AUSTRALIAN ECONOMIC PAPERS

JUNE, 1967

POLICY TRIBULATIONS OF A TRIBUNAL*

ALEX HUNTER Australian National University

In considering whether any restriction, or any practice, other than a practice of monopolisation, is contrary to the public interest, the Tribunal shall take as the basis of its consideration the princi le that

public interest, but shall wei& a ainst the detriment constituted by any

of the restriction or practice as re ards an of the matters referred to in

balance, the restriction or the practice is not contrary to the public interest.

Trade Practices Act 1965: Section 50 ( 1).

the preservation and encoura ement of competition are desirab P e in the

proved restriction of, or any ten 2 ency to restrict, competition any effect

the next succeeding sub-section, i 7 2 that e ect tends to establish that, on

“This article originally was written for the 1968 ANZAAS conference in Christchurch, New Zealand. Although dealing with law, it is an article for economists - to show how the processes of judicial review attempt to derive economic policy from a trade practices statute. My indebtedness to various legal writers will be evident from the references. Since the analysis is concerned entirely with what procedures and policies are likely to develop from the proceedings of the Australian Trade Practices Tribunal it makes no attempt to question the structure of the 1905 Act. For a more general assessment and critique the reader is referred to the Symposium on the Trade Practices Bill in the Economic Record, XLI, 1965, which includes the following: J. E. Richardson, “The Legal Framework”; Maureen Brunt, “Legislation in Search of an Objective”; J. Hutton and J. P. Nieuwenhuysen, “The Tribunal and Australian Economic Policy”; and Geoffrey de Q. Walker, “Reasonableness of Prices as a Test of Legality in Price-Fixing Cases”.

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This opening subsection of Section 50 of the Trade Practices Act contains the core of the legislature’s instruction to the Trade Practices Tribunal on how to interpret “the public interest” effect of any examinable agreement or practice1 which comes before its members.2 However, it may be, as some legal authorities suggest: that there is no real instruction in the form of words employed by the legislature. If so, the Tribunal will not interpret except in a very general sense, It will instead fmula te an important part of Australian economic policy. This article examines the likely course of the Tribunal’s proceedings to discover how far this view is correct. It does so by (I) displaying where the onus of providing evidence and proof will lie; (2) examining the character of the escape routes to exemption provided in subsection 2 of Section 50; and (3) considering how the Tribunal is likely to evaluate “detriment” and “benefit” to determine the public interest.

I. THE ONUS OF PROOF The structure of the Act, especially Sections 35,36,49 and 50, compels the

Tribunal to analyse agreements and practices along certain lines. Conceptually, they can be set out as follows. First, the Tribunal must decide whether the agreement or practice brought before it is indeed examinable within the meaning of the relevant sections of the Act, Section 35 (1) and 38 (1). Secondly, the Tribunal must assume that any practice or agreement shown to be examinable involves detriment? And, thirdly, against any such detriment the Tribunal is required to weigh any advantage coming within the provisions of Section 50 (2). This third component of the Tribunal’s thinking is usually referred to as the “balancing proces~”.~

1As defined under Sections 35 and 36 of the Act. Note that the practice of “monopolisation” (Section 37) is given scant attention in this paper since it is not expected to figure very prominently at first in the Tribunal’s proceedings and in any event will be judged on rather different considerations than those employed for restrictive agreements and practices. See G. de Q. Walker, Australian Monopoly Law (Melbourne: Cheshire, lSe7), p. 71; and footnote 37 below.

2 Part IV of the Act contains all of the legislature’s instructions to the Tribunal on how to assess the public interest effects of practices and agreements, including interpretation (section 46); the institution of proceedings by the Commissioner (47 and 48); the inquiry and determination procedures of the Tribunal (49-58); clearance procedure (5961 ); and review procedure (62-66). The definitions section of the Act is also of significance for the interpretation of Part IV.

SFor example, G. G. Masterman and E. Solomon, Australian Trade Practices Law (Sydney: Butterworth, 1967), pp. 220-223.

4 Section 50 (1 ) : “but shall weigh against the detriment constituted by any proved restriction of, or tendency to restrict, competition . . .” (Italics supplied).

5 Much as in Section 21 of the British 1958 Restrictive Tr& Practices Act. The British Act d e r s more difficulties to the respondent parties in that the Registrar need not demonstrate that an agreement contains a restriction of competition (as in the Australian Act). Any agreement which comes within the terms of the registration provisions automatically goes on a public register and comes before the Restrictive Practices Court where it is deemed to be against the public interest until otherwise declared by the Court.

1968 POLICY TRIBULATIONS OF A TRZBUNAL 3

These broad components of thought, which encompass the whole of the Tribunal’s review, can be given more content by use of a time-honoured device - showing where the onus of supplying evidence to the Tribunal will lie during the proceeedings of any case.

