Messcash: A Comedy of Errors

This article first appeared in the CCH Australian Competition & Consumer Law Reporter, Issue 636, 14 October 2011, pp. 1-6.

Introduction[1]

On 25 August 2011, Emmett J of the Federal Court in Australian Competition and Consumer Commission v Metcash Trading Limited (2011) ATPR ¶42-368; [2011] FCA 967 decided that Metcash’s proposed acquisition of Franklins would not substantially lessen competition in breach of section 50 of the Competition and Consumer Act 2010 (CCA) (formerly the Trade Practices Act 1974).[2] Indeed, Emmett J found that the proposed acquisition was likely to enhance competition.

Subsequently, many commentators in the media trumpeted Emmett J’s decision as a triumph of practical, commercial common-sense reasoning over the Australian Competition and Consumer Commission’s (ACCC) increasingly hypothetical and theoretical approach to merger analysis.[3] The commentary went so far as to suggest that the ACCC’s entire approach to merger analysis would have to change in the light of Emmett J’s judgment.

On 20 September 2011, Jacobsen J denied the ACCC’s application for an interim injunction to prevent the sale.[4] The ACCC’s appeal will be considered by the Full Federal Court over three days, commencing on 24 October 2011.[5]

A Comedy of Errors

The reality is that Emmett J’s judgment in the Metcash case is deeply flawed and highly unlikely to survive an appeal. The court appears to have ignored binding precedent in relation to market definition and made a number of significant legal and analytical errors in applying the relevant legislation.

Unfortunately, the ACCC also made a number of significant errors in the way it ran its case. These errors ranged from pleading errors to major strategic errors such as selecting the wrong counterfactual prior to the trial and then having to switch to a new counterfactual during the trial.

Background to the case

In July 2010, Metcash entered an agreement to purchase the Franklins Supermarket business for $215m.

The ACCC opposed the proposed acquisition because it believed it would substantially lessen competition. The ACCC subsequently commenced legal proceedings in the Federal Court to prevent the acquisition from proceeding.

Metcash is a specialist wholesaling company which supplies groceries, fresh produce and liquor products on a national basis. Metcash supplies independent retailers with grocery products principally under the IGA brand and owns a number of private labels which it makes available to its retail customers.

Franklins operates as both a vertically integrated retailer and an independent wholesaler. Franklins is vertically integrated through its ownership of 80 supermarkets in NSW. It also operates as an independent wholesaler to 10 Franklins franchises in NSW. Franklins owns the No Frills brand which it makes available to its company owned and franchise stores.

The ACCC’s case

The most significant error made by the ACCC in its case was its failure to amend its pleadings in relation to the relevant market prior to the trial commencing.

The ACCC initially pleaded that the market was the market for the wholesale supply of packaged groceries to independent supermarkets in NSW and the ACT. However, a problem arose when the expert for the ACCC, Dr Christopher Pleatsikas, appeared to define a different market to the ACCC’s pleaded market in his expert report. Dr Pleatsikas defined the market as the market for the supply of wholesale services for dry groceries (at {121}).

In order to understand the difference between the ACCC’s pleaded market and the market found by the ACCC’s expert, one has to understand the goods and services which Metcash supplies to its customers. 

Metcash effectively charges its customers for three different things:

• dry groceries;

• a service fee for providing a wholesaling service; and 

• a fee for freight. 

In other words, while Metcash charges its customers for the dry groceries (goods), it also charges its customers for two related services – ie wholesaling services and freight services.

The problem for the ACCC arose when Metcash’s lawyers wrote to the ACCC on 2 March 2011 pointing out the discrepancy between its pleaded market and the conclusions contained in its expert report (at {122}). Metcash’s lawyers invited the ACCC to amend its pleadings at that stage to reflect the market described in the ACCC’s expert report, but the ACCC declined to do so.

Subsequently on the ninth day of the hearing, the ACCC sought leave from Emmett J to amend its pleading to make the same amendment which Metcash’s lawyers had suggested that it make three weeks previously. Justice Emmett refused the ACCC’s application for leave to amend its pleadings (at {123}).

Justice Emmett’s decision not to grant leave to the ACCC to amend its pleading had profound consequences for the way in which the case was run. Indeed, the court’s decision meant that the case was effectively fought by the parties on the wrong market definition – ie that the ACCC was concerned that following the acquisition, Metcash would be able to increase the wholesale prices of groceries to independent retailers by between 5-10%. However, the ACCC’s true concern was that following the acquisition, Metcash would be able to increase the price of wholesaling services to independent retailers by between 5-10%.

The practical difference between these two markets is significant. In the pleaded market, the ACCC would have had to prove that Metcash had the ability, following the acquisition, to increase its prices for dry grocery supplies by between 5-10%, which would have amounted to a doubling of its profit margin. However, under the alternative wholesale services market, the ACCC would only have been required to prove that Metcash could have increased its wholesale service fee from, for example, 3% of the value of the groceries supplied to its independent retailers to 3.15% to 3.3%. Obviously it would have been much easier for the ACCC to prove the latter.

Ultimately, the ACCC attempted to circumvent this pleading problem by arguing that the market it has pleaded was effectively the same as the wholesale services market. However, Emmett J did not accept this argument.

The other significant mistake made by the ACCC in the case related to the selection of its counterfactual. The ACCC claimed prior to hearing, and for the first few days of the hearing, that SPAR was the likely counterfactual in the event the proposed acquisition by Metcash did not proceed. However, it should have been abundantly to the ACCC, based on even a cursory review of SPAR’s financial accounts, that it simply did not have the financial resources to purchase the Franklins business. SPAR’s total wholesale sales of groceries in each of the 2009 and 2010 financial years was only $150 million (at {76}).[6]

On the other hand, the strength of the alternative consortium headed by Supabarn made it a much superior counterfactual to SPAR.

Not only did the Supabarn-led consortium have greater financial resources, but it had significant wholesale grocery volumes which it could have redirected to Franklin’s wholesale operations. The addition of this volume would have significantly enhanced the overall efficiency of Franklins’ wholesale operations and driven down the costs of providing wholesale services.

Mr Perlov, the Managing Director of Franklins advised TMT, the advisers to the Supabarn-led consortium, that the Franklins wholesale operations were currently operating at only 60% capacity and that it needed another 20 good stores to achieve scale efficiency (at {373}). The consortium itself could have added 13 quality stores to the Franklins wholesale operation overnight.

Unfortunately, the ACCC did not recognise that the Supabarn-led consortium was the most likely counterfactual until after the trial had commenced. The ACCC had to change its position mid-way through the trial by abandoning SPAR and embracing the Supabarn-led consortium as its preferred counterfactual. The ACCC’s decision to change counterfactuals in the middle of the case significantly undermined the credibility of its arguments in favour of the Supabarn-led counterfactual.

