Stocktake of the ACCC’s new powers and remedies under the Australian Consumer Law – the first 18 months

Part 1: substantiation notices and public warning notices

This article first appeared in the Australian Competition & Consumer Law Tracker, CCH, Issue 11, November 2011.


Introduction

Australian consumer laws have undergone a great deal of change in the last two years. While much of the recent commentary on these changes has related to the new legislation which commenced in January 2011,[1] in many ways the more profound changes occurred 18 months ago.[2] In April 2010, the Australian Competition and Consumer Commission (ACCC) received a wide range of new powers and access to a number of new remedies for combating suspected breaches of consumer protection and unconscionable conduct laws.

In this three-part article, I will be discussing the new powers and remedies which have been given to the ACCC to assist it in its fight against breaches of the Australian Consumer Law (ACL). I will also be conducting a stocktake of how the ACCC has used these powers and remedies in practice over the first 18 months since their introduction.

My stocktake of how the ACCC has used its new powers and remedies confirms the concern held by many legal practitioners at the time of their introduction that these new powers and remedies were likely to tilt the balance too heavily in favour of the ACCC. The ACCC now has a comprehensive and quite unparalleled armoury of powers which it can use to combat suspected breaches of consumer protection and unconscionable conduct laws. Furthermore, the ACCC has also shown that it is very willing to use these new powers and remedies regularly and aggressively to obtain its desired outcomes.

Background

The new powers and remedies were introduced into the Trade Practices Act 1974 (TPA) in April 2010. In January 2011, the TPA was renamed and replaced by the Competition and Consumer Act 2010 (CCA). Therefore, the ACCC had access to these new powers and remedies for nine months prior to the renaming of the TPA. The main change brought about by the enactment of the CCA in January 2011, was the amalgamation of all consumer protection laws into Schedule 2 of the CCA, which is also known as the ACL. The ACL has replaced all of the various state and territory fair trading laws to create, for the first time, a truly national system of consumer protection laws.[3] As part of this reform process, the ACCC gained a wide range of intrusive investigatory powers as well as access to a range of new remedies to combat alleged breaches of the ACL.

The ACCC’s new powers and remedies

The new enforcement powers the ACCC gained in April 2010 were the power to issue:

• substantiation notices 

• public warning powers 

• infringement notices. 

The new remedies available to the ACCC in consumer protection and unconscionable conduct matters are the ability to seek:

• civil pecuniary penalties 

• disqualification orders 

• non-party redress orders. 

Substantiation Notices

A substantiation notice is a notice which "requires a supplier to provide a consumer regulator with a basis for representations that it makes regarding its supply of goods and services".[4] Under s 219 of the ACL, the ACCC has the ability to issue a substantiation notice to persons who have made a claim or representation promoting the supply of goods or services, or an interest in land or employment. The person (which includes corporations) can be required to provide information or documents to substantiate or support their claims or representations. The period for compliance with a substantiation notice is 21 days unless extended by the ACCC under s 220.

Failure to comply with a substantiation notice is a criminal offence with a maximum criminal penalty of $16,500 for a corporation or $3,300 for an individual: s 205. Providing false or misleading information in response to a substantiation notice is also a criminal offence with a maximum criminal penalty of $27,500 for a corporation or $5,500 for an individual: s 206.

Previously, the ACCC's practice was to request information from a business either on a voluntary basis or in accordance with a s 155 notice. Under an s 155 notice, a business could be compelled to produce information and/or documents to the ACCC. Prior to issuing a s 155 notice, the Chairperson of the ACCC had to satisfy themself that they had reason to believe that the business had information or documents which related to a matter which constituted, or may have constituted, a contravention of the TPA. While the requirement to form a "reason to believe" did not involve a very high burden for the ACCC, it did impose some evidentiary threshold.