In the first stage - proving the existence of an agreement which restricts or has the tendency to restrict competition-the onus appears to lie mainly with the Commissioner. He is the sole authority designated in the Act to institute proceedings before the Tribunal (Section 47). Further, only he, after consultation with the prospective respondents, may decide which agreements and practices are of sufficient importance in terms of restrictions of competition to require examination by the Tribunal; and only he may request leave of the Tribunal to discontinue proceedings (Sections 47 and 48). True, the respondents may argue that the agreement does not contain restrictions of any significance. Where they do so the onus is, of course, shifted to them. But it seems unlikely that many such attempts will be made.

Respondents could argue, for example, that if the restriction under review does not involve all members of the industry there is therefore a substantial fringe of effective competition restraining the respondents in their alleged restrictive behaviourS6 Rather more strongly it could be argued that, while some components of competition are restricted by an agreement or practice (for example, on quality, the number of specifications or sizes, on delivery provisions, stocks held, areas or persons supplied, etc. ) , a more fundamental component of competitive behaviour, say price competition, remains in operation. Another possible line of defence, also designed to terminate judicial review in these initial stages, could be as follows: although price competition has been removed by agreement or arrangement, this means only that the quality of competition and not its intensity has been changed and, indeed, the effect of the agreement is to promote competitive effort in more important respects such as product competition, convenience to consumers, technological innovation, accompanying service or quality.7

The alternative view is that any restriction of competition coming within the terms of the relevant section, even if confined to a small number of rival firms in the industry or even if affecting competition only in such minor matters as minimum agreed standards of quality or specification,8 the minimum amounts of capital equipment or stocks to be employed in the trade or “reasonable” credit terms, is nevertheless a proper subject for the judicial scrutiny of the Tribunal.

6A.s in Standard Metal Window Group agreement, Law Reports, Vol. 3, Restrictive Practices Court, p. 198 (L.R. 3 R.P., p. 198); and Phenol Producers agreement, L.R. 2 R.P.. p. 1.

7 Black Bolt and Nut, L.R. 2 R.P., p. 50; Glazed Floor and TUe AssocWh, L.R. 4 R.P., p. 239; and Motor Vehicle Distribution Scheme, L.R. 2 R.P., p. 173.

8 Bkznket Manufactuzezs agreement, L.R. 1 R.P., p. 208.

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The latter interpretation would appear to be the correct one for several cogent reasons. First, we have the literal meaning of Section 35(1), which says that “an agreement is an examinable agreement for the purposes of this Act, if it is an agreement under which restrictions of any of the following kinds are accepted; and the “following kinds” include agreements on prices, terms, discounts, concessions, rebates, quantities, qualities, stocks held, services attached and places or persons supplied. There is no suggestion in this firm and direct language that the comprehensiveness or the significance of the restriction must be a qualification for examination by the Tribunal.@ In the same way, the three examinable practices, d e h e d in Section 36(1), carry no reference to the importance, significance or coverage of the practices. Secondly, the Act, in Section 59, gives a discretionary powex to the Commissioner, where he is satisfied that an examinable agreement or practice “is not contrary to the public interest” (and providing he has the written consent of a presidential member of the Tribunal) to file with the Registrar a certificate to that effect. While such a “negative clearance”, as it is termed, remains unrevoked no proceedings will be instituted before the Tribunal. This is an important discretionary power. Presumably it was inserted for a purpose. Why not, therefore, employ it for the purposes of separating out the agreements and practices which are clearly of no economic or social importanceTlO Thirdly, where there is any doubt as to the significance or insignificance of the restrictions contained in an examinable agreement or practice, this would appear to be a matter best left to the consideration of the Tribunal. The Act is quite explicit that this body is constituted precisely to determine whether or not an agreement or practice does, or is likely to, operate against the public interest.

If this view is correct, the Commissioner’s task in the preliminary stage of the judicial hearing - to establish the existence of an examinable agreement or practice - would seem to be relatively simple. Most multilateral restrictions (those accepted between competitive manufacturers or, at another level, between wholesalers or retailers) will automatically be registrable under the provisions for agreements (Sections 41, 42 and 43). In the process of registration “the whole of the terms of the agreement”, including the restrictions strictly relevant to the Act, will become a matter of

9 The categories of restriction (a) to (e) defined in Section 35 (1) appear to encompass all possible forms of restrictive agreement between two or more persons.

1oSome commentators have argued that the discretionary powers held by the Commissioner (to issue clearance certificates, consult with respondents and to initiate proceedings on his own authority) are too great to be vested in one person. The Commissioner certainly is a key figure. However, in providing or revoking “negative clearances” he may act only with the written permission of a presidential member of the Tribunal.