Federal Court Judgment

The first unfortunate decision made in the conduct of the trial was the refusal by Emmett J to allow the ACCC to amend its pleadings. In deciding not to allow the ACCC to amend its pleadings, the court treated the ACCC as a private litigant to private proceedings, rather than a public interest litigant. The court appears to have taken the view that because the ACCC had not amended its pleadings when it had a chance to do so prior to the commencement of the trial, it had lost its opportunity to do so once the trial started.

Despite the ACCC not being permitted to amend its pleadings to include the wholesale services market, the ACCC still had every right to expect that they would be successful in establishing the market which they had pleaded – namely the market for the supply of wholesale groceries to independent grocers. This was because there was a clear binding precedent which should have determined the issue in the ACCC’s favour.

In 1996 the Full Federal Court handed down its judgment in Davids Holdings Pty Limited & Ors v Attorney-General of the Commonwealth (1994) ¶ATPR 41-304 In this case, Davids was proposing to acquire another independent wholesaler, Queensland Independent Wholesalers. Therefore, the market definition issues considered in the Davids case were identical, in product and functional terms, to the market definition issues raised in the Metcash case.

The Attorney-General[7] was successful in arguing both at first instance and before the Full Federal Court, that the relevant markets in the Davids case were: 

• the market in Queensland and northern NSW for wholesaling groceries by independent wholesalers to independent retailers; and

• the market for retailing groceries, including independent retailers and chain stores.

Not only did the court in Metcash define a different market to the market found by the Full Federal Court in the Davids case, but Emmett J did not discuss the Davids case in his judgment. It is surprising that Emmett J did not at least try to distinguish the Davids decision as it related to market definition before defining a completely different market.

Unfortunately it is not a simple exercise to state with precision the market which Emmett J ultimately found in the Metcash case. This is because his description of the relevant market is far from clear. However, it would appear that Emmett J defined the relevant market as follows:

• the national market for the supply of packaged groceries, encompassing both the wholesale supply of groceries and the retail supply of groceries by independent grocers and vertically integrated chains.

The other significant mistake which the court made in the Metcash case relates to the appropriate counterfactual test to apply in merger cases. In his judgment, Emmett J defined the counterfactual test as involving the following two-step process (at {146}):

• “that it is more probable than not that one of the Commission’s counterfactuals will come to pass if the proposed acquisition does not proceed; and 

• that there is a real chance that, if the proposed acquisition does proceed, that would result in a substantial lessening of competition compared to the scenario in which one of those counterfactuals comes to pass.”

While Emmett J cited French J’s decision in the AGL case[8] as establishing the relevant test for assessing competing counterfactuals, a close reading of the two tests shows that Emmett J’s formulation is significantly different to the French test.

In AGL, French J explained the test for assessing the counterfactual as follows:

“The ACCC submits that AGL must satisfy the Court that its hypothesis against any likely substantial lessening of competition in any relevant market is more probable than the competing hypotheses which are advanced to suggest a real chance of competition being substantially lessened in any such market. I accept that formulation of the approach which should be taken in this case. I accept also the proposition advanced by the ACCC that AGL is not entitled to relief if:

(a) the Court is left in a position of uncertainty about the competing hypotheses; or

(b) the Court concludes that the hypotheses suggesting a real chance of competition being substantially lessened are more probable than the opposing hypotheses.[9]

The formulation established by French J in AGL is that the counterfactual has to be “more probable” than the competing hypothesis. This is clearly a relative test which looks at the likelihood of one of two competing hypothesis eventuating.

However, Emmett J described the counterfactual test differently as requiring that the court be satisfied that the counterfactual be “more probable than not.” This is an entirely different test to the test established in AGL.

The French test looks at how probable one counterfactual is when compared to another counterfactual. This means that a counterfactual with say, a 30% chance of occurring would be selected as the counterfactual if the competing counterfactual only had a 20% chance of occurring. However, under Emmett J’s formulation the only way that any counterfactual could succeed is if its probability of occurring was more than 51% - ie more probable than not.

The mistake of using this test was further compounded by Emmett J’s application of the test to the relevant facts. In his judgment, Emmett J set out an extensive range of factors which the ACCC’s counterfactual would have to meet in order for it to be considered as the likely counterfactual. The actual application of the test to the facts raised the standard of proof significantly higher than even the balance of probabilities. Indeed the standard bears more resemblance to proof beyond reasonable doubt.

Furthermore, Emmett J did not apply his counterfactual test with the same rigour to the counterfactual put forward by Metcash and Franklins – namely, that there would be a store sale if the acquisition did not proceed.

Conclusions

The claims that Justice Emmett’s judgment represents a triumph of common sense over economic theory are entirely misplaced. Nothing could be further from the truth.

It was the ACCC which argued a common-sense market definition. The ACCC asked the simple question – to whom will independent grocers turn if Metcash increases its wholesale grocery prices? The ACCC believed that these independent retailers would have nowhere to turn because Franklins was their only viable potential source of wholesale supply.

In reality, it was the court in the Metcash case which defined the more economically theoretical and speculative market. The court found that because competition at the wholesaling level is constrained by downstream competition at the retail level, that the functional dimension of the market should be broadened to include this downstream retail competition. Put another way, the court found that Metcash would not increase its prices to its independent retail customers because it would recognise that if it tried to increase its prices to these captive customers, this action would make these customers uncompetitive against Coles, Woolworths and Aldi stores at the retail level which would in time force these customers out of business.

It is highly unlikely that the decision in the Metcash case will survive an appeal, despite Jacobsen J’s recent comments. The court has made too many fundamental legal and factual mistakes for the judgment to be allowed to stand.

The remaining question is why has both the ACCC and the court made so many apparent errors. The simple explanation is “time”. It is not possible for the ACCC to prepare a merger case properly in the very short time frames imposed upon it by the court. In both the AGL case and the Metcash case, the ACCC had only a couple of months to fully prepare its cases. It is no coincidence that the ACCC lost both of these cases quite comprehensively. The court will also struggle to properly adjudicate on all the relevant (and irrelevant) issues raised during a merger case.

Given the importance of merger analysis under section 50 of the CCA – namely to ensure the future competitiveness of Australian markets in the medium to long term – more time should be given to both the ACCC and the court to get the decision right.

Postscript

On 20 September 2011, the Full Federal Court handed down its decision in Australian Competition and Consumer Commission v Metcash Trading [2011] FCA 1079[10], rejecting the ACCC’s appeal against Emmett J’s judgment. Accordingly, my prediction that Emmett J’s judgment would not survive an appeal has proven to be incorrect.

---

[1] I acted for TMT, the financial adviser to the Supabarn led consortium, in the Metcash case.

