French, Justice Robert --- "Authorisation and public benefit - playing with categories of meaningless reference?" (FCA) [2006] FedJSchol 24

4TH ANNUAL UNIVERSITY OF SOUTH AUSTRALIA
TRADE PRACTICES WORKSHOP

20-21 October 2006
Barossa Valley Resort

AUTHORISATION AND PUBLIC BENEFIT – PLAYING WITH CATEGORIES OF MEANINGLESS REFERENCE?

Justice R S French
Federal Court of Australia

Introduction

1. Pogo Possum, a cartoon character of the 1940’s, created by American cartoonist, Walt Kelly, is credited with the well known words:

‘We have met the enemy and he is us.’ [1]

The saying can be reframed to apply to very broad legal standards whose scope and content are left to the discretion and perhaps imagination of decision-makers. Of them we can say:

‘We have met the standard and it is us.’

2. ‘Public benefit’, as a statutory standard, seems to fit that description. It opens the door to a multi-dimensional universe of discourse. Taken in isolation it is capable of meaning anything, and of attracting any criteria of evaluation that the person invoking it thinks are good. Under the Trade Practices Act 1974 (Cth) it informs the exercise of the power of the Australian Competition and Consumer Commission (the Commission) to authorise conduct which could otherwise contravene competition law. It may be ‘weighed’ against incommensurable detriments. This paper considers the nature of the decision-making process involved in applying the public benefit test and in a general way the limits applicable to it. It is helpful to begin with a brief reference to some historical analogues and antecedents.

Public benefit, public interest and other like terms

3. There is nothing new under the sun. It is a long and honourable tradition of the judge-made law to develop criteria that require policy-based approaches to the decision of legal questions. Concepts such as ‘reasonableness’ in the law of tort, its now deceased companion ‘proximity’, ‘unconscionable conduct’ in equity and ‘legitimate expectation’ in public law are all examples. Statute law has multiplied beyond number the cases in which administrators and judges are invited to apply similar language. Such terms do not define legal rules. Rather they confer power on administrators and judges to make decisions based on criteria which they develop for themselves within a vaguely defined normative universe of discourse.
4. Judicial use of ‘public benefit’ and like expressions as a standard of legal excuse or justification has a history. In 19th century England, for example, it was an actionable nuisance for a riparian land owner partly to obstruct a publicly navigable river by erecting mooring posts or jetties on the riverbed. The nuisance could be excused if the conduct generated a public benefit. There was debate about the scope of that concept. One view was that if the construction meant goods could be brought to market in better condition and at smaller expense, the public would benefit.[2] A narrower test, which prevailed, was that the benefit must be to the same public who used the river and must be a direct benefit.[3] It had to be of a similar nature to the nuisance showing that, on the balance of convenience and inconvenience the public at that place would not only lose nothing but gain something by the erection.[4]
5. A closer analogy for present purposes is found in the common law doctrine relating to covenants in restraint of trade. All such covenants are ‘prima facie unenforceable at common law and are enforceable only if they are reasonable with respect to the interests of the parties concerned and of the public’.[5] A classic formulation by Lord Macnaghten was thus:

‘It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable – reasonable that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.’ [6]

6. A conservative approach to public interest would assess whether a restraint is reasonable, not by reference to potential economic advantages and disadvantages to the public, but by asking whether it amounts to an unreasonable limitation of liberty to trade.[7] A less restrictive view is that the public interest covers ‘the public welfare’ or ‘general utility’ to the public which as Chitty on Contracts says is:

‘A meaning which, though compelling the court to secure a difficult balance between this objective of public benefit and the other one of fairness to the individual trader, would be the modern equivalent of the ‘pernicious monopoly’ of ancient times and would harmonise well with modern statutory philosophy against monopolistic practices that are inconsistent with welfare objectives.’ [8]