1968 POLICY TRIBULATIONS OF A TRIBUNAL 5

record.ll Mere demonstration of these should be sufficient in most cases to establish the existence of an examinable agreement. Indeed there can be no disagreement on this point in respect of respondents who have registered with the firm intention of justifying before the Tribunal the merits of their particular restrictions of competition. Some respondents will challenge the necessity to register, alleging that no agreement involving restrictions of competition exists. One example could be the large company which operates parallel (but identical) agreements with each of its distributors.12 However, such challenges, on British experience, are likely to occur in a very small proportion of the total agreements.

Examinable practices which are not registrable present a rather different picture. Section 36( l )c is concerned with inducements or attempts to induce (whether by a single company or by a trade association) persons or firms to refuse to carry on business with third parties except on disadvantageous terms. To establish the facts and circumstances of this practice - which when operated by a trade association is known as “the collective boycott” - probably would not be too difficult. There may be some difficulty in showing, under Section 36(i)b, that a (large) supplier requires as a condition of trading that his customers also purchase the goods of an allied or associated company; and rather more difficulty in showing, under Section 36(l)a, that a powerful buyer has succeeded by means of an “express or implied threat or promise” in obtaining goods from a supplier at prices lower than are normal when the same goods are supplied to the large buyer’s competitors. However, the examinations of practices will be less numerous than those of agreements: they will result from the complaints of injured parties; and the establishment of all the relevant circumstances required to construct a case examinable by the Tribunal will not be intolerably difficult and may, with experience, become relatively routine.13

It is at the second stage of the review proceedings - the assumption that an examinable agreement carries “detriment” for public interest purposes - that the Commissioner’s main burden arises. On the established legal principle that he who asserts must prove, the onus is on the Commissioner.

11 Not all agreements will appear on the register immediately. One can count on many business people failing to appreciate their statutory duty to register restrictive agreements; and there will be some evasion based on “alleged ignorance” of the terms of the Act. A few are likely to challenge the necessity to register. These will include trade associations operating “information agreements” ( see Alex Hunter, Competition and the Law (London: Allen and Unwin, 1966), pp. 169-179) and large companies operating parallel (but identical) sets of bilateral agreements with each of their distributors in order to preserve resale price maintenance conditions in the distributive sector (see Masterman and Solomons, op. cit. p. 205) .

12For example, see Austin Motor Co. Ltd. Agreements (1957), 3 A.E.R., p. 62. 1 3 h d many respondents will of course terminate their agreements or practices as a

result of negotiations with the Commissioner (Section 46 of the Act) before proceedings are properly under way.

JUNE 6 AUSTRALIAN ECONOMIC PAPERS

He cannot leave matters in the state that detriment is presumed merely by the existence of an examinable agreement or practice. Since he is, & fucto, the sole custodian of many interests who, normally, will not be represented in the proceedings ( consumers, employees, shareholders and pastoral interests, for example), he has a duty to make the detriment specifio-to make clear to the Tribunal the various consequences of the operation of the agreement or practice which are damaging to certain interests or to the economy as a whole. For example, he may attempt to show that prices are higher than they otherwise would be; that the range of choice open to consumers is restricted; that restriction on entry into an industry restrains the assimilation of new blood and ideas or slows up the pace of technological innovation; that a price agreement results in continued investment, and possibly the creation of excess capacity, although that investment might otherwise be channelled to a more productive part of the economy; or that there may be damage to potential export markets because a price agreement creates inefficient conditions in the domestic industry. It is for the discovery of specific detriments of this sort that a substantial part of the Commissioner's staff consists of investigatory teams whose function is to probe the affairs of the relevant industry.1'

The onus of proof during the course of the Tribunal's proceedings does not lie entirely with the Commissioner, but shifts to fall on the parties to an agreement or practice who, on the grounds provided for them in subsection (2) of Section 50, wish to demonstrate the merit of their restrictions. This aspect of the proceedings is as it should be. It appears only proper that interests who wish to operate their business affairs on a principle contrary to the presumption of free competition which obtains in a private enterprise economy should have the task of demonstrating that collusion or collaboration in business matters is indeed superior in some substantial sense.l5 It will not be an easy task to secure an exemptionla and in some cases there could be problems equally as great as those confronting the Commissioner on his side of the proceedings.

14For the type of argument which the Commissioner can advance to show detriment see R. B. Stevens and B. S. Yamey, The Restrictive Practices Court (London: Weiden- feld and Nicholson, 1965), chs. 4 and 5; Alex Hunter, op. cit., ch. 6; and Masterman and Solomon, op. ctt., ch. 6.

16The respondents need not attempt to demonstrate the superiority of their arrangements over those of free competition. But if they do not, the presumption that any examinable agreement carries detriment will become the operative factor in the hearing and the Tribunal will have a duty to declare the agreement or practice against the public interest. It would seem that it is no part of the Commissioner's duty to point out to the Tribunal those characteristics of the restriction which are beneficial.