[2] Australian Competition and Consumer Commission v Metcash Trading Limited [2011] FCA 967 (25 August 2011) -
http://www.austlii.edu.au/au/cases/cth/FCA/2011/967.html

[3] For example Bryan Firth, “Metcash black eye puts ACCC's new boss Rod Sims in a spot”, The Australian, http://www.theaustralian.com.au/business/opinion/metcash-black-eye-puts-acccs-new-boss-rod-sims-in-a-spot/story-e6frg9kx-1226122403750

[4] Australian Competition and Consumer Commission v Metcash Trading Ltd [2011] FCA 1079 (20 September 2011) -
http://www.austlii.edu.au/au/cases/cth/FCA/2011/1079.html

[5] See Postscript at end of article.

[6] I expressed the view to the ACCC’s lawyers prior to the Metcash trial commencing that they were arguing the wrong counterfactual and should change their focus from SPAR to the Supabarn-led consortium.

[7] The Davids proposed acquisition of QIW was challenged under section 50 of the Trade Practices Act 1974, by the Commonwealth Attorney General.

[8] Australian Gas Light Company v Australian Competition and Consumer Commission (No. 3) [2003] 137 FCR 317.

[9]  AGL at 356.

[10] http://www.austlii.edu.au/au/cases/cth/FCA/2011/1079.html

The Untold Story: The ACCC’s role in the Waterfront Dispute - Part 13 - The ACCC's case in detail

Part 13: The ACCC’s case in detail

ACCC’s case

As stated in the last instalment of the Untold Story, the ACCC’s case against the MUA was a large and sophisticated case. The ACCC alleged that the MUA had engaged in a significant number of contraventions of the TPA. In this instalment, I will describe the ACCC’s case in more detail.

International Solidarity Contract

The ACCC pleaded that on 10 June 1997, the MUA entered into an International Solidarity Contract with the ITF and other affiliated unions.

The ACCC claimed that by entering into this Contract, the MUA and other signatories had committed to supporting each other in the future in the event that:

• any ITF affiliated dock workers’ union was confronted with the introduction of port reforms (including privatisation);

• an employer or employers tried to replace ITF affiliated dock workers with non-union labour; and 

• employers or authorities attempted to undermine the strength of ITF affiliates. The MUA and affiliated ITF unions agreed to take all available practical means to achieve the above outcomes.

The fact that the Contract was to have practical application was made clear in a letter send by David Cockcroft, the General Secretary of the ITF, to Coombs which stated:

May we recall the resolution aimed at stopping anti-trade union policies by authorities and employers as well as the International Solidarity Contract, both unanimously adopted by the world wide ITF Dockers Section Conference in June this year (1997). This resolution and this contract could be the basis of further international support for the MUA.

Please let us know if we should start to prepare a world wide campaign towards the cancellation of Government policies aimed at the destruction of the waterfront workers’ union. The ITF guarantees you all the support you need.[1]

There were further reports that the Contract was to have practical application. Mr Marges, the Secretary of the Dockers Section of the ITF was quoted as saying: 

At our Miami docker's section conference, we unanimously adopted a resolution aimed at stopping the anti-trade union policies of employers.

We also adopted an International Solidarity Contract. Recent developments in Sri Lanka and Australia have given cause for the development of a campaign aimed at the practical implementation of the resolution and the contract. 

According to the decision in Miami the steering committee should be consulted if a campaign needs to be developed, including a strategy for targeting ships bound for ports where anti trade union policies were to be taken extremely seriously (sic).

As you may recall MUA’s National Secretary, John Coombs, arrived late at the docker’s section conference in Miami as a result of union activities to stop the government’s interference in labour disputes in the Australian ports on 10 June.

As discussed in Miami we need to be prepared to select our targets and plan our action carefully and continue to organise all kinds of actions until we have won. 

An action aimed at stopping all ships for one day will not be sufficient and we should look more to establishing a permanent threat to terminal operators and subsequently ship owners to disrupt their business as long as they make use of ports where unionised workers are being made victims of port reforms or attempts are carried out to destroy trade unions.[2]

The ACCC pleaded the International Solidarity Contract to lay the platform for arguing that the subsequent actions by the ITF and overseas affiliated unions in boycotting vessels during the Waterfront Dispute were in performance of this Contract.

Cairns and Dubai incidents 

The ACCC also pleaded the Cairns and Dubai incidents as earlier examples of the MUA calling on the ITF and other overseas unions to support it in relation to domestic issues. 

In relation to Cairns, the ACCC pleaded that Trevor Charles, the local ITF representative, and James Tannock, a National Organiser of the MUA, contacted Central Gulf Shipping, the time charterer of the Java Sea, to advise that it was the ITF’s intention to organise a world wide boycott of all ships owned by the owner of the Java Sea.

The ACCC based its pleading on various MUA and ITF documents then publicly available in which they openly bragged about how they have been able to organise a global boycott in relation to Cairns. For example, the ITF made the following statement on its website: 

In a stunning demonstration or the effectiveness of international solidarity, the Maritime Union of Australia (MUA) and the ITF have joined forced to prevent a shipping company from introducing non-union labour

The MUA organised a demonstration picket line and publicly called upon the ITF to support the sacked union members.

The ITF also warned the company that world wide actions would be organised against ships calling at ports such as Cairns where de-unionisation had taken place. 

Following this intervention the company instructed the captain of the Java Sea to anchor outside Cairns and await further instructions.

Intensive negotiations were then held between the MUA and the company which resulted in an agreement to rehire the unionised dockers.[3]

In relation to Dubai, the ACCC pleaded that Coombs had announced publicly that the MUA and ITF had acted together to take whatever steps were necessary to frustrate the training of the Australian workers in Dubai. This announcement was made after a meeting between Coombs and Charles with the ITF in London.

The ACCC also pleaded that Coombs and Cockcroft, the President of the ITF, had met with the UAE ambassador to the United Kingdom to advise him that ITF affiliates would boycott vessels using the Port of Dubai unless the trainees were expelled.

The ACCC’s argument was that given this history, it was highly likely that the MUA had again called on the ITF and affiliated unions to boycott vessels stevedored by Patrick’s non-union labour during the Waterfront Dispute.

Global boycott 

The ACCC also pleaded that shortly after Patrick sacked its MUA workforce, the MUA resolved that it would take all available steps to ensure that Patrick had “no business, no ships and no cargo moving across its ports”. Coombs made this announcement to the media on 10 April 1998.

Coombs confirmed these threats during an interview with Mike Carlton on 2UE on 14 April 1998. During this interview, Coombs stated that the blockades would remain in place until the MUA members were re-employed by Patrick. He also made it clear that no cargo would move in or out of the Patrick’s facilities until the reinstatement of the MUA workers had been achieved.