7. The Monopolies and Mergers Commission in the United Kingdom set up under the Monopolies and Restrictive Practices (Inquiry and Control) Act 1948 was empowered to make orders in relation to ‘monopoly conditions’ operating against the public interest in connection with the supply, processing and export of goods. The Restrictive Trade Practices Act 1956 (UK) authorised the Restrictive Practices Court to declare whether restrictive agreements affecting production, supply and processing of goods were against the public interest and, if so, to declare the restrictive agreements void. The system was extended to services by the Restrictive Trade Practices Act 1976.[9] The 1976 Act required the Restrictive Practices Court to be satisfied that a restriction was not unreasonable having regard to the balance between circumstances of benefit to the public and any detriment to the public resulting from, or likely to result from, the operation of the restriction. The Court had to consider whether removal of the restriction would deny to the public as purchasers, consumers and users of goods ‘specific and substantial benefits and advantages’. In so doing it had to consider a future with and without the restriction. Interestingly, there was debate about whether the parties to a restrictive agreement were part of the public whose benefit could be considered.[10] It was uncontroversial that if prices were lower with the restriction than under free competition without the restriction there was a specific and substantial benefit to be lost.[11]
8. A similar balancing test was established under the Resale Prices Act 1976. Goods might be exempted under that Act if it appeared to the Restrictive Practices Court that the detriment to the public as consumers or users of goods flowing from maintenance of minimum resale prices would be outweighed by the detriment if those prices were not maintained.[12] Detriments included effects on the quality and variety of goods available for sale. Health and safety issues and services provided with or after sales were also specified.
9. It is likely that the functions of the former Restrictive Practices Court in England would be viewed in Australia as administrative rather than judicial, more akin to those of the Australian Competition Tribunal, than those of a Court. The concept of ‘court’ in England and of ‘judge’ seems wider than in Australia confined as it is, at the Federal level, by constitutional concepts of judicial power.
10. In Australia the Trade Practices Act 1965 (Cth) empowered the Trade Practices Tribunal to prohibit anti-competitive conduct ‘against the public interest’. This covered matters such as the needs and interests of consumers, employees, producers, distributors, importers, exporters, proprietors and investors. It also covered the needs of small business, the promotion of new enterprises and the need to achieve the full and efficient use and distribution of labour, capital, materials, industrial capacity, industrial know-how and other resources. Efficient and economical means of production, provision, treatment and distribution of goods and services of a quality, quantity and price to best meet the requirements of domestic and overseas markets was a relevant matter. So too was the ability of Australian producers and exporters to compete in overseas markets.[13]
11. Public interest and public benefit criteria have a long history in the law. The idea of using them to excuse or authorise anti-competitive conduct has been in existence in one form or another for a long time. The interesting feature of the public benefit criterion for authorisation under Australia’s law however is its width. That raises, at the outset, a rule of law question about its limits. It also raises the question whether authorisation is essentially administrative in character and whether it could conceivably be undertaken by a Court. Before turning to those questions it is useful to give a brief overview of the authorisation provisions.

Overview of the authorisation provisions

12. Australia’s original competition legislation, the Australian Industries Preservation Act 1906 (Cth), was modelled on the Sherman Act 1890 (US). It did not provide for authorisation to disapply any of its prohibitions. It included a requirement that the Court be satisfied that conduct be ‘to the detriment of the public’. In the Trade Practices Act 1965 there was a procedure established for registration and examination of anti-competitive agreements or practices which could be prohibited if held by the Trade Practices Tribunal to be against the ‘public interest’.
13. Under the Trade Practices Act 1974, as originally enacted, certain conduct, which might otherwise be prohibited under Pt IV, could be authorised if it were likely to result in a ‘substantial’ benefit to the public which would not ‘otherwise be available’. When the Act was reviewed in 1976 the Swanson Committee recommended that the test be made less onerous. The Committee said that competitive behaviour is to be valued for the benefits that it brings to the community at large. It went on:

‘However, if in a given case it can be shown that public benefits, ie,not merely benefits to the parties to the restrictive conduct, are available, and that those benefits outweigh the benefits to the public foregone by the absence or restriction of competition, then that conduct should be permitted to continue. In other words, we still favour the maintenance of the primary position that competitive behaviour is to be preferred, but that many who engage in restrictions of competition should be able to obtain an authorisation if they can show that on balance there are public benefits that outweigh the effects on the public of the restrictions on competition.’ [14]

Following the 1977 amendments the public benefit tests under the authorisation provisions of the Act entered what is substantially their present form.