The evidentiary threshold that the ACCC must satisfy now before issuing a substantiation notice is significantly lower. The ACCC only needs evidence of a claim or representation before exercising its powers. The ACCC does not need to have a reasonable belief or reasonable grounds for suspecting a breach of the ACL before issuing a substantiation notice. The availability of substantiation notices gives the ACCC the ability to move much more quickly against traders which have made, in the ACCC's opinion, outlandish claims about the uses and benefits of their goods or services.

A good example of a case where the ACCC most probably used its new substantiation notice powers is the Power Balance matter.[5] In this matter, the ACCC appears to have issued a substantiation notice or notices to Power Balance Australia Pty Ltd (Power Balance) to ascertain whether the company could substantiate its claims that its wristbands and pendants “improve[d] balance, strength and flexibility and worked positively with the body’s natural energy field”.

Power Balance admitted that there was no credible scientific basis for the claims that they were making about their wristbands and pendants. The company also admitted that it had no reasonable grounds for making the representations about the benefits of its products. It seems that these admissions may have been made in response to a substantiation notice or notices from the ACCC. As a consequence of making these admissions, Power Balance agreed to a range of remedies including refraining from making such representations in the future unless they could be supported by an independent testing agency. It also offered consumers full refunds.

The Power Balance case provides a good example of the types of cases where the ACCC will be able to use its new substantiation notice powers to quickly and effectively to stop outlandish representations, particularly about the health benefits of products.

The main concern prior to the introduction of the substantiation notice power was that the ACCC may simply 'churn out' substantiation notices, rather than going to the effort of actually collecting evidence to prove a contravention of the CCA. This has not eventuated. The ACCC has used the substantiation notice very sparingly since its introduction in April 2010. As at the end of August 2011, the ACCC had only issued five substantiation notices.[6]

Having said this, there are some indications that the ACCC will be using its substantiation notice powers much more often in the future. The current Chairman of the ACCC, Mr Rod Sims, has stated in a speech that the ACCC is likely to make greater use of its substantiation notice powers as part of its role in preventing carbon tax price gouging.[7] Indeed, the substantiation notice power will be the ideal tool for the ACCC in investigating the basis for business claims that their prices have increased by a particular amount due to the introduction of the carbon tax.


Public warning powers

The ACL also provides the ACCC with the power to issue a public warning about a trader. In this regard, An Australian Consumer Law: Fair Markets - Confident Consumers, which recommended the introduction of the ACL, stated that: "public warnings [will be] issued to inform the public of potentially harmful conduct taking place in the very short term."[8]

Public warning powers were intended to be directed against:

“'fly by night' operators, itinerant traders and financial, investment and property spruikers and advisors who often move across state and territory borders.”[9]

Therefore, the intended focus of this new power was on bogus traders who simply seek to misappropriate money from consumers and then vanish, making subsequent legal action against them all but impossible.

The ACCC’s power to issue a public warning notice is contained in s 223(1) of the ACL which states that:

“The regulator [that is, the ACCC or local fair trading agency] may issue to the public a written notice containing a warning about the conduct of a person if:

(a) the regulator has reasonable grounds to suspect that the conduct may constitute a contravention of a provision of Chapter 2, 3 or 4 [of the ACL[10]]; and 

(b) the regulator is satisfied that one or more other persons has suffered, or is likely to suffer, detriment as a result of the conduct; and 

(c) the regulator is satisfied that it is in the public interest to issue the notice.”

Therefore the elements of the public warning power are:

• the ACCC must have reasonable grounds to suspect that conduct being engaged in may constitute a breach of the ACL 

• one or more persons are likely to suffer detriment as a result of the conduct 

• the ACCC is satisfied that it is in the public interest to issue the notice. 

The first element of the new public warning power is that the ACCC must have reasonable grounds to suspect that conduct is in breach of the ACL. It seems that the test of whether the ACCC has "reasonable grounds to suspect" a breach of the ACL is an objective test. In practice, it will not be very difficult for the ACCC to satisfy this element because of the use of the word "suspect" in the legislation.