16 For the type of arguments likely to be developed in support of examinable agreements and practices see Hunter, op. cit, ch. 6; Masterman and Solomon, op. dt., ch 8; and Walker, op. dt., ch. 7.

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In the proceedings as a whole, however, the Commissioner seems to have the heavier burden.17 On the one hand, the respondents are concerned only with their individual problems. They know the industry and its characteristics intimately and are in a position to display, with relatively little effort, the strong points of their case, remaining silent on the weaknesses. The Commissioner on the other hand must simultaneously investigate a variety of industries. Although his stafE will acquire some considerable skill in seeking out those characteristics which are specially relevant to the Tribunal’s work, each industry or trade investigated will provide a fresh set of circumstances to be analysed. It must also be remembered that the Commissioner has the duty, under Section 48, to have prior consultation with parties to all agreements and practices on which he intends to institute proceedings. Consequently, the size of his task is not measurable by the number of cases actually contested. His staff must secure knowledge of, and build up analyses on, (1) contested agreements and practices, (2) those which are dropped in the course of the Tribunal’s examination and (3) those agreements and practices which the parties, after consultation with the Commissioner, allow to lapse. Moreover, it is implicit in the situation that the onus is on the Commissioner to fulfil another duty. Not only must he point out the s i e c a n t features of the detriment attaching to a contested agreement or practice; he must also present to the Tribunal those characteristics of free competition which make it a workable and superior alternative to the respondent’s arrangements for collaboration. Taken by itself, this aspect of the Commissioner’s work could provide some subtle difficulties of presentation. Most industry sectors of the Australian economy have had so-called “orderly marketing” arrangements operating for thirty years or more. When competition was last experienced, many industries found that depression conditions created excess capacity and episodic bursts of “cut-throat” competition, leading to low profit margins and even greater unemployment of labour and capital. The Tribunal is unlikely to equate the competitive conditions of prewar years with free competition conditions which have prevailed in the full employment economy of the post- war years (although doubtless some respondents will argue along such lines).le On the other hand, the absence of free competition conditions for so long a period means that the arguments of the Commissioner in favour of free competition will necessarily be for a rather hypothetical alternative set of conditions. Nevertheless, it is not an issue which can be evaded. The Commissioner must attempt to educate the Tribunal. Otherwise, by default,

17 See also footnote 5. 18The Tribunal is likely to be persuasively influenced by the views of the British

Restrictive Practices Court in regard to such claims. The Court consistently rejected arguments based on the experience of the inter-war years. (See Hunter, op. cit., pp. 135-140).

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the Tribunal will be left to construct a picture of competitive conditions based on the interpretations put forward by the respondents.

Although the Commissioner appears to have a formidable task - greater than is the case for his counterpart in the United Kingdom - he has one strong advantage. Respondents, whatever the merits of their cases, objectively speaking, are dearly in a position where, as they see it, they are defending an established interest against the encroachments of competition either from outsiders or among themselves. No matter what advantages for the community may be advanced for their agreement or practice, to some degree this self-interest constitutes a weak moral position insofar as the Commissioner can point to situations where self-interest is being protected at some sacrifice of the interests of consumers, of general economic efficiency, of the ability of the economy to export and earn foreign exchange, and so on. This qualitative factor, properly exploited, may be most important in the future considerations of the Tribunal.

This article is concerned to analyse what is likely to occur within the proceedings of the Tribunal. But it is appropriate to point out at this stage that to secure a proper perspective of all the workings of the legislation Section 48 should be studied, Under this section the Commissioner is required to consult with parties to agreements and practices “with a view to securing such undertaking or action - by way of determination, cessation or variation of the agreement or practice-as will render the proposed proceedings unnecessary”. In a word, he is asked to avoid proceedings if this seems reasonable and proper in all the circumstances. Discussions during the consultation may be, if the respondent parties desire it, on a “without-prejudice” basis. A substantial number of agreements and practices will traverse this route and never see the Tribunal. Precisely what proportion does so will depend on: the expectation of survival before the Tribunal which business men will come to have; their willingness to litigate; and, presumably, the skill of the Commissioner in converting the restrictive parties to a faith in competition. In addition-an unknown factor at this stage - some respondent parties will be disposed to rely upon constitutional objections. Section 48 will not, of course, offer an escape route uniquely dependent on the judgment of one man, the Commissioner. The purpose of the consultation, so far as the Commissioner is concerned, is to make certain that agreements or practices, through either cancellation or modification, no longer are encompassed by the Act; or, alternatively, that their operation is such that they clearly cannot fall within the Tribunal’s interpretation of restrictions which operate against the public interest. Thus even on this quasi-administrative procedure the Tribunal’s fhdings set the standard. Obviously, there is scope in the operation of Section 48 for a neat, economical resolution of most of the Trade Practices problem without undue

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resort to Tribunal proceedings which can be expensive for the parties and costly in terms of the legal talent involved. It is impossible to predict the development of this obviously important branch of the Act. Yet it does not seem unreasonable to forecast that, once the constitutional issues are settled and the Tribunal’s attitude to the various types of restriction becomes known, the great majority of practices and agreements will txavel the Section 48 route.