Indeed, Coombs had made similar threats the day before during an interview with Graham Richardson on 2GB.

The ACCC pleaded that the MUA and ITF had acted in concert to organise and incite the various global boycotts of vessels stevedored by Patrick’s non-union labour.

The ACCC included a Schedule to its Statement of Claim listing the concerted actions of the MUA and the ITF.

In the Schedule, the ACCC drew attention to various statements made by the MUA before Patrick sacked its MUA workforce that it would not hesitate to call overseas affiliates to oppose the introduction of non-union labour to the Australian docks. For example, on 29 January 1998 Coombs told reporters that the MUA would oppose the introduction of non-union labour “with all the international force we can muster”.

Furthermore, comments were made by other senior MUA officials in January 1998 in response to the establishment of the PCS business at Webb Dock that international contacts would be called upon to assist.

The ACCC also pleaded that the MUA and the ACTU had held discussions with the ITF to devise a campaign to provide “full support to Australian unions”.

On 31 January 1998, Coombs was reported to have requested the ITF to black ban any ship loaded by PCS at Webb Dock and to pursue any such ships with global boycotts “forever”.

On 30 January 1998, Marges of the ITF stated the following during a radio interview in relation to the PCS business:

[The ITF is prepared to go] far enough to support the MUA in their struggle to get farmers out and the union in which means that any ship loaded by non-union labour will be prepared a warm welcome in any other port in the world. So the ship owners should know that if they allow one of their ships to be loaded by non-union labour that ship will be followed all over the world…We will be pleased to prove that we are more than a paper tiger and we will prove that.

And as I have said, any ship owner allowing a ship into the port where the farmers are involved in loading or unloading their ship can be assured that a ship is completely useless and is better to make it into scrap than using it any more.

In any port where we can stop that ship or delay cargo handling on that ship we will do that. We will follow that forever, all over the world, even if that ship has another name, we will find it and it will be followed everywhere.

On 2 February 1998, Greg Combet, the then Assistant Secretary of the ACTU, told reporters that the ITF had pledged its full support for the MUA.

In early February 1998, the ITF started issuing circulars to its members to advise them of development in Australia and calling on them to be prepared to take action against any vessels loaded or unloaded by PCS.

On 13 February 1998, Coombs made a speech at Dallas Brooks Hall in which he reportedly made the following statements: 

From Cairns through Dubai, to Webb Dock and we gave him (Peter Reith) a taste of what’s in store in Cairns and a slightly better example of what’s in store in Dubai.

This union has enormous international support as well. 

And we ask for that support, as we asked for it internationally and which we got internationally. So that we can say that any ship which leaves this port with this cargo loaded by other than MUA members, the cargo will rot through the bottom of that ship before it ever breaks any union power.

And for that level of commitment we are thankful to the world organisations, the ITF who intervened in the Dubai exercise. You will never have to worry about the MUA’s support in any of your scuffles, in any of the battles, nationally or internationally, we will be there.

Towards the middle of February 1998, Coombs started becoming more cautious about making statement that the MUA were seeking the support of international union affiliates.

For example, on 19 February 1998, in response to a question from a reporter whether the MUA had international union support, Coombs said, “I am not allowed to talk about that”.

On 22 February 1998, Coombs stated:

Well, I’m not going to comment on what they might do out of London, given Mr Fels has threatened the Crimes Act on me: so we will just let London do what London does.

Prior to Patrick’s sacking its MUA workforce, there were many other examples of MUA officials bragging about the level of international support which the MUA enjoyed. The ACCC made sure that it pleaded every single statement made by any MUA officials along these lines.

The day after Patrick sacked its MUA workforce, Cockcroft and Marges of the ITF appeared on television and radio to make it clear that the ITF and its affiliates were now targeting Patrick.

MUA domestic conduct 

The ACCC also pleaded that the MUA’s domestic conduct which consisted of refusals to provide services and the blockades, breached of the TPA.

The refusals to provide services included such conduct as MUA linesman failing to attend to release or attach the lines of vessels which had been loaded or unloaded by non-MUA workers. The most well known example of this conduct was the failure by the linesmen to attend to attach the lines for the Australian Endeavour when it arrived at Port Botany on Easter Saturday.

There were numerous other examples including: 

• Tasman Venture at Darling Harbour on 8 April 1998; 

• Star Global Bridge at Newcastle on 1 3 April 1998; 

• Direct Falcon at Darling Harbour on 15 April 1998; and 

• Star Seabridge at Newcastle on 13 to 15 April 1998. 

We only pleaded examples where we had obtained evidence to prove the breach. There were many other examples of such conduct where the shipping company did not want to assist the ACCC by providing evidence.

The ACCC also pleaded instances where MUA had refused to provide towage services. Again, the most well known example was the refusal by the MUA towage employees to provide services to the Australian Endeavour on Easter Saturday. In this case, the refusals continued for over 7 hours before the MUA eventually agreed to provide the services.

The ACCC also pleaded that the MUA and its members had established and maintained blockades outside Patrick terminals at each of the following locations:

• Melbourne – Webb Dock; 

• Melbourne – East Swanson Dock; 

• Sydney – Darling Harbour; 

• Sydney – Port Botany; 

• Newcastle;

• Brisbane – Maritime; 

• Townsville; and 

• Fremantle. 

Rather than plead a general blockade, the ACCC pleaded specific instances of trucks and trains, which had been contracted to pick up or unload cargo at Patrick’s terminals, being turned back by the picket lines.

The ACCC pleaded incidents in which it could identify specific MUA members as being part of the blockades. For example, on 10 April 1998 a train containing 94 containers of goods from South Australia was due to deliver these containers to East Swanson dock. A picket line of approximately 200 persons gathered across the rail lines at the rail gate entrance and prevented the train from entering East Swanson dock. The ACCC alleged that amongst these 200 persons were four identifiable MUA members, who appeared to be in charge of the picket line.

The ACCC also pleaded the specific details of some of the blockades. For example, on 11 April 1998 a truck carrying cargo to be loaded on vessels at Patrick’s Townsville terminal was stopped by a picket line. The ACCC pleaded the following conduct then occurred:

Members of the gathering then climbed up on the vehicle and began punching glass and doors whilst yelling abuse at the driver. Indicator and clearance lights were destroyed on the vehicle.

The ACCC alleged that in another incident at East Swanson on 13 April 1998, that Mick O’Leary, a National Organiser of the MUA, addressed the picket line in the following way:

Two trucks are expected to arrive at the dock shortly and attempt to enter. From day one our aim has been to make sure that nothing goes in or out of the gates and that is what we intend to do today.