The second element is that one or more persons are likely to suffer detriment because of the conduct. The legislation does not require that the consumer must actually suffer detriment, but rather that it be likely that the consumer will suffer detriment. This approach is appropriate given that the entire rationale for the new power is to empower the ACCC to take action before consumers have suffered any financial detriment.

The third element of the legislation is the most onerous for the ACCC when using its public warning power. This element requires that the ACCC be satisfied that it is in the public interest to issue a public warning. This will require that the ACCC balance up the utility of issuing a public warning notice with other strategies such as commencing rapid court action or seeking ex parte injunctions. In applying the public interest test, it may also be incumbent on the ACCC to consider the negative impact that issuing a public warning notice may have on a business' ability to continue trading.

Finally, the legislation provides that the ACCC can issue a notice where a business has failed to respond to a substantiation notice. In these circumstances, the ACCC must also satisfy itself that it is in the public interest to issue a notice.

At the time of writing this article, the ACCC has only issued one public warning notice since it obtained this new power in April 2010.[11] On 20 August 2010, the ACCC issued a public warning notice in relation to a number of companies which were advertising part time parcel delivery businesses.[12] The ACCC suspected that the following companies had breached the relevant legislation by making misleading claims about the income to be earned from delivering Heartlink-branded household products to independent supermarkets:

• Halkalia Pty Ltd (the sole director being Mr Norman Lander) 

• Heartlink Enterprises Pty Ltd (the sole director being Ms Vicki Lowe)

• National Semi-Retired Group Pty Ltd (the sole director being Mr Laurence Hann).

The ACCC explained in a news release that these companies were advertising a “part time delivery business” in rural, regional and metropolitan newspapers and claiming potential earnings of between $900 and $2,000 per week for between three to four days’ work. The ACCC did not believe that these companies had a reasonable basis to make these income projections.[13] The ACCC explained that it had decided to issue the public warning notice following complaints from individuals who paid between $10,000 and $30,000 for a business. The majority of these individuals had earned no income from the business.

The ACCC then issued the following specific warning to the public:

“The ACCC is warning the public that the advertisements may be misleading and that individuals who pay money for the advertised business opportunity may derive no earnings from the business.”[14]

The ACCC can also issue public warning notices under s 51ADA of the CCA in relation to suspected breaches of an applicable industry code of conduct, such as the Franchising Code of Conduct. The test for issuing such a notice is the same as the test under s 223 of the ACL.

There are three main concerns about the ACCC’s power to issue public warnings.

1. The first concern about the public warning power is that it may be exercised by the ACCC against a company which has not, in fact, engaged in any illegal conduct. Clearly, a public warning issued by the ACCC about any business is likely to have devastating consequences for that business. The public warning notice will have the effect of preventing prospective consumers from dealing with that business. Another likely consequence is that current customers of that business (who may have been quite happy with the business before the public warning was issued), may now want their money back because they believe that the business is disreputable. Despite the devastating effects of a public warning notice on a business, there is no provision in the ACL to permit a business who may have been incorrectly accused of illegal conduct through a public warning notice to seek compensation.

2. The second concern is that there is no obligation on the ACCC to advise the public if its concerns about a business’ conduct have subsequently proved to be without foundation. This is in contrast with the provisions relating to the issuing of safety warning notices under the ACL. Under s 129 of the ACL, the Minister can issue a safety warning notice if he or she believes that a good will cause injury or that a reasonably foreseeable use or misuse of a good will or may cause injury. The Minister is also required under s 130 of the ACL to announce publicly the results of any investigation into the supplier/s if the investigation has not resulted in any formal corrective action. In other words, the Minister must advise the public if the relevant investigation into the product safety issue has not disclosed any safety concerns. Accordingly, it seems strange not to have a similar obligation to s 130 included in the ACL in relation to public warning notices.