11. SECTION 50(2): THE “GATEWAYS”

Subsection 2 of Section 50 specifies the matters which the Tribunal must set against the presumed detriment of an examinable agreement. These contain the core of the legislature’s instruction (if there is one) to the Tribunal. They can be termed the ‘*gateways” to exemption.lD The subsection reads as follows:

The matters that are to be taken into account in accordance with the

( a ) the needs and interests of consumers, employees, producers, distributors, importers, e orters roprietors and investors;

( d ) the need to achieve the full and efficient use and distribution of labour, capital, materials, industrial capacity, know how and other resources;

last preceding subsection are-

b) the needs and interests ?i o small > % usinesses; I c ) the promotion of new enterprises;

and exporters to compete in overseas markets.

Three comments come to mind immediately. First, category ( a ) requires the tribunal to have regard for every interest group which can conceivably be associated with business affairs. But there are no instructions on priorities. Consumers are no more important than employers or distributors; and employee interests are no more significant than those of exporters or proprietors. Secondly, categories ( d ) and ( e ) require that the Tribunal, when assessing the economic efficiency criteria of a restriction, as distinct from the interest groups involved, should have regard to, apparently, every resource allocation principle applicable to the Australian economy. Between them

1s Following the terminology used for the 1956 Restrictive Trade Practices Act (see Hunter, op. cit., p. 101). Some British writers use also the term “escape route”, thus reflecting the necessity, under the British Act, of escaping the presumption that all registered agreements are presumed contrary to the public interest until otherwise demonstrated. There is no such presumption in the Australian Act - rather it more neutrally contemplates a judicial review which attempts to balance out the advantage and detriment of agreements.

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these two categories are reminiscent of that section in every first year text book of economics which sets out the economic problems of every society. Again there is no indication of Thus, so far, it would seem that in devising the public interest tests of the Act, the legislators have been SO

carefully general in their instructions as to give no positive instruction whatever. The Tribunal, if we look only at categories (a) , ( d ) and (e) , has carte blanche. It can make its own law.

However - and t h i s is our third comment - there are possible qualifications to this view. Categories (b) , (c) and ( f ) are more specific. Each of them refers to a particular interest group or a particular situation. There is no direction in the Act to suggest that categories (b) , (c) or ( f ) are of greater importance than any or all of the remaining three categories. But it is a fact that they receive separate explicit mention. This, combined with our knowledge that they could each have remained subsumed under the general categories (a) , ( d ) and (e), strongly suggests that the legislators wished to rescue these situations and interests from the anonymity of more general economic and social criteria in order to ensure for them some prior consideration.

This apparent internal inconsistency in the public interest instructions of the Act may seem surprising. However, it should be remembered that the idea of controlling trade practices was never wholly popular within the ranks of the Liberal-Country Party government which brought down the legislation.21 The Act was passed five years after the Commonwealth govern- ment first indicated its intentions to control trade practices; and two and a half years after Sir Garfield Barwick made his controversial proposals, which were subsequently altered Further, business interests of all types, manufacturing, wholesale and retail, importers and exporters, were given generous access to the government to put their points of view.= It appears as though our legislators have attempted to evade some substantial part of their responsibility by stating the key section of the Act in such general

20 Categories ( d ) and (e) have a strong family resemblance to Section 14, the public interest section, of the original British Monopolies and ReStTktkW Practices (Inquiry and Control) Act 1948, a statute designed only to give general powers of inquiry, not judicial review, to the Monopolies Commission in this field.

21 Significantly, the proposals never had the support of the Department of Trade of the Commonwealth Government or its influential Minister (Mr. McEwen).

22Compare the Act finally passed with the Banvick proposals set out in a statement prepared by Sir Garfield Banvick and read by the Acting Attorney General on December 6, 1982 (Commonwealth of Australia, Parliamentaq Debates, vol. H . of R. 37, pp. 3102-3114), also see Maureen Brunt, op. cit., pp. 3!57-380.

23 It is reliably reported that the final draft of Section 50 was substantially redesigned in the Cabinet room after numerous consultations with “interested parties“. See also Walker (op. dt . , p. 5 ) , who reports on the lobbying activities of various trade association groups who were responsible for, inter dia, the insertion of category ( a ) of Section 50 (2 ) concerning the interests of producers, investors, exporters, etc.

