -- meaning that animal welfare boycotts (such as PETA ran against Australian woolgrowers because of 'mulesing') will not be actionable under s 45D if this judgment stands.
The Victorian Farmers Federation are saying the decision 'opens the gate for Agricultural Terrorism'. I thought that agricultural terrorism was cows with guns?
They sued under s 45DB of the TPA -- boycotts affecting international trade or commerce. They lost, despite the fact that Hahnheuser withdrew his instructions to counsel at the last minute and didn't appear at the trial. Gray ACJ held that the trade and commerce of one of the applicants was not affected, and in any case it was not international trade or commerce.
Significantly, Gray ACJ held that the conduct of Hahnheuser was for the subjective purpose of preventing the suffering and cruelty of sheep in live export, and that such animal welfare concerns fall within the meaning of 'environmental protection' in s 45DD(3) (which deals with permitted boycotts). Therefore, Hahnheuser's actions could not contravene s 45DB. Section 45DD not only qualifies the scope of s 45DB, it qualifies the secondary boycott provisions in s 45D -- meaning that animal welfare boycotts (such as PETA ran against Australian woolgrowers because of 'mulesing') will not be actionable under s 45D if this judgment stands.
The Victorian Farmers Federation are saying the decision 'opens the gate for Agricultural Terrorism'. I thought that agricultural terrorism was cows with guns?
This just gets weirder and weirder... After reporting three days ago that Telstra were suing Senator Coonan for the second time, Telstra has accused Coonan of having "misled members of the public to believe they are unable to acquire
services from Telstra and that they can only acquire those services
from Telstra's competitors." Telstra have reportedly asked the ACCC to investigate. Good luck establishing that Coonan's statements were made "in trade or commerce."