3. The final concern about public warning notices is that the ACCC does not have to have the intention, prior to issuing the public warning notice, of taking the relevant business or businesses to court. In other words, there is no obligation on the ACCC to follow through on its public warning by commencing legal action against a business which has been the subject of a public warning. In the matter discussed above, the ACCC did ultimately take follow-up legal action against the three companies and two of the directors after it issued the public warning.[15] However, it is still possible that a business which has been the subject of a public warning notice may never get the opportunity to refute or challenge the ACCC’s allegations in court.

One can appreciate the benefits of using the public warning power in relation to blatant fly by night operators. There is a considerable public interest in warning unsuspecting consumers about such fly by night operators as soon as possible, as often the money obtained by such operators is immediately siphoned overseas to distant jurisdictions and their Australian operations liquidated. However, it is unfortunate that given the obviously devastating consequences that a public warning notice will have on a business, that additional accountability safeguards were not included in the ACL to govern its use.

In the Part 2 to this article, I will be discussing the ACCC’s power to issue infringement notices and the extensive use which the ACCC has made of this power since its introduction in April 2010.

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[1] In January 2011, the Trade Practices Act 1974 was renamed and replaced with the Competition and Consumer Act 2010. This also saw the introduction of the Australian Consumer Law.

[2] The period of 18 months is calculated from 15 April 2010 to 15 October 2010.

[3] An Australian Consumer Law: Fair Markets - Confident Consumers, 17 February 2009, available at www.treasury.gov.au/contentitem.asp?NavId=037&ContentID=1482 (ACL: Fair Markets).

[4] ACL: Fair Markets, op. cit., 46.

[5] It is the ACCC’s policy to not disclose the identities of parties who have been issued with a substantiation notice. This is consistent with its existing policy of not disclosing the identities of parties who have been issued with section 155 Notice or been served with a search warrant. Accordingly, I can only speculate about which particular ACCC investigations the ACCC used its new substantiation notice powers.  I believe that there is a very highly likelihood that the ACCC used its substantiation notice powers in the Power Balance matter. ACCC News Release, Power Balance admits no reasonable basis for wristband claims, consumers offered refunds, NR 284/10, 22 December 2010, available at  http://www.accc.gov.au/content/index.phtml/itemId/964074.

[6] The ACCC’s initial experience with Australian Consumer Law remedies and powers, Speech by Peter Kell, Deputy Chair of the ACCC to the 36^th Competition and Consumer Workshop, 26-28 August 2011, 2, available at http://www.cch.com.au/AttachmentLibrary/MarketingPromo/Peter_Kell_The_ACCC%E2%80%99s_initial_experience_with_Australian_Consumer_Law_remedies_and_powers.pdf (Speech by Peter Kell).

[7] Some compliance and enforcement issues, Speech by Rod Sims, Chairman of the ACCC to the Law Institute of Victoria, 25 October 2011, 7, available at http://www.accc.gov.au/content/item.phtml?itemId=1014098&nodeId=19e390ff37e28f4162412d52635be1a4&fn=Some%20compliance%20and%20enforcement%20issues.pdf.

[8] ACL: Fair Markets, op. cit., 47.

[9] Ibid.

[10] Chapter 2 of the ACL deals with misleading or deceptive conduct, unconscionable conduct and unfair contract terms.  Chapter 3 deals with false or misleading representations, unsolicited supplies, pyramid schemes, pricing issues, consumer guarantees, unsolicited consumer agreements, lay-by agreements, product safety, information standards and defective goods. Chapter 4 deals with the same types of conduct as are contained in Chapter 3. However, contraventions of Ch 4 are criminal offences.

^[11] Public warning notice register (s. 86DA), http://www.accc.gov.au/content/index.phtml/itemId/943316.

[12] Trade Practices Act 1974 Section 86DA Public Warning Notice, 20 August 2010, available athttp://www.accc.gov.au/content/item.phtml?itemId=943358&nodeId=fd4dc116921390237549e0970958b939&fn=%20Notice.pdf (Public Warning Notice).