Another example occurred in Fremantle on 20 April 1998, when a National Rail train was stopped by a picket line. The Regional Manager of National Rail was approached by an MUA official and told that the train could not pass because there was a safety issue. The MUA official then advised the National Rail Manager that he should go to the MUA headquarters to discuss the issue.

The National Rail Manager went to the MUA headquarters, as directed, and was told by senior MUA officials that the train could access Fremantle Wharf as long as no Patrick’s containers were loaded. The National Rail Manager agreed to this condition.

There were other very blatant examples of breaches of the boycott provisions of the TPA. My personal favourite was at Fisherman’s Island in Brisbane where the MUA members decided to place a sign at the level crossing where the National Rail Freight trains entered the terminal which stated:

MUA Picket Line, Stop.

As is apparent, the MUA were not making much of an effort to hide their involvement in the picket lines.

Specific contraventions 

The ACCC alleged the following specific contraventions:

1. damage to Patrick Stevedores – section 45D;

2. damage to shipping corporations, road and rail transport corporations, importing corporations and exporting corporations – section 45D;

3. preventing or hindering Patrick Stevedores – section 45DB;

4. preventing or hindering shipping operators, importers and exporters – section 45DB;

5. preventing or hindering road and/or rail transport operations – section 45DB;

6. preventing or hindering non-union stevedores - section 45DB; and

7. preventing or hindering overseas shippers - section 45DB.

The ACCC was quite confident of winning its case due to the blatancy of the MUA’s conduct. In particular, we believed that our evidence concerning the global boycotts and the various refusals to provide services was very strong. The weaker part of our case related to the blockades, as we suspected that the MUA would argue that whilst their members were in attendance at the various blockade, they were not actually in charge.

[1] As reported on page 1 of the Daily Commercial News, 11 September 1997.
[2] Kes Marges quotes on page 3 of the Daily Commercial News on 23 September 1997.
[3] De-unionisation attempt blocked with ITF help – Victory for Australian Dockers, ITF website

Warranties Against Defects: Coming to grips with Regulation 90 of the Competition and Consumer Regulations 2010

This article first appeared in the December 2011 edition of the NSW Law Society Journal, Vol. 49 No. 11, pp. 71-73.

Introduction

Businesses have a nine-month amnesty to provide the prescribed warranties against defects in their goods, but lawyers need to make their clients aware of the Australian Consumer Law (ACL) requirements or retailers could face enforcement action.

Recently competition and consumer law practitioners have been in up in arms about the implications of Regulation 90 of the Competition and Consumer Regulations 2010 (CCR).

The proposed regulation, which commences on 1 January 2012, will have a profound effect on the voluntary warranties provided by many manufacturers, importers and retailers to their consumers, as well as the way they promote such warranties. In broad terms, reg. 90 will be to introduce prescriptive requirements and obligations in relation to the provision of voluntary warranties against defects to consumers.

Legal practitioners with clients who supply goods with a warranty against defects document will need to understand the requirements of reg. 90 and the risks of providing a non-compliant warranty.

Despite the highly prescriptive nature of the legislation, the ACL Regulators have shown a willingness to take a practical and commonsense approach to enforcing the new laws; for example, the recent announcement of a nine month amnesty for suppliers who make a good faith effort to comply with the reg. 90.

However, businesses should also recognise that if they do not make a good faith effort to comply with reg. 90 from 1 January 2012, the ACL Regulators are highly likely to take enforcement action against businesses which come to their attention.

What it is a warranty against defects?

Whenever a consumer purchases a product, they will often receive a warranty against defects document from the manufacturer, importer or retailer. This is not an express warranty such as a statement printed on a label on a scooter that states: “This scooter is suitable for use by riders who weigh less than 100 kgs”.

Rather, warranties against defects are usually general representations communicated to a consumer that a business will:

• repair or replace goods (or part of them); 

• resupply or fix a problem with services (or part of them); or

• provide compensation to the consumer, if the goods or services (or part of them) are defective. 

In some cases, the warranty document will have to be returned to the manufacturer for it to be valid. In other cases, all the consumer has to do is retain their proof of purchase to take advantage of the warranty at a later date.

Less expensive consumer goods, such as home appliances and electrical goods, often have 12-month warranties. However, warranties on new motor vehicles will be considerably longer, usually between three and five years.

Currently there are no legislative requirements that voluntary warranties have to meet, other than they cannot be misleading or deceptive about the mandatory statutory consumer guarantees. However, from 1 January 2012, all such warranties will have to meet the prescriptive requirements contained in reg. 90 of the CCR. There will also be civil and criminal penalties for failing to comply with these new laws.

Who needs to comply?

Manufacturers, importers and retailers, will all have to comply with the new laws. Section 102(2) of the Competition and Consumer Act 2010 (CCA) makes it illegal for a person to:

• give to the consumer a document that evidences a warranty against defects that does not comply with the requirements of reg 90; or 

• represent directly to the consumer that the goods and services are goods or services to which such a warranty against defects relates. The use of the word “give” in s.102(2)(b) indicates that any person in the supply chain who physically provides a document to a consumer which purports to be a warranty against defects will be caught by the provision.[1]

 For example:

• if a manufacturer places a warranty against defects document in a box with a product after 1 January 2012, then sells it directly to a consumer and the document does not comply with reg. 90, the manufacturer will contravene s.102(2)(b) of the CCA; and[2] 

• it would appear that if a salesperson working at a retail outlet hands a consumer a document which purports to be a warranty against defects and it does not comply with reg. 90, that salesperson may have contravened s.102(2)(b) of the CCA.[3]

 The use of the word “give” suggests that a manufacturer will not be liable under s.102(2)(a) for supplying a good with a non-compliant warranty to a retailer which is then sold to a consumer. This is because the manufacturer is not physically “giving” the non-compliant warranty to the consumer – perhaps an unintended consequence of the use of the word “give” in s.102(2)(a).

The other prohibition contained in s.102(2) is that it will be illegal for a person to represent directly to a consumer that a good or service has a warranty against defects if the warranty does not comply with reg. 90. In other words, if a consumer asks a salesperson at a retail outlet whether a product comes with a warranty against defects, it is illegal for that person to say “yes” if the warranty against defects does not comply with reg. 90.[4]

The Australian Competition and Consumer Commission (ACCC) and state fair trading regulators (collectively known as the ACL Regulators) could allege that the failure by a manufacturer, importer or retailer to “provide” a consumer with a compliant warranty against defects constitutes false and misleading conduct in breach of ss.18 or 29 of the ACL. This would avoid the problems in relation to the use of the word “give” in s.102(2)(a).

Retail staff in every retail outlet who sell goods which include a warranty against defects are going to have to receive some training as to what to say to consumers about warranties against defects or risk contravening the CCA.

What are the penalties?