1968 POLICY TRIBULATIONS OF A TRIBUNAL 11

terms as to leave the development of economic policy to the Tribunal. Yet, at the same time and in the same instrument, they have also attempted to conciliate business interests by the insertion of categories of “gateway” which may ( or, admittedly, may not) give special protection to particular interests.

Those respondent parties who can bring the operation of their agreements :and practices within the terms of categories ( b ) , (c) and ( f ), rather than resort to the general categories (a ) , ( d ) and (e ) , would appear to have at least a marginally greater chance of having their agreement declared to be in the public interest. The needs and interests of small business - Category ( b ) - for example, could be interpreted to permit a restriction of

competition among small producers to allow them to meet the competition of the larger, oligopolistic companies in the industry. In respect of a practice coming under Section 37( 1 )a (whereby a large buyer secures discriminatory prices by threatening to take his custom elsewhere), small businesses may claim that their exclusive dealing restriction protects them from the activities of large department stores, chain stores or discount houses. Again, any one of the “monopolisation” provisions of Section 37( 1) may be invoked to assist struggling small busine~ses .~~ The promotion of new enterprises, category (c) , would permit a newcomer to an Australian industry to arrange an :agreement on prices, market quotas or areas or the variety of product to be produced, in order to secure a period of guaranteed prices and profit margins and freedom from competitive marketing. As such, it would appear to be a variation on the “infant industry” argument for tariff protection: that is, designed to control internal competition with the tariff limiting external ,competition.25 Category ( f ), which asks the tribunal to consider favourably the ability of Australian producers to penetrate export markets, can be used to justify the operation of consortia combining to trade overseas, an agreement to allocate overseas markets to particular producers, or an arrangement to sell overseas at certain minimum prices. Such agreements will assist Australian producers to establish themselves abroad, often in competition with foreign concerns which themselves have a similar legislative protection in their own countries. Restrictions of this type could well appear reasonable to the Tribunal. Unfortunately, experience seems to show that the restriction is often one which is applied to both the domestic market and a variety of foreign markets, and discriminates in prices or terms against the domestic consumer in order to establish and perpetuate the

24 See Hutton and Nieuwenhuysen, op. cit., p. 391. 25 An unattractive argument for maintaining a restriction. However, if the category were

invoked, not in order to protect a new enterprise, but to aid the introduction of a new product, a new material or new process, it could appear much more justifiable.

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overseas markets. Such arrangements involve a more delicate balance of advantage and detriment for the Tribunal to

If there is any greater force in arguments obtained by the employment of categories ( b ) , (c) and ( f ) , this will lie in the apparently greater concreteness of what is claimed. They will be specific advantages actually named in the Act as against what can well be termed the more general admonitions contained in the categories (a ) , ( d ) and ( e ) regarding economic efficiency and the need to consider all interests at all times. Reference to factual rather than hypothetical situations always has an appeal for judicial or quasi-judicial Nevertheless it is open to this Tribunal, if it is so disposed, to discern in the general categories of Section 50( 2) economic principles of a greater and more continuing validity than the ad hoc and often temporary arrangements put forward under categories ( b ), ( c) and ( f ) : that is, the need to secure economic efficiency by means of proper resource allocation over the long periodz8 and to supply goods and services at the quantities, qualities and prices consumers and users desire.

How far the Tribunal will be prepared to develop doctrines out of the melange which is Section 50 is one of the more interesting aspects of the legislation. To such considerations we now turn.

111. THE PROCESS OF EVALUATION If one looks at Section 50 as a whole, it is clear that all of the

considerations of detriment and advantage which the Tribunal must bear in mind in respect of an examinable agreement or practice must come together in the “balancing process” in order to be crystallised in judgement. At this point in the proceedings the Tribunal will undertake a complex evaluation process. Some of the main elements of the process which can be discerned, if we bear in mind the possibility of according a special status to categories ( b ) , (c) and (f) , are as follows:- (1 ) The Tribunal must reconcile the conflicting claims of different

interest groups (consumers, employees, producers, distributors, etc. ) . In itself this is a complicated exercise not made easier by the great difficulty of quantifying such matters as the relative importance of one group as against another, the intensity of a group’s need for the benefit claimed, the importance or significance of the benefit or detri- ment involved, the likely duration of the benefit or detriment, and many other factors.29

26 See Hunter, op. cit., pp. 150-151. 2 7 I b l d . , pp. 157-158 for a consideration of this element in the operation of the

Restrictive Practices Court. 28For a classic example of this type of reasoning, favouring long term resource

allocation factors in preference to ad hoc restrictions which preserve the interests of a particular group, see the Yarn Spinners Agreement, L.R. 1 R.P., p. 118.