^[13]ACCC News Release, Distribution scheme 'business opportunity' draws ACCC's first public warning, NR 170/10, 20th August 2010, available at http://www.accc.gov.au/content/index.phtml/itemId/943380/fromItemId/927069.

[14] Public Warning Notice, op. cit..

[15]ACCC v Halkalia Pty Ltd & Ors, VID362/2011 available at https://www.comcourts.gov.au/file/Federal/P/VID362/2011/actions.

The Untold Story: The ACCC’s role in the Waterfront Dispute - Part 14 - The Litigation

Part 14: The Litigation

Introduction

When we commenced the litigation against the MUA, we expected to be widely criticised not only by the MUA and its supporters, but also by Patrick. We thought that Patrick and Chris Corrigan would be critical of the ACCC for having taken so long to commence legal proceedings. What we did not expect were the allegations of collusion that arose immediately after we commenced our legal proceedings.

Alleged collusion

It was strange for the ACCC, as the competition regulator, to be accused of collusion but that is exactly what happened immediately after we commenced our proceedings.

Quite coincidentally, on the very same day that the ACCC commenced its legal proceedings, Patrick commenced its own proceedings against the MUA alleging a range of misconduct, including contraventions of the Trade Practices Act. As reported in the media at the time:

The nation's competition watchdog and Patrick stevedores yesterday launched a two-pronged legal assault on the Maritime Union of Australia, including the pursuit of massive damages and the deregistration of the union.

In dramatic developments in the long-running waterfront dispute, Patrick applied to the Federal Court to have the unions registration cancelled and damages sought under the Trade Practices Act.

At the same time, the Australian Competition and Consumer Commission announced it was seeking an injunction against the union to prevent any international ban on ships or any domestic boycotts.[1]

Professor Fels was quick to dismiss any suggestion that the ACCC had colluded with Patrick in relation to its litigation. In this regard, he stated:

We didn't know that they (Patrick) were going to court… And they certainly didn't know that we were going to court because we told no one outside organisation.[2]

It was pure coincidence that Patrick commenced its legal proceedings against the MUA on the same day we commenced our proceedings. As stated in earlier posts, the relationship between the ACCC and Patrick was not a positive one, primarily because Patrick was of the view that the ACCC should have taken action against the MUA immediately.

There was also considerable evidence to show that the ACCC and Patrick had not colluded.

For example, Patrick had commenced legal proceedings against the MUA in relation to particular conduct which they claimed breached the Trade Practices Act. The ACCC had also pleaded the same conduct in its case. However, it would not make sense for two parties who were colluding to take legal action against the MUA for the same conduct. Rather, if there had been some collusion it would have made more sense for each party to have pleaded different conduct to avoid duplication.

Another major difference between the two actions was that the ACCC only pleaded breaches of the Trade Practices Act. However, Patrick alleged a wide range of other alleged illegal conduct, including breaches of industrial legislation and a number of common law torts. If we were colluding it made more sense for the ACCC to take action under the Trade Practices Act and for Patrick to pursue the alleged breaches of industrial legislation and a number of common law torts.

Finally, there was also a significant difference between the two actions in terms of the remedies being sought. In addition to seeking damages, Patrick had sought an order to deregister the MUA. The ACCC on the other hand, did not seek either pecuniary penalties or damages in its action. Rather, the ACCC had sought findings of fact which, if made, would have facilitated private actions by businesses and individuals against the MUA.

ITF and ILWU

One unfortunate consequence of the ACCC proceedings against the MUA, related to the ACCC’s inadvertent identification of the various ships which had been loaded and unloaded by non-MUA labour in Australia.