A contravention of s.102(2) can be either a criminal offence[5] or a civil contravention.[6] The financial penalties for a contravention under both regimes will be the same - $50,000 for a corporation for each contravention and $10,000 for an individual per contravention.

The maximum financial penalties for a breach of s.29 are $1.1 million for a corporation for each contravention or $220,000 for an individual for each contravention.

What does Regulation 90 require?

Sections 192 and 224 of the ACL require that from 1 January 2012 all warranty against defects documents provided by manufacturers, importers and retailers to consumers will have comply with reg. 90.

Reg. 90 establishes the following requirements in relation to all warranty against defects documents. The document must:

• be transparent – that is, it must be expressed in reasonably plain language, legible and presented clearly; 

• concisely state what the person who gives the warranty must do so that the warranty will be honoured and what the consumer must do to be entitled to claim the warranty; 

• prominently state the name, business address, phone number and email address (if any) or the person providing the warranty; 

• provide the period or periods within which a defect in the goods or services to which the warranty relates must appear if the consumer is to claim the warranty; 

• provide a procedure for the consumer to claim the warranty including the address to which a claim may be sent; 

• state who will bear the expense of claiming the warranty and if the expense is to be borne by the person who gives the warranty, how the consumer can recoup expenses incurred in making the claim; 

• state that the benefits to the consumer given by the warranty are in addition to other rights and remedies of the consumer under a law in relation to the goods or services to which the warranty relates; and 

• must include the following text: 

Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.

The above requirements in relation to warranties against defects will provide a number of benefits for consumers.

First, warranty documents will be easier for consumers to understand as they will have to be written in reasonably plain language.

Second, consumers must be provided with all the relevant contact details of the person offering the warranty. This should make it much easier for the consumer to claim the warranty.

Third, the new warranties will be more specific about the consumer’s legal rights under the warranty. The consumer will know how to claim the warranty, how long the warranty is valid for, and what their costs will be of claiming the warranty.

Finally, by requiring the mandatory text in each warranty document, consumers will understand that the warranty against defects does not replace or restrict any other mandatory consumer guarantees which they may have under the ACL.[7]

What are the problems with Regulation 90?

There are a number of potential practical problems with the way reg. 90 will operate.

The most significant problem is that it will apply by reference to when the warranty against defects document is physically given to the consumer rather than by reference to when the product was manufactured. The obvious problem with this requirement is that many manufacturers, importers and retailers are likely to be selling goods after 1 January 2012 that were manufactured prior to that date. Such goods are likely to already have warranty documents included with the product, either in a sealed box or tamper proof plastic packaging, which do not comply with reg. 90.

As a consequence, a range of organisations lobbied the ACL Regulators for some transitional arrangements to avoid the cost and disruption of manufacturers, importers and retailers having to replace existing warranty documents with new ones which complied with reg. 90.

As a result of this lobbying, the ACL Regulators recently announced a nine-month amnesty for businesses which do not comply with the requirements of reg. 90:[8]

A number of businesses have advised ACL Regulators that due to the long lead times associated with many consumer products, and the nature of the packaging of those products, there will be some goods in the supply chain that, as at 1 January 2012, do not contain warranty documents that are compliant with the warranty against defects requirements of the ACL.

The ACL Regulators recognise that transitional practical difficulties may arise in the application of the new provisions. Accordingly, until September 2012, when considering the appropriate enforcement response to any contravention of the warranty against defects requirements that apply to stock in the supply chain manufactured and packaged prior to 1 November 2011, the ACL Regulators will have regard to:

• whether there are serious practical difficulties in updating warranty documents—e.g. the warranty is in a tamper-proof package; and 

• whether the supplier has taken all reasonable steps to otherwise convey the mandatory text and information required by the ACL to consumers—e.g. by placing a compliant sticker on the outside packaging.

In these circumstances the ACL Regulators are unlikely to take enforcement action.

In other words, until September 2012, ACL Regulators are unlikely to take enforcement action in response to contraventions of the warranty against defects requirements that apply to stock in the supply chain manufactured and packaged prior to 1 November 2011.

However, in order to qualify for this amnesty a business will have to demonstrate that they meet the following three conditions: 

1. the relevant goods were manufactured and packaged prior to 1 November 2011, 
2. there were serious practical difficulties in updating warranty documents; and
3. the supplier has taken all reasonable steps to convey the required information to consumers. 

Legal practitioners should be explaining the terms of the above amnesty, particularly the three conditions, to their clients with a view to determining whether these clients qualify for the amnesty. Practitioners should also advise their clients that the amnesty will not apply to any goods manufactured after 30 October 2011.

Another problem is that manufacturers will also be liable for any point-of-sale material which they provide to retailers which states that a good has a warranty against defects if the actual warranty against defects document does not comply with reg. 90. The key issue here is whether the manufacturer has made that representation directly to the consumer, for example, by placing a sticker on the product or by placing written point-of-sale material near the product.

It will also be important for legal practitioners to assist their retailer clients in understanding the new laws. As stated above, s.102(2)(a) of the ACL states that the mere act of “giving” a non-compliant warranty against defects to a customer, say in a box or in tamper proof packaging, may expose a retailer to liability. However, it seems that in practice such an outcome is unlikely.

During a Webinar organised by the ACL Regulators in relation to the ACL,[9] a colleague asked a representative of one of the ACL Regulators whether the mere act of a retailer passing onto a consumer a manufacturer’s non-compliant warranty against defect document, given to the retailer by the manufacturer, would make the retailer liable for a breach of s.102(2)(a).[10] The representative of the ACL Regulator responded that this conduct would not result in liability for the retailer.

However, retailers may be liable under s.102(2)(b) if they make a representation about a warranty against defects which is incorrect or misleading. For example, a retailer will breach s.102(2)(b) if they tell a consumer that a product comes with a warranty against defects, when that warranty does not comply with reg. 90.

Accordingly, legal practitioners have three options when providing guidance to their retailer clients about their obligations:

• advise their client that they must check every warranty against defects document which is being provided to consumers with any of the goods which they are selling to make sure they comply with reg. 90; or 

• direct their salespeople not to make any representations to customers about the warranties against defects provided with any of the goods which they are selling; or 

• check the warranty documents in relation to goods where they believe consumers are more likely to ask warranty questions, for example in relation to more expensive or technically complicated goods, and direct staff to only make representations to consumers about the warranties against defects on these particular goods and no other goods. 

 Some large retailers have taken the approach of demanding that their suppliers provide them with indemnities in relation to the warranties against defects documents for the goods which the retailer is selling. The idea behind seeking an indemnity appears to be that if the particular retailer is pursued by ACL Regulators for a breach of s.102(2) of the ACL, they can effectively shift liability back onto their supplier. While this is a possible fourth strategy, it is both impractical and likely to be unenforceable.