29 See Masterman and Solomon, op. cit., pp. 22-23.

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(2) The Tribunal must compare the predictive value of competing eco- nomic theories about what is likely to occur in a specific industry, sometimes including changes in external conditions, when a restriction of competition is removed or retained. Put very crudely the compet- ing propositions before the Tribunal may be, on the one hand, that free competition will reduce costs by eliminating the less efficient pro- ducers, cause the entry of new blood and new ideas and promote an atmosphere in which innovations flourish and are rapidly introduced, thus leading to lower prices, a development of total demand, and further growth of the industry; on the other, that collaboration among producers leads to stability of market conditions and security of profit margins, favours further investment of an innovatory or Ast-saving character, lowers prices, assists the growth of the industry and main- tains employment.30

(3) The Tribunal will be called upon to evaluate the social justice of favouring small business (and the relative efficiencies of the different economic structures involved). For example, the retention of resale price maintenance in a particular group of consumer durable goods may be defended on the ground that small retail outlets must be safe- guarded against the competitive effects of loss-leader tactics by large department stores or the price-cutting of discount h0uses.~1

( 4 ) The Tribunal is likely to be asked to undertake exercises in applied eco- nomics in order to discover whether restrictions which, it is claimed, give advantages to exporters of Australian goods damage or benefit the economy and the balance-of-payments position. Similar exercises will be required to discover the merits or otherwise of allowing new enterprises to maintain restrictions of compet i t i~n .~~

A purist can maintain without difficulty that this range of functions is inherently non-justiciable- that the Tribunal is being called upon to make law and not to interpret it. To some degree, of course, all judicial bodies make law. It is impossible for the legislature to foresee all of the complexities of circumstance which can be brought to bear on a statute; nor can it anticipate the changing values of society which subtly remould the

301n practice competing theories are liable to be more complex, touching on balance-of-payments considerations, the likely reallocation of resources stemming from the removal of a restriction, the likelihood of mergers if an agreement is given up, the conditions under which large companies will accept lower prices and profits if guaranteed freedom from competition, etc. (See Stevens and Yamey, op. cit., ch. 5; and Hunter, op. cit., ch. 6 ) . A particularly good example of conflict af economic theories is contained in G. de Q. Walker, “Price Agreements, Rationalisation and the Distant Waters Case”, Australian Law Journal, XLI, 1964.

31 Masterman and Solomon, op. cit., p. 226; and Walker, Australian Monopoly Law, pp. 170-17 1.

32 Stevens and Yamey, op. cit., ch. 5.

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public policy surrounding an enactment. But the task of examining trade practices is well outside the normal boundaries of the judicial function. Not only does the 1965 Act refer to matters (such as the reconciliation of the financial and economic interests of different groups and the evaluation of economic theory) which cannot easily be related to the present body of law, nor for which the country’s judicial talent has any particular expertise, but it also requires standards of judgement (represented by the presence of lay members on the bench and the extensive use of trade and expert witnesses) foreign to the judicial tradition of thought. In short, the Tribunal is an administrative rather than a judicial tribunal. In function it is closer to the model provided by the Arbitration Commission, or even the Tariff Board, both of which are formulators of economic policy rather than interpreters of legal enactments.

Unlike its British counterpart, the Restrictive Practices Court, the Tribunal’s status in the Australian judicial hierarchy reflects this position. The Australian constitution compelled the framers of the Act to define the standing and powers of the Tribunal so as to avoid coming within the current definition of what constitutes a court. To quote Walker: “Its determinations are not final and conclusive, for the Tribunal may be directed to reconsider an existing decision, without necessarily rehearing the case. It does not adjudge existing rights according to a pre-existing standard, but declares rights de futuros. Enforcement, together with the power to punish contempt of the Tribunal, is in the hands of a judicial body, the Commonwealth Industrial Court. It has no title to make conclusive decisions on matters of law. These are strong grounds for concluding that the Tribunal has not been given judicial power.”33

But although not a legal tribunal in the full sense, the Trade Practices Act requires the Tribunal to behave in many respects like one. In particular: (1) it must attempt to construe the wording of the Act as though it were just one more statutory enactment, difficult though this may be; and (2) the relevant parts of the Act-Sections 50(1) and 50(2)-require it to be guided by the efjects of an agreement or practice (or their withdrawal) as displayed in the proceedings and not by the Tribunal’s translation of national policies on to these facts. Precisely what course these factors will cause the Tribunal to take in its evaluation exercises is difficult to predict. But there appear to be two broad alternatives. Selection as between them depends on the weight one attaches to the passage in Section 50( 1) which reads: “. . . the Tribunal shall take as the basis of its considerations the principle that the preservation and encouragement of competition are desirable in the public interest . . .” 33 Walker, op. cft., p. 64; and Stevens and Yamey, op. cit., ch. 8.