On the very same day that the ACCC commenced legal proceedings against the MUA, the Harry Bridges Action Brigade, which was an affiliate of the ILWU, placed the following message on its website:

SCAB-LOADED SHIPS FROMA AUTRALIA: HERE’S THE BEEF

We must acknowledge the encouragement and assistance of Prof Allan Fels, chair of the Australian Competition and Consumer Commission in providing this list of scab cargo for dockworkers around the world to support their fellow wharfies “down under”. Should the government persist in its devious efforts to destroy the MUA, disregard this list and ban all Australian cargo! [3]

The Harry Bridges Action Brigade then listed twenty vessels which had been loaded or unloaded in Australia by non-MUA labour during the dispute.

The most disconcerting aspect of this post was the fact that the list which the Harry Bridges Action Brigade had obtained and posted on their website was taken directly from Annexure A to the ACCC’s Application which had been filed earlier that same day.

It appeared to us that the MUA must have immediately provided this list of ships to its overseas affiliates, including the Harry Bridges Action Brigade, so they would know which ships to boycott. There was simply no other way that these overseas affiliates could have obtained a copy of this list so quickly unless they got it from the MUA.

The ITF and ILWU were also very active at this time in taking steps to facilitate and coordinate overseas boycotts of Australian vessels which been loaded or unloaded using non-MUA labour. The following is a good example of the type of information which these affiliates were posting on their websites:

MAY 21: OAKLAND ALERT! MORE SCAB LOADED SHIPS HEADED TO THE U.S!

The Direct Kea and other scab ships are headed towards Oakland. The shipping companies know that Oakland’s union town and have changed their schedules. We are not sure exactly when it will be in, so keep calling. A Coastal Scab Cargo Watch is now in effect. Call (501) 845–0540 for further information. Be sure you leave your name and telephone number.

There was a great deal of this type of information on websites, particularly in the US, seeking to organise boycotts. The difficulty for the ACCC was trying to work out who was behind these particular websites. Very often these websites would be set up without any details of the individuals or organisations behind the site. Accordingly, it was very difficult for the ACCC to get evidence that the people behind these websites had been in communication with the MUA.

Interlocutory injunctions

As stated in the last post, the ACCC had sought urgent interlocutory injunctions against the MUA. The hearing in relation to the ACCC’s application for these urgent orders was held on 27 May 1998 before Justice Beaumont of the Federal Court.

The ACCC argued that the MUA and its senior officials (John Coombes, National Secretary of the MUA and Trevor Charles, the local ITF representative ) had been active in inciting overseas unions to boycott Australian vessels which had been loaded and unloaded using non-MUA labour. The focus of the ACCC's evidence was on boycott action on the US East Coast, particularly in relation to the Columbus Canada.

The ACCC put on evidence to show that this particular vessel had been prevented from unloading its cargo in Los Angeles after action by the ILWU. The owners of the vessel had also provided evidence to the ACCC that they believed that the actions of the ILWU had been initiated by the MUA.

The MUA were in a difficult position at the hearing. On the one hand, they were continually denying that they were involved in initiating the overseas boycotts. On the other hand, they were adamant that they did not want to consent to the orders being sought by the ACCC. The ACCC submitted somewhat cheekily to the Federal Court that if the MUA had not engaged in the illegal conduct and were not intending to engage in any illegal conduct in the future, then there was no reason why they couldn’t agree to the injunctions.

We pointed out to the Court that under the relevant provisions of the Trade Practices Act, the Court could grant an injunction whether or not it appeared likely that a party would engage in particular conduct in the future.

After hearing the evidence and the arguments, Justice Beaumont granted the ACCC interim orders, until 4 June 1998, restraining the MUA, Coombs and Charles, from taking any action to bring about the boycotts of certain ships loaded or unloaded in Australia using non-MUA labour.[4]

Justice Beaumont also ordered that the MUA inform the ITF that it:

• makes no call on the ITF or its affiliates to boycotts or take other action to hinder the movement or unloading of either the Columbus Canada or the Direct Kea; and

• withdraws any calls for assistance, whether made expressly or by implication, for international boycotts or similar action.

