Re Radio 2ue Sydney Pty Limited v Stereo FM Pty Limited and 2 Day-Fm Limited [1983] FCA 140; (1983) 68 FLR 70 (12 July 1983)

COURT

CATCHWORDS

Trade Practices Act 1974 (Cth) ss.45, 45A.

Trade Practices - Competing commercial radio broadcasting stations - Contract to produce combined rate card to attract advertising - Whether contract had the effect of "fixing" - Whether evidence disclosed a price fixing arrangement between competitors - Meaning of "fixing" - Trade Practices Act 1974 (Cth), ss 45, 45A. The two respondent companies were Sydney F.M. radio broadcasting stations in competition with each other and with the appellant company (which was also a Sydney commercial radio broadcasting station) for listeners and for advertisements. The respondents produced a combined Sydney F.M. rate card (the combined card) which offered equal advertising time on both stations at combined rates.

The combined rates were calculated by adding the current rates of the two stations and either station was free to vary its rate at any time.

A single judge of the Federal Court of Australia held that the conduct of the respondents involved no breach of the provisions of s. 45(2) of the Trade Practices Act 1974 (Cth) (the Act).

On appeal, the appellant company alleged that the evidence disclosed a price-fixing arrangement within the meaning of s. 45A of the Act and that such an arrangement automatically involved a breach of s. 45 of the Act, whether or not there was a substantial lessening of competition.

Held: (1) The evidence did not disclose a price-fixing arrangement between the competitors.

Per curiam: the word "fixing" in s. 45A (of the Act) takes colour from its general context and from the words used with it - "controlling or maintaining" - and not every determination of a price, following discussion between competitors would amount to a price "fixing". There must be an element of intention or likelihood to affect price competition before price "fixing" can be established. This will often be a matter for inference, requiring no direct evidence for it to be established.

Per curiam: when two or more competitors agree to sell a joint package of goods or services, at a price agreed between them, in addition to the goods or services which they ordinarily sell in competition with each other and with others, the necessary provision for arriving at a price for those goods or services is not a provision for fixing, controlling or maintaining prices within the meaning of s. 45A (of the Act). This is certainly true in those cases where the individual competitors are entirely free to fix the price of their ingredient of the package and to change it at any time and, although the court did not need to reach a concluded opinion on the point, the proposition would appear to be correct without that proviso.

(2) Accordingly, it was not necessary for the court to consider the scope of the "joint venture" provision in s. 45A(2) of the Act, or to decide whether or not the learned trial judge was correct in suggesting that a price-fixing arrangement falling within s. 45A of the Act, which was shown to have in fact a nett advantageous effect on competition, could not constitute a breach of s. 45 of the Act.

Per curiam: it would be better to decide that question and the secondary question of discretion in awarding injunctive relief in such a case if and when it directly arose for determination. Accordingly, the appeal would be dismissed.

HEARING

The appellant company alleged that its competitors had entered into a price-fixing arrangement within the meaning of s. 45A of the Trade Practices Act 1974 (Cth) and that such an arrangement automatically involved a breach of s. 45 of the Act whether or not there was a substantial lessening of competition.

A.M. Gleeson Q.C. and F.M. Douglas, for the appellant.

B.W. Rayment Q.C. and A.D.M. Hewitt, for the first respondent.

J.D. Heydon and P. Greenwood, for the second respondent.

Cur. adv. vult.

Solicitors for the appellant: Allen, Allen & Hemsley.

Solicitors for the first respondent: Boyd House & Partners.

Solicitors for the second respondent: Stephen Jaques Stone & James.

J.D.W.

ORDER

DECISION

When they began to put such an arrangement into operation early last year, by distributing to advertisers a document called 'Combined Sydney FM Ratecard' ("the combined card"), the appellant applied to this Court for injunctions restraining the respondents from proceeding with their plans, on the ground that their proposed activities involved breaches of s.45(2) of the Trade Practices Act 1974 ("the Act").

The matter came on for hearing before Lockhart J., who held that the conduct of the respondents involved no breach of the Act and accordingly dismissed the application with costs.