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[1] Unfortunately, the ACCC has used the word “provide” rather than “give” in its advice on how the new provisions will operate - http://www.accc.gov.au/content/index.phtml/itemId/996742.  I agree with other commentators that the word “give’ in s.102(2)(a) requires the physical act of providing the warranty document to the consumer - see Geoff Taperell, “Warranties Against Defects – A New Regulation will Apply from 1 January 2011”, http://www.dlapiper.com/Global/publications/detail.aspx?pub=f1a532d6-f6ac-4f8f-808d-1327a3cd6e1f, dated 16 May 2011

[2] Subject to “amnesty” discussed below.

[3] Subject to Webinar advice discussed below.

[4] Unfortunately, s.102(2)(b) has been very poorly drafted.  The use of the word “or” between ss.102(2)(a) and 102(2)(b) suggests that these sections should be read disjunctively. However, reading the provision in this way makes no sense. For the provision to make any sense, it has to be read conjunctively.

[5] s.192 ACL

[6] s.224 ACL

[7] Under the ACL there are a range of mandatory consumer guarantees which are implied into every consumer contract and which cannot be excluded by manufacturers, importers or retailers.

[8] Warranties Against Defects, ACCC website – see http://www.accc.gov.au/content/index.phtml/itemId/996742

[9] “The Australian Consumer Law – Be Prepared”, ACCC Webinar, held on 29 October 2010, http://webcast.viostream.com/?viocast=3041&auth=cd52b9dd-0a50-4444-a188-53acf89cd811. Unfortunately, a recording of this Webinar is not currently available on the ACCC website.

[10] David Johnson, Managing Director, Watchdog Compliance - http://www.watchdogcompliance.com.au.

The Untold Story: The ACCC’s role in the Waterfront Dispute - Part 12 - It begins ACCC v MUA

Part 12: It begins – ACCC v MUA

ACCC commences legal proceedings

The ACCC was at the end of its tether when it decided to commence legal proceedings against the MUA on 22 May 1998. Not only was the ACCC continually being baited by the MUA, but the MUA was continuing to engage in illegal boycott conduct. For example, when Patrick decided to subcontract some stevedoring work to P&O in Adelaide and Newcastle, the MUA immediately organised illegal picket lines.

When the accc commenced legal proceedings it is fair to say that we threw the book at the MUA. The following is the full text of the media release which the ACCC issued at the time:

ACCC institutes against Maritime Union of Australia[1]

The Australian Competition and Consumer Commission today instituted proceedings against the Maritime Union of Australia alleging breaches of the boycott provisions of the Trade Practices Act.
The ACCC has instituted proceedings now because it believes there have been serious and continuing breaches of the Act by the MUA, which the union has made no effort to address.

The ACCC has alleged that the MUA has: taken steps to get the International Transport Workers Federation and its affiliates to organise and implement an international ban of ships, and shipping lines, loaded or unloaded with non-MUA labour in Australia; threatened ships, and shipping lines, that they would be the subject of such bans if they used Patrick, PCS or other stevedores using non-MUA labour; organised a campaign of domestic boycotts of Patrick operations because it used non-MUA labour, including: withdrawal of labour for tugs and lines to impede ships berthing at Patrick; and blockading Patrick to stop transport companies delivering and picking up cargo from Patrick.

The ACCC alleges that this conduct was done for the purpose and with the effect of stopping Patrick and other stevedores using non-union labour, from engaging in international trade or commerce, in breach of the primary boycott provisions of the Act. [The ACCC does allege other breaches of the Act]. The MUA has not taken any steps to respond substantively to the ACCC's previously expressed concerns in relation to either the domestic blockade activity or the ITF threat.

The proceedings will seek: urgent injunctions in relation to the alleged involvement of the MUA in international boycott activities in conjunction with the ITF; declaration that the domestic blockades, refusal to work tugs and lines and the ITF international boycott actions breach the Trade Practices Act; findings of fact (which would enable business suffering loss or damage from the MUA conduct to seek damages); and permanent injunctions restraining the MUA from engaging in relevant primary and secondary boycott action.

The proceedings also name MUA national secretary, Mr John Coombs, and Mr Trevor Charles, an MUA official and the Australian International Transport Workers Federation representative, as respondents. The ACCC concerns include: the impact on competition on the waterfront where boycotts hinder both new and established businesses from operating; that a large number of businesses have sustained significant losses due to their inability to gain access to cargo which was stranded in containers on docks around the country. In some cases cargo has been irreparably damaged; and damage to Australian exports, and Australian export businesses.

Boycott conduct by the MUA appears to be continuing. Since the High Court decision there has been further alleged boycott conduct by the MUA in Newcastle and Adelaide, where vessels have been held up by picket lines unless or until the shipper or shipowner agrees to using labour chosen by the MUA, eg in some ports work is not done unless done by firms using former Patrick's labour.

It is also relevant that a number of vessels which were loaded by non-union labour during the dispute have been subject to boycotts and harassment by affiliated unions overseas. The ACCC has been particularly concerned by the Columbus Canada boycott in the United States.

Furthermore there are real prospects that domestic picket activity and ITF bans may increase to the detriment to Australian importers and exporters.

The ACCC conveyed its concerns to the MUA over both the domestic boycott activity and ITF threats at an early stage in the dispute. Despite repeated requests, the MUA: has failed to provide any explanation as to why its conduct does not breach the Act; has failed to guarantee that it will not engage in such conduct again; and appears to be engaging in new conduct which may breach the Act. 

Publicly, the MUA's initial response was to accuse the ACCC of harassment and to state that if the ACCC believed it had a case it should take proceedings. Privately, the MUA requested the ACCC not to institute proceedings and asked for more time to prepare a substantive response. The ACCC agreed to this request.

No substantive response has been provided. The MUA has not provided any assurance that its Federal Court undertakings "not to take industrial action" cover the boycott conduct of concern to the ACCC. At all times the ACCC has been willing to meet with the MUA to discuss its concerns and also to provide the MUA with extensive material outlining its concerns. The ACCC always reserved its position to take legal proceedings.

The failure of the MUA to address the ACCC's concerns has led the ACCC to institute proceedings at this time. At all times the ACCC was conscious of not taking precipitous action, particularly when issues were before the Federal Court and High Court of Australia. The ACCC considers that the current action raises a significant trade practices issue between the ACCC and the MUA; it does not bear on the dispute which exists between Patrick and the MUA.

The ACCC is taking this action as the Trade Practices Act applies equally to the MUA as it does to any other organisation in Australia. The ability of the ACCC to achieve pro-consumer results in many areas would be crippled if it started making special exceptions in defiance of clear Parliamentary intent.

