Academic journal article Melbourne University Law Review

Melway Publishing Pty Ltd. V. Robert Hicks Pty Ltd

Academic journal article Melbourne University Law Review

Melway Publishing Pty Ltd. V. Robert Hicks Pty Ltd

Article excerpt

I INTRODUCTION

The decision of the High Court of Australia in Melway (1) was handed down on 15 March 2001. It is only the second decision of the High Court in a substantive market-centred case under Part IV of the Trade Practices Act 1974 (Cth). The first was Queensland Wire Industries Pty Ltd v Broken Hill Co Ltd (2) which also concerned s 46 of the Trade Practices Act 1974 (Cth). (3) Although the decision of the majority in Melway was firmly based on Queensland Wire, it provided the High Court with an opportunity to elaborate on the meaning of the key phrase in s 46 -- `take advantage' -- and, in particular, the relationship between the phrase `take advantage' and the purpose that is proscribed in the section.

The private litigation in Melway arose from a decision by a producer of street directories not to supply its directories to a wholesale distributor. (4) From modest beginnings in 1966, Melway Publishing Pty Ltd (`Melway') had become, by the early 1980s, the producer of by far the largest selling street directory in Melbourne. At first instance, Merkel J found that Melway directories held in excess of 80 to 90 per cent of the retail market share in Melbourne street directories. (5) Barriers to entry were substantial. (6)

For many years, Melway had divided the retailers who were selling its directories into a number of segments. The segments were, respectively: newsagents and bookshops; service stations; retail outlets for automotive parts; office stationers; and over-the-counter sales by the wholesaler and sales to authorised car dealers. One company was appointed the exclusive wholesale distributor to each of these segments -- except for the service station segment for which there were two.

In 1986, Robert Hicks Pty Ltd (`Robert Hicks') was appointed exclusive wholesale distributor for suppliers of automotive parts. Robert Hicks was jointly controlled by two men -- Messrs Pawsey and Nagel. In 1993, Mr Pawsey acquired Mr Nagel's shareholding in Robert Hicks and Mr Nagel started a rival business. Melway decided that it preferred Mr Nagel and terminated its agreement with Robert Hicks with effect from 30 June 1995. Melway refused to sell to Robert Hicks any of the 30 000 to 50 000 directories that it wished to acquire.

Robert Hicks issued proceedings claiming that Melway's refusal to supply the directories infringed s 46 of the Trade Practices Act 1974 (Cth). To make out its claim under s 46, Robert Hicks had to establish each of three propositions:

* that Melway had a substantial degree of power in a market;

* that its refusal to supply the directories represented a `taking advantage' of that power; and

* that the `taking advantage' was for one of the purposes proscribed in s 46. In this case, the alleged purpose was to deter or prevent Robert Hicks from engaging in competitive conduct in a market.

Robert Hicks succeeded at the trial before Merkel J. This decision was upheld by Sundberg and Finkelstein JJ (Heerey J dissenting) in the Full Court of the Federal Court, (7) but was overturned in a split decision of the High Court. The majority was Gleeson CJ, Gummow, Hayne and Callinan JJ. The minority was Kirby J.

The decision of the High Court focuses on a narrow issue -- but one that is of critical importance to litigation under s 46. The issue is the `taking advantage' of market power and, in particular, the relationship between proof of `taking advantage' and proof of the proscribed purpose. The majority accepted the findings of the trial judge as to market definition, market power and purpose. But the majority found that the Federal Court had erred in finding that Melway's refusal to supply the directories constituted a `taking advantage' of its power in a market.

This case note is arranged into four substantive sections. Part II examines the issue of market definition. Part III considers what the decision has to say as to the relationship between `taking advantage' and purpose. …

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