In this Court the appellant confined itself to arguing that the evidence disclosed a price-fixing arrangement, within the meaning of s.45A of the Act, and that such an arrangement automatically involves a breach of s.45 of the Act, whether or not there is a substantial lessening of competition.

Section 45(2)(a) provides, among other things, that a corporation shall not make an arrangement which would be 'likely to have the effect of substantially lessening competition'.

Section 45A provides (so far as is relevant for present purposes),

... a provision of ... (an) arrangement .... shall be deemed for the purposes of (s.45) to have the purpose, or .... to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or .... is likely to have the effect .... of fixing, controlling or maintaining .... the price for, or a discount .... in relation to .... services .... to be supplied .... by the parties to the .... arrangement .... in competition with each other.'

The first question to be decided in this appeal is whether the evidence did in fact disclose a price-fixing arrangement between competitors.

It is clear that the respondents are in competition with each other and with the appellant, both for listeners and for advertisements. According to surveys, the appellant ("2UE") had, at the time to which the evidence related, some 16% of the Sydney radio listening audience; the first respondent ("2MMM") had 7%; and the second respondent ("2 DAY") had 4%. According to the surveys, 2MMM drew most of its support from the 18-24 age group and 2 DAY from the 25-39 age group.

The respondents decided to, and did, produce the combined card offering equal advertising time on both stations at combined rates. The combined rates were arrived at simply by adding the current rates of the two stations, which either station was free to vary at any time. Because of their larger listening audience, 2MMM's rates were higher than 2 DAY's.

There was some evidence to suggest that the parties agreed that the combined rates so arrived at should not be discounted in negotiations with potential advertisers, a practice apparently common in the industry. However the evidence on this point was unclear _ due no doubt to the fact that the pleadings raised no issue concerning discounting and the matter only emerged as having possible significance as the hearing progressed.

In any event, senior counsel for the appellant in arguing the appeal sought to rely on the question of discounting only as illustrating his contention that there had been price-fixing. He relied upon the basic arrangement, to charge nominated rates for the combined service until further notice, as constituting the price-fixing arrangement, within the meaning of s.45A, of which his client complained.

We are quite unable to accept that the combined card represented such a price-fixing arrangement. All that the respondents were doing was to offer a service additional to those which they were separately offering, at a price which represented the total for the time being of the separate rates _ arrived at in a competitive market. It was clear that, if an advertiser preferred to do so, it could negotiate exactly the same coverage, possibly at a lower cost, by dealing with both companies separately. All the combined card offered was convenience, for which the advertiser may have had to sacrifice an ability to negotiate a lower rate than the standard contract offered. As we have already said, the evidence on this point was unclear and the arrangement had not operated for a sufficient length of time for any practice of the parties to emerge.

If we were to assume _ although we do not believe the evidence justifies the assumption _ that the combined charge for the combined service was non-negotiable, we would nevertheless conclude that what occurred was not price fixing within the meaning of s.45A. In our view the word 'fixing' in s.45A takes colour from its general context and from the words used with it _ 'controlling or maintaining' _ and not every determination of a price, following discussion between competitors, will amount to a price 'fixing'. There must, we believe, be an element of intention or likelihood to affect price competition before price 'fixing' can be established. This will often be a matter of inference, requiring no direct evidence for it to be established.

When two or more competitors agree to sell a joint package of goods or services, at a price agreed between them, in addition to the goods or services which they ordinarily sell in competition with each other and with others, the necessary provision for arriving at a price for those goods or services is not, in our opinion, a provision for fixing, controlling or maintaining prices within the meaning of s.45A. This is certainly true in those cases where the individual competitors are entirely free to fix the price of their ingredient of the package, and to change it at any time. We believe the proposition would still be correct without that proviso, but we do not need to reach a concluded opinion on that point in this case.

Since we take the view that the arrangement referred to in this case did not contain a provision for price-fixing, it is unnecessary to consider the scope of the 'joint venture' provisions in s.45A(2) or to decide whether Lockhart J. was correct in suggesting that a price-fixing arrangement, falling within S.45A, which is shown to have in fact a nett advantageous effect on competition, cannot constitute a breach of s.45. It would be better to decide that question, and the secondary question of discretion in awarding injunctive relief in such a case, if and when it directly arises for determination.

The appeal should be dismissed with costs.