Other investigations

The ACCC continues to investigate a number of competition issues on the product market side of the waterfront.

These include the contractual arrangements between Patrick and PCS, particularly any side agreements associated with the lease of facilities; possible anticompetitive agreements between Patrick and the former Port of Melbourne Authority which came to light during the OOCL litigation; alleged 'no poaching' agreements between stevedores; a protocol that existed allegedly between the Australian Wheat Board and the ITF; and transfer of contracts from Patrick to other stevedores.

There are also other investigations in progress on the labour side, including boycotts in relation to hold cleaning.

The matter has been set down for first hearing at 10.15am on Wednesday 27 May in the Federal Court, Sydney.

As you will appreciate, it was not the typical ACCC media release – rather the ACCC went to great pains to explain precisely why it had commenced legal proceedings against the MUA at that time.

Scale of the ACCC’s case

As is apparent from the ACCC media release, the ACCC decided to commence legal proceedings against the MUA for all of its alleged illegal conduct - namely:

• taking steps to get the International Transport Workers Federation and its affiliates to organise and implement an international ban of ships, and shipping lines, loaded or unloaded with non-MUA labour in Australia; 

• threatening ships, and shipping lines, that they would be the subject of such bans if they used Patrick, PCS or other stevedores using non-MUA labour; and

•  organising a campaign of domestic boycotts of Patrick operations because it used non-MUA labour, including: withdrawal of labour for tugs and lines to impede ships berthing at Patrick; and blockading Patrick to stop transport companies delivering and picking up cargo from Patrick. 

The ACCC had decided that there was no point holding back at this stage. Rather, we made the decision to commence proceedings in relation to virtually every act which the MUA had engaged in or been implicated in since the dispute first started. It now appeared that one of the main benefits of delaying our action was that we were now able to run a much larger and more sophisticated case than would have been possible had we commenced at the end of April 1998.

We also decided to take legal proceedings against only two individuals, namely, John Coombs, the National Secretary of the MUA and Trevor Charles, the local representative of the ITF. The reality was that the ACCC could have sued almost every senior MUA official for having some role in the illegal conduct. However, we chose these two individuals because we saw them as the guiding minds of the domestic and global boycotts respectively.

Explaining our conduct

The ACCC believed that it was important to explain fully why it had decided to take legal proceedings against the MUA at this time. We made it clear that the MUA’s conduct was causing a great deal of damage to innocent parties – particularly Australian businesses whose export foodstuffs were going off or rotting on the wharves.

The ACCC’s desire to protect Australian businesses from the effects of the MUA boycotts was to become a major theme of the ACCC’s action.

The ACCC also wanted to make it clear that it had been more than reasonable in its dealings with the MUA. The ACCC took the fairly unconventional step of stating in the media release that the MUA had privately requested that the ACCC not commence legal proceedings so that the MUA could have more time to prepare a response. However, the next thing that would happen was Coombs would appear on TV or on the radio abusing and ridiculing the ACCC.

Orders sought

The ACCC sought the following orders in its case:

• urgent injunctions in relation to the alleged involvement of the MUA in international boycott activities in conjunction with the ITF; 

• declaration that the domestic blockades, refusal to work tugs and lines and the ITF international boycott actions breach the Trade Practices Act;

• findings of fact (which would enable business suffering loss or damage from the MUA conduct to seek damages); and

• permanent injunctions restraining the MUA from engaging in relevant primary and secondary boycott action. 

The most notable remedy that the ACCC did not seek in its litigation was pecuniary penalties against the MUA. At the time, the maximum pecuniary penalties for a breach of section 45DB and 45D were $660,000 per contravention. There were no pecuniary penalties available against individuals for breaches of these provisions.

The decision by the ACCC not to seek pecuniary penalties against the MUA was a significant concession to the MUA. I think it is highly likely that had a business been engaging in such blatant and sustained breaches of the TPA that the ACCC would have sought substantial penalties. However, by not seeking penalties against the MUA, the ACCC could not be accused of trying to destroy the MUA financially.

The most significant remedies which the ACCC sought in its action were the urgent injunctions. The ACCC sought injunctions to prevent the MUA from calling on the ITF and overseas affiliates to boycott the 25 ships which had been stevedored by non-MUA labour during the dispute.

We believed it was important to stop the likely detriment which would result from these 25 vessels being boycotted at various ports around the world. Such boycotts would have caused the exporters with goods on the vessels considerable financial damage, particularly if the foodstuffs on these vessels went off or rotted before they could be unloaded. These boycotts would also have the more general negative effect of damaging Australian reputation as a reliable exporter.

We also thought it would be relatively easy to win our urgent injunctions given that the MUA were both publicly and privately claiming that they were not actually inciting overseas unions to engage in illegal boycotts. In other words, if the MUA were not asking the ITF or any other overseas affiliates to engage in the global boycotts, they could hardly refuse to consent to the injunctions.

In this regard, we were relying heaving on sections 87(1AA), (4) and (5), which stated:

(1AA) Where an application for an injunction under subsection (1) has been made, whether before or after the commencement of this subsection, the Court may, if the Court determines it to be appropriate, grant an injunction by consent of all the parties to the proceedings, whether or not the Court is satisfied that a person has engaged, or is proposing to engage, in conduct of a kind mentioned in subsection (1).

(4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:

(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;

(b) whether or not the person has previously engaged in conduct of that kinds; and

(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.

(5) The power of the Court to grant an injunction restraining a person to do an act or thing may be exercised:

(a) whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; 

(b) whether or not the person has previously refused or failed to do that act or thing; and

(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or thing.

Therefore, the ACCC believed that it could get an injunction whether or not it could prove that the MUA had engaged in particular conduct in the past and regardless of whether it could prove that the MUA was proposing to engage in particular conduct in the future.

A final advantage of pursuing urgent interlocutory orders related to our problems in obtaining evidence in a timely manner. As stated earlier, the ACCC was finding it difficult to get detailed affidavits from witnesses for use in the legal proceedings in the short time frames available. However, we believed that this problem could be overcome, at least in the short term, because the ACCC would be permitted to file a hearsay affidavit prepared by an ACCC officer in support of its application for an urgent interlocutory injunction.

This meant that an ACCC officer could interview a market participant over the telephone or at a face to face meeting and then immediately prepare their own hearsay affidavit outlining the evidence obtained. In this way, the ACCC was able obtain evidence from market participants quickly and then provide this evidence to the court in a timely manner.

Accordingly, I spent much of the next couple of months interviewing market participants over the telephone during the day and then preparing hearsay affidavits at night. In this way, the ACCC was able to get a great deal of compelling evidence before the court very quickly.

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[1] http://www.accc.gov.au/content/index.phtml/itemId/87310/fromItemId/378006