14. The Trade Practices Act 1974 is made under the power conferred on the Parliament of the Commonwealth to make orders with respect to foreign corporations and trading and financial corporations formed within Australia. It also relies, in its extended operation, upon a variety of other specific heads of legislative power.
15. The brief long title of the Act describes it as ‘An Act relating to certain Trade Practices’ and its stated object, inserted in 1995, is ‘... to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection’. To that end, although its core provisions predated the objects statement by 21 years of the Act’s prior history, Part IV prohibits a range of anti-competitive conduct under the global title ‘Restrictive Trade Practices’.
16. The classes of conduct prohibited by Part IV include:
    1. Contracts, arrangements or understandings which have the purpose or have or are likely to have the effect of substantially lessening competition (s 45).
    2. Contracts, arrangements or understandings fixing, maintaining or controlling prices (ss 45 and 45A).
    3. Secondary boycotts and boycotts affecting overseas trade and commerce (ss 45D and 45DB).
    4. Contracts, arrangements or understandings preventing or hindering the supply or acquisition of goods or services (s 45E).
    5. Misuse of market power (ss 46 and 46A).
    6. Exclusive dealing (s 47).
    7. Resale price maintenance (s 48);
    8. Acquisition of shares or assets that would have the effect, or be likely to have the effect, of substantially lessening competition (s 50).
17. Part VII of the Act empowers the Commission to authorise conduct which might otherwise contravene certain of the provisions of Pt IV. When so authorised the relevant prohibitions do not apply to that conduct. The power to authorise such conduct is expressed to be subject to a public benefit test, variously formulated, which is to be assessed by the Commission. The provisions which can be disapplied in this way are ss 45, 45A, 45D, 45DA, 45DB, 47, 48 and 50. Misuse of market power contrary to s 46 cannot be authorised.
18. The power to authorise conduct is conferred on the Commission by s 88 of the Act. Its effect in relation to the disapplication of the prohibitions under Pt IV is also set out in that section. The tests for authorisation are contained in s 90.
19. The tests for authorisation fall into three broad categories[15] and here the term ‘conduct’ is used as including contracts, arrangements, understandings and covenants, as well as conduct as defined in the Act:
    1. That the proposed conduct would result, or be likely to result, in a benefit to the public and that benefit would outweigh the detriment to the public constituted by any lessening of competition that would result, or be likely to result, if the proposed conduct were engaged in (ss 90(6) and 90(7)). This test applies to s 45 and related provisions importing a competition test for their contravention.
    2. That the proposed conduct will result, or be likely to result, in such a benefit to the public that it should be allowed (s 90(8)). This test applies to exclusive dealing in exclusionary provisions, boycotts and resale price maintenance where a competition test is not applicable.
    3. The third test is applicable to acquisitions covered by s 50 and requires that in all the circumstances the proposed acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to take place (s 90(90)).
20. Only in respect of the authorisation of s 50 conduct are there factors which the Commission is expressly required to take into account as benefits to the public. They are:

(i) a significant increase in the real value of exports;
(ii) a significant substitution of domestic products for imported goods.

The Commission is also required to take into account all other relevant matters that relate to the international competitiveness of any Australian industry. None of this exhausts the concept of public benefit for the purposes of determining whether a proposed merger or acquisition should be authorised.

Public benefit and Public law

21. The width of the concept of public benefit was declared by the Trade Practices Tribunal in QCMA[16] in 1976 when it said:

‘... we would not wish to rule out of consideration any argument coming within the widest possible conception of public benefit. This we see as anything of value to the community generally, any contribution to the aims pursued by the society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress.’ [17]

The Tribunal added that the wider concept of public benefit had to be ‘severely qualified by reference to the requirements that it be the result, or likely result, (in that case of the acquisition), (2) that it was not otherwise available; and (3) that it was ‘substantial’’. The latter two requirements do not now apply. The severity of the qualification is questionable.

22. The concept of public benefit applies, under the Trade Practices Act 1974 (Cth) (the Act), in the context of authorisation and to that extent is limited by its procedural and subject matter setting. It must be ‘public’, a term which has been construed as referring to the Australian public.[18] Beyond that there is no express limit on its content. It has the ring of an unfettered discretion strengthened as appears below by the other wide ranging criteria which the Commission is to apply.
23. It is an important principle of Australian public law deriving from concepts of the rule of law and our constitutional framework that there is no such thing as an unfettered discretion. The common law principle was stated by Lord Denning MR in 1971:

‘The discretion of a statutory body is never unfettered. It is a discretion which is to be exercised according to law.’ [19]

Kirby J put the same proposition in its Australian context when he said:

‘No parliament of Australia could confer absolute power on anyone.’ [20]

24. The exercise of official power in Australia is derived from statutes made under the written constitutions of the Commonwealth and the States and, in the cases of executive or prerogative power, directly from those constitutions. But no official power can exceed the limits set by those instruments. A truly unfettered discretion conferred by a Commonwealth law could travel beyond the limits of the constitutional head of power upon which the statute creating it is based. It is a general principle of interpretation that every statutory power is confined by the subject matter, scope and purpose of the statute which creates it.[21] The internal logic of the statute requires no less.
25. The ‘public benefit’ factor in s 90 is confined to by its application to the authorisation of limited classes of conduct and the requirement that it be causally related to the conduct authorised. But within those constraints the range of matters that may be brought into account under the rubric of public benefit is not in terms limited. Many, if not most cases will focus on questions of economic efficiency. But the scope and purposes of the Act and even its stated objects do not impose any well-defined constraint upon matters which may be considered as benefits.
26. The word ‘benefit’ itself of course may suggest a link to some sort of community sense of what is a good thing and what is a bad thing. If conduct which it is sought to authorise has benefits but involves illegality under some other statute of the Commonwealth or a State or Territory or may otherwise be contrary to public policy evidenced in statute or common law then it may be held not to give rise to a ‘benefit’ for that reason.[22]
27. The other side of the public benefit coin is the risk of ‘detriment to the public’ under s 90(6) and 90(7). This covers ‘... any impairment to the community generally, any harm or damage to the aims pursued by the Society, including as one of its principal elements the achievement of the goal of economic efficiency ...’.[23] The concept of ‘detriment’ is ‘wider than the notion of anti-competitive effect’, although normally the most important detriments will have that character. The relevant detriment flows from the anti-competitive effect of the conduct for which authorisation is sought.[24] Other detriments which may be intrinsic to and therefore detract from, the claimed public benefit may also be relevant in the weighing of that benefit.[25]

Authorisation – essentially administrative

28. Authorisation does not change the law. It is not a legislative process. The Act provides that certain of its prohibitions do not apply to conduct which is authorised. So it limits its own application. Authorisation is essentially administrative.
29. A somewhat analogous example of administrative disapplication of a particular provision of the law existed under provisions of the Income Tax Assessment Act 1936 (Cth) governing the rate at which trust income should be taxed. Sections 99 and 99A of that Act provided for different rates of tax on the same trust estate. The higher rate applied under s 99A. The section provided, however, that if the Commissioner thought it unreasonable that the section should apply, then it would not apply and tax at a different rate would be imposed under s 99. The Commissioner was required to have regard to a number of matters set out in s 99A but also to ‘such other matters, if any, as he thinks fit’.
30. In Giris Pty Ltd v Federal Commissioner of Taxation [1969] HCA 5; (1969) 119 CLR 365, the High Court held s 99A to be valid. Barwick CJ observed that the Commissioner could choose which section was to apply in the exercise of what he called ‘a legislative discretion’ (372). He said (at 372):

‘I have been unable to find any content for the word “unreasonable” in the context of the two sections except considerations of a kind upon which a legislature acts in deciding whether an enactment or its particular terms are or are not unreasonable having regard to the interests of the public generally, of the citizen to be affected, of the revenue and of the requirements of those policies, political, economic and fiscal which the Parliament is prepared to sanction.’