1968 POLICY TRIBULATIONS OF A TRIBUNAL 15

On one view there are few decisive guidelines through the jungle of situation and circumstance, economic theory and social policy which constitutes Section 50. The Tribunal must decide for itself “the priority and relative weight” to be given to each of the conflicting interests. And the principle that competition is in the public interest, as stated in the Act, is no better than a “rebuttable presumption7’, that is, no more than a starting point in procedure, a “basis for consideration” which can be eroded by a series of reasonable arguments in favour of collusion or collaboration. Only “when the scales are otherwise even” does the restoration of competition become a conclusive considerati~n.~~ On another, quite different, view the Trade Practices Act does not leave

the issue nearly so wide open. The key phrase in Section 50( 1) becomes a directive, not a phrase indicating procedure. “The public interest in the preservation and encouragement of competition shall be the basis for its con~ideration”.~~ That is to say, free competition (the concept having been suitably interpreted by the Commissioner to bring out its advantages) is itself the primary benefit against which must be balanced or weighed the advantages of the agreement or practice.

The difference between these two views is not merely one of semantics. The former states that the loss of competition is only one factor in a range of possible detriments which may be set against the benefits claimed for an examinable agreement or practice in a sort of balance sheet procedure. The loss of competition has no stronger significance than, say, the convenience of consumers or the future of a group of small businessmen. The latter proposes a quite different test. In effect it states that competition is a norm for a free enterprise economy. Therefore, rather than operate a balance sheet technique, the Tribunal should instead ask the question: Can the restrictions contained in this agreement or practice undeniably accomplish benefits which competition cannot and which are at the same time substantial enough to warrant some sacrifice of the benefits and safeguards of competition? Obviously this constitutes a severer test if only because it will eIiminate a large number of agreements which, although fairly harmless in their operations, nevertheless do not offer any very great advantages.36 It is a more intelligible test, since it poses an objective for each situation reviewed instead of a woolly arithmetical exercise in which the Tribunal attempts to

34 Masterman and Solomon, op. dt., pp. 221-222. 35 Walker, op. cit., p. 76. 36111 the Restrictive Practices Court harmlessness is not a ground for exemption. See

Bkznket Manufacturns Agreement, L.R. 1 R.P., p. 208.

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add and subtract the ~nquantifiable.~T It should make a more attractive test for lawyers because, by introducing a public policy strand, it gives direction to thought and increases the possibility of preserving consistency in decisions. Best of all from the point of view of men of the law, the test is there, in plain words, awaiting interpretati~n.~~

For the economist the use of free competition as a bench-mark is also the more satisfactory test since it normally operates in an automatic fashion to provide safeguards for the consumer and efficiency in the distribution of resources. By contrast, an economic organisation dominated by agreements or practices which involve collaboration on matters of price, terms of trading, persons and places to be supplied and the quantities and qualities of goods and services to be offered, cannot provide consumer safeguards or economic efficiency in the same degree - or at least not without cumbersome and expensive official surveillance.

37 Indeed the “balance sheet” type of thinking would seem to be reserved for the examination of monopolisation cases. Section 50 (3), whiIe omitting any reference to competition as the basis of consideration, as it must in the nature of things, says: “In considering the public interest in relation to a practice of monopolisation, the Tribunal shall weigh against any detriment (including detriment competition) that has resulted, or can be expected to result, from the practice any effect of the practice as regards any of the matters referred to in paragraphs ( a) to ( f ) of the last preceding subsection if that effect ten& to establish that, on balance, the practice is not contrary to the public interest”. ( Italics supplied).

38 It is possible to restate the formal objectives of this type of statute to secure much the same effect. Instead of having free competition as the norm, the Act could specify, for the Tribunal’s guidance, a more generally understood criterion: the primacy of consumers’ and users’ interests. (The satisfaction of users’ and consumers’ demands is a criterion which also receives support from respectable, if academic, welfare theorems. See T. Scitovsky, Welfare and Competition, (London: Allen and Unwin, 1952), chs. 3 and 4 and the references therein). Dealing with restrictionsof competition in a free enterprise context the Tribunal, in practice, would be forced to make the same test as indicated above: can an agreement or practice undenkrbly accomplish (for consumers and users) benefits which competition cannot and which, at the same time, are substantial enough to warrant some sacrifice of the benefits and the safeguards of competition? It is worth noting that the relative simplicity and workability of the British Resale Prices Act 1964-in both law and economics-is due to precisely this factor: that the objectives of the Act are restricted to the interests of consumers and rigorously exclude the interests of other groups and indeed any other economic policy objectives. (See Stevens and Yamey, op. cit., pp. 86-87; and Hunter, op cit., pp. 226-230).