The ACCC also took the opportunity in its news release to respond to the allegations made by the MUA during the interlocutory hearing that the ACCC had been colluding with Patrick. Indeed, the MUA had gone as far as suggesting that they were proposing to take legal proceedings against the ACCC in relation to this collusion allegation. The ACCC stated:

The ACCC action follows the failure of the MUA to address issues of concern to the ACCC raised in discussions between the parties aimed at averting continuing breaches of the Act. In today's proceedings counsel for the MUA appears to have implied that the commencement of the ACCC proceedings was for an improper purpose and associated with Patrick Stevedores lodgement of a counterclaim on Friday.

The first the ACCC knew about the action was via a radio program on Friday afternoon after the ACCC had gone to court that day. If the MUA proceeds with the foreshadowed court case based on the allegations, the ACCC will seek a speedy resolution of the unfounded claims and will seek full indemnity costs.[5]

The MUA never commenced this foreshadowed action against the ACCC.

Second ACCC action
In addition to obtaining urgent interlocutory injunctions against the MUA and its officials, the 27th of May 1998 was memorable because it was the day that the ACCC commenced its second set of legal proceedings against the MUA.

The ACCC had not been sitting back waiting for the first hearing in the legal proceedings after commencing on 22 May 1998. Rather the ACCC had been working diligently on preparing a second case against the MUA concerning further boycotts. This second case related to boycott activity by the MUA against P&O customers in Newcastle and Adelaide.

The ACCC described the second legal proceeding in the following way in its news release:

In other developments today, the ACCC has begun further proceedings against the MUA in relation to the boycotts of stevedores serving ships formerly contracted to Patrick Stevedores who refuse to use labour from the Patrick labour hire companies. The ACCC has alleged that the MUA and/or certain MUA officers have formed an understanding and an intention to make sure that all stevedoring work for vessels formerly contracted to Patrick at ports where Patrick has ceased operations (including Newcastle and Port Adelaide) was performed by employees of the Patrick labour hire companies, now under administration.

As part of that plan, the ACCC has alleged that the MUA put in place boycotts of P&O terminals at Newcastle and Port Adelaide on the loading and unloading of the Althea and the Bay Bonanza, which formerly been contracted to Patrick Stevedores. P&O had won the right to stevedore those ships when Patrick Stevedores ceased operating in those ports. In addition, it is alleged that the MUA threatened boycotts have led to a number of shipping lines and shippers (including K-Line, Wilhelmsen, Pasminco and Newcastle Ships Loader) only using stevedores who were prepared to use employees of the Patrick Stevedores labour hire companies.

The ACCC has claimed that this conduct was engaged in for the purpose, and has had the effect, of preventing or substantially hindering those shipping lines from engaging in trade or commerce involving the international movement of goods, in breach of s.45DB of the Trade Practices Act 1974.

The ACCC has sought declarations that the MUA has breached the Act, injunctions restraining the MUA from engaging in such conduct in the future and findings of fact, which could form evidence in any subsequent private damages action[6].

I always though that the MUA’s conduct, which became the subject of the second ACCC proceedings, was quite bizarre. As discussed earlier, the MUA's first goal when Patrick sacked its entire MUA workforce and started using non-union labour was to make sure that Patrick had no business. As a result of the MUA's boycotts, a number of large Patrick stevedoring customers had no choice but to move their stevedoring business to P&O. The MUA had been happy with this development, given that all the P&O stevedoring workers were also MUA members.

However, once the High Court had decided that the labour hire companies could only hire MUA members, the MUA wanted to ensure the viability of the labour hire companies by making sure they had sufficient business. As a result, the MUA started boycotting the former Patrick customers who were getting stevedoring services from P&O in an effort for force them back to the Patrick labour hire companies. In other words, after forcing these customers away from Patrick to P&O though the use of boycotts, the MUA were now trying to force these customers back from P&O to Patrick through the use of boycotts.

What made the situation even more bizarre was that a number of MUA members who had been employed by P&O to do this particular stevedoring work were very unhappy about losing the work. These MUA members objected to the conduct of other MUA members in preventing them from getting this work.

One amusing incident in relation to the second legal proceedings occurred when the AGS and ACCC were settling the pleadings. We had not quite finalised the statement of claim for the second proceedings by the time that we had to go to court for the interlocutory injunctions in the first case.

Accordingly, an AGS lawyer was forced to come to the Supreme Court building with a draft copy of the Statement of Claim for the second proceedings to get me and another AGS lawyer to settle the document before it could be filed and served. The only problem was that we sitting in the court where the interlocutory injunction application was being heard by Justice Beaumont with the MUA lawyers sitting about two meters away from us.

I remember sitting there in the court trying to listen to what was being said, whilst checking a few facts in the statement of claim and also trying to make sure that I hid what I was doing from the MUA lawyers who were peering at me with a great deal of curiosity.

When we finished our changes to the statement of claim for the second proceedings, we handed the draft back to the AGS lawyer who rushed away to the AGS offices to make the changes, print out the required number of copies and file it in the Federal Court Registry. 

Our plan had been to try to serve the MUA with the originating documents in relation to the second proceeding as they were leaving the court after the interlocutory hearing in relation to the first matter.

I still remember the look of astonishment on the MUA lawyers faces when we served them with the originating documents for the second proceedings just as they stepped out of the NSW Supreme Court building onto Phillip Street, just after our successful application for interlocutory injunctions in the first proceedings. I think it dawned on them almost immediately that this was what we had been furtively working on during the interlocutory hearing.

Media beat up

There was one incident in relation to the investigation of the conduct leading to the second proceeding which demonstrates the way in which issues were regularly misrepresented by the MUA in the media.

When I first became aware of the MUA’s conduct in trying to force P&O customers back to the Patrick labour hire companies, I was surprised at how blatant the conduct was. There was no pretence that the boycotts were being carried out by members of the community or members of other unions. It was absolutely clear to everyone that the MUA were running these boycotts.

It was due largely to how blatant this conduct was that I decided to try a different approach to resolving the illegal conduct. I decided to call the senior MUA official, who appeared to be coordinating the boycott conduct in Newcastle, to give him a polite warning . I thought that if I could explain to him that the conduct that he and his colleagues were engaging was a very clear breach of the Trade Practices Act they may decide to stop the conduct.

I remember politely explaining to this senior MUA official both the relevant legislative provisions and the maximum penalties which the ACCC could seek against the MUA for their conduct. I had hoped that the senior MUA official would have given some serious thought to my polite warning.

Unfortunately, my warning had absolutely no effect on the senior MUA official. Not only did the boycotts continue but the very next day my conversation with the senior MUA official was front page news in Newcastle. The story which was reported in the newspapers and later in radio was that a senior ACCC officer had contacted the MUA to threaten that unless they stopped trying to protect their livelihoods, the ACCC was going to sue them, take away their homes and throw their families out on the street.

I remember receiving a phone call from the ACCC’s then CEO querying me about what I had in fact said to the relevant MUA official. I told the CEO that I had just given the MUA official some free legal advice and a polite warning, and that I had definitely not told the MUA official that we would take away their homes or indeed that we would be throwing their families out onto the street.

That was the last warning I ever gave to the MUA.

---

[1] Legal push to destroy dock union, The Age, 23 May 1998, p, A1.

[2] Watchdog denies Patrick collusion, The Daily Telegraph, 25 May 1998, p. 2. See also Fels rejects any collusion against MUA, The Canberra Times, 25 May 1998, p. 3.

[3] ITF thanks Fels for ‘naming’ ships, Daily Commercial News, 23 May 1998, p. 1

[4] ACCC/Maritime Union of Australia, ACCC News Release, 27 May 1998 - http://www.accc.gov.au/content/index.phtml/itemId/87308/fromItemId/378006

[5] Ibid.

[6] Ibid.

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