He went further and said, disapprovingly, (at 372):

‘This view of the discretion gives to the Commissioner a wide charter which it might have been thought he was ill-equipped to exercise. What he is required to decide, in my opinion, is in truth a function of the legislature, rarely delegated to an official.’

The term ‘legislative discretion’ does not seem to have been used by Barwick CJ in the constitutional sense of legislative power. It was rather a way of drawing attention to the width of the Commissioner’s discretion. He identified, as a vice of the legislative scheme, that the taxpayer would not know what impact the law regarding income tax would have upon him. Put another way, there was no certainty about the rate of income tax that would be levied upon trust estates where the discretion was invoked. The question of predictability and the role of consistency and policy and the use of guidelines in the exercise of wide discretions is of significance in this context. It is also significant for the authorisation process.

31. Kitto J had no difficulty in rejecting the notion that s 99A involved a transfer of legislative power to the Commissioner. He accepted the proposition that the operation of the law with respect to taxation could validly be made to depend upon the formation of an administrative opinion or satisfaction upon a question (at 379). Menzies J described the section as conferring ‘an extraordinary responsibility on the Commissioner of Taxation’. He noted the absence of any ‘common principle’ underlying the factors which the Commissioner was required to take into account which would give him a lead to other matters to which he might have regard. He said (at 381):

‘The enactment of such a provision can only be regarded as an acknowledgement by the legislature of its inability to make laws laying down prospectively what will give rise to a particular taxation liability.’

32. Windeyer J saw the Commissioner’s discretion as ‘apparently at large’. He went on to say (at 384):

‘However I assume that he is to be guided and controlled by the policy and purpose of the enactment, so far as that is manifest in it. That would exclude from his consideration any matter which it would be unlawful for him to take as a criterion, such as the State of residence of a trustee or of the beneficiaries of a trust. It would also, I think, exclude all merely fanciful and prejudiced tests which were hypothetically suggested in argument, such as vocation, religion, colour of skin or hair.’

The latter observation points to the outer limits of any wide discretion. Where a term such as ‘public benefit’ is used, there is necessarily a link to some criteria which distinguish the good from the bad and the merely indifferent. This must ultimately be rooted in a perception of widely shared community values.

33. The difficulties that the High Court had in discerning the limits of the Commissioner’s discretion under s 99A which had a relatively narrow focus are magnified in the case of the public benefit test in Pt VII which must have a content sufficiently wide to be capable of offsetting different kinds of detriment flowing from the anti-competitive acts of a wide variety of conduct covered by Pt VII.
34. The nature of authorisation can be examined by asking whether it is a function exclusively administrative in character or one which could be undertaken by a court. Administrative bodies such as the Australian Competition and Consumer Commission and the Australian Competition Tribunal do not exercise the judicial power of the Commonwealth. They cannot do what is reserved to Courts exercising federal jurisdiction by Chapter III of the Constitution. A judge who sits on the Australian Competition Tribunal does not act judicially, but in an administrative capacity. On the other hand, a court exercising federal jurisdiction can only act as a court. It cannot engage in administrative decision making except such as may be incidental to its judicial role. As Sir Isaac Isaacs said in 1926:

‘... some matters so clearly and distinctively appertain to one branch of government as to be incapable of exercise by another.’ [26]

35. There are some classes of decision making however which are administrative when done by an administrative body and judicial when done by a court. They are sometimes called ‘chameleon’ functions. Isaacs J described them thus:

‘Other matters may be subject to no a priori exclusive delimitation, but may be capable of assignment by Parliament in its discretion to more than one branch of government.’ [27]

36. An example of a chameleon function is the determination of whether a person is eligible for extradition. Under the Extradition Act 1988 (Cth) it is determined at first instance by a magistrate acting, not as a court, but in an administrative role. The magistrate’s decision can be reviewed on the merits by a court exercising federal jurisdiction which is then acting judicially.[28] The Registrar of Trade Marks acts administratively when deciding to grant or withhold registration of a trade mark, but may be reviewed on the merits (not merely for error of law) by the court. The function of the court in such a review is judicial.[29] For an administrative function to be capable of changing its character to a judicial function it should ordinarily involve the application of legal rules to ascertained facts, the determination of rights, liabilities or status and the grant or refusal of relief. This form of reasoning also applies to the example given earlier about the enforceability of covenants in restraint of trade. The legal rule is that the covenant is unenforceable unless reasonable by reference, inter alia, to the public interest. The rule is applied to the particular covenant involved. It may be that reference is had to factual matters comprising the context in which the covenant was created. Although involving a public interest evaluation, the approach is essentially judicial.
37. Authorisation is administrative in character because it is not concerned with a dispute between parties or the determination of rights, liabilities or status. Nor is it to be compared to a judgment in rem which is good as against the whole world. An application for authorisation is not a proceeding to resolve a justiciable controversy. It may be opposed by particular parties but not necessarily. The public benefit test invites consideration of the impact of the proposed conduct on a range of interests and allows for administrative inquiries. It involves what is sometimes called in public law discourse ‘polycentric decision making’ which courts are not institutionally competent, nor constitutionally authorised, to do. The process of investigation, receipt of submissions from interested groups and parties, the consideration of their roles and interests in the relevant market and the compromises which may be reflected in conditional authorisations lie beyond the functions of courts.
38. Courts have regard to policy considerations in the development of legal standards just as they may make evaluative and normative judgments. But these things are done within the general framework of judicial decision making.
39. The characterisation of authorisation as administrative flows in part from the very width of the public benefit test and the open-ended nature of the fact finding processes associated with it. That in turn raises a question about the extent to which the Commission in its authorisation decisions can aspire to consistency. It raises the related question about the extent to which the Commission can establish non-statutory guidelines about its approach to authorisation in particular classes of case.

The elements of the authorisation process

40. It has been said by the Australian Competition and Consumer Commission that the authorisation process allows it ‘... to grant immunity on public benefit grounds for conduct that might otherwise breach the competition provisions of the TPA’.[30] This could be read as suggesting that authorisation is a kind of dispensation from the rigors of the law. In the Commission’s paper published in July 2004 it said:

‘The authorisation process is necessarily a thorough and rigorous process, given that what is being contemplated is immunity from the law.’

There can be no complaint about a requirement that the authorisation process be thorough and rigorous. However the disapplication of the prohibition under the Act is contemplated by the Act itself on the application of a public benefit balancing test. It reflects a legislative intention that certain types of anti-competitive conduct should not be subject to the prohibitions if the public benefit of their proposed conduct outweighs the anti-competitive detriment or otherwise satisfies the requirements of authorisation. While Pt IV of the Act is directed to the maintenance of workable competition, the authorisation provisions recognise that legitimate public benefits can flow from conduct otherwise prohibited. They recognise that competition is not ‘a theory of everything’ when it comes to the public interest. Or as a famous American cosmologist once remarked, ‘There is more to everything than meets the eye’. The political pressures to amend the Act in various ways in the interests of particular groups such as small business, exemplify that reality.

41. The proposition that competition, and indeed economic efficiency, is not everything is reflected in the observations of the Australian Competition Tribunal in Qantas. The Tribunal eschewed the notion that the net public benefit test for authorisation under s 90 has as its sole objective the promotion of efficient resource allocation (at [180]):

‘The authorisation provisions of the Act, unlike those of Pt IV, are not solely concerned with the promotion of competition or the achievement of a socially efficient allocation of resources. The test for authorisation does, after all, provide for a balancing of public benefit against anti-competitive detriment, which necessarily calls on us to consider policy imperatives and broader social values and balance those against competition concerns.’

The Tribunal quoted, with approval, the words of the Tribunal in Re 7-Eleven Stores:

‘We cannot rely upon the functioning of competitive markets to deliver everything ‘of value to the community generally’.’

42. It is notable in this context that s 90(10) provides for an application for certain classes of authorisation to be deemed granted if not determined by the Commission within a certain timeframe. This arguably evidences a legislative intention that certain prohibitions can be disapplied, regardless of the balance of detriment and benefit, by reason of administrative failure or incapacity.
43. A legal analysis of the decision-making framework within which the Commission operates under Pt VII reveals a number of elements which allow for a range of possible outcomes on any given set of facts. The first is the discretionary character of the power conferred upon the Commission by s 88 of the Act to authorise conduct involves the exercise of a discretion. Section 88(1) begins with the words:

“Subject to this Part, the Commission may, upon application by or on behalf of a corporation, grant an authorisation to the corporation.’

A similar form of words is used in the other parts of s 88. The discretion is expressed to be ‘Subject to this Part’. That requires that the necessary conditions for its exercise under s 90 must be satisfied. But that satisfaction does not mandate authorisation. The Commission appears to have a discretion to refuse authorisation even where the public benefit test has been satisfied. For the framing of the test in s 90 is prefaced by the words ‘The Commission shall not make a determination granting an authorisation ... unless it is satisfied ...’.

44. What is the significance of the discretion? Once the Commission is satisfied that the public benefit of proposed conduct outweighs its anticompetitive detriment or is such that the conduct ought to be allowed, there would seem little room left for any legitimate basis for refusal of authorisation. The exercise of the discretion would have to have regard to the stated object of the Act under s 2, but that object will already have been taken into account in the public benefit assessment. A refusal to grant authorisation despite a positive public benefit assessment would necessarily have to identify factors extraneous to the public benefit test, which warranted refusal of authorisation. It is not easy to imagine what they would be.
45. Where, as in most cases, neither the apprehended detriment nor the promised benefit is a certainty, the Commission is required to have regard to ‘likelihoods’. The Tribunal in QCMA put it thus:

‘We are to be concerned with probable effects rather than with possible or speculative effects. Yet we accept the view that the probabilities with which we are concerned are commercial or economic likelihoods which may not be susceptible of formal proof. We are required to look into the future but we can be concerned only with the foreseeable future as it appears on the basis of evidence and argument relating to the particular application.’

46. To the extent that this assessment of likelihood imported the concept of a balance of probabilities, it is not reflected in subsequent judicial construction of words importing likelihood in the Act. The Tribunal in Qantas applied what was said about the likelihood of a substantial lessening of competition in Australian Gaslight Company v Australian Competition and Consumer Commission (No 3) [2003] FCA 1525 at [348]:

‘The assessment of the risk or real chance of a substantially lessening of competition cannot rest upon speculation or theory. To borrow the words of the Tribunal in the Howard Smith case, the Court is concerned with ‘commercial likelihood relevant to the proposed merger’. The word ‘likely’ has to be applied at a level which is commercially relevant or meaningful as must be the assessment of the substantial lessening of competition under consideration.’

The Tribunal said (at [156]):

‘Thus for a benefit or detriment to be taken into account, we must be satisfied that there is a real chance, and not a mere possibility, of the benefit or detriment eventuating. It is not enough that the benefit or detriment is speculative or a theoretical possibility. There must be a commercial likelihood that the applicants will, following the implementation of the relevant agreements, act in a manner that delivers or brings about the public benefit or the lessening of competition giving rise to the public detriment. We must be satisfied that the benefit or detriment is such that it will, in a tangible and commercially practical way, be a consequence of the relevant agreements it carried into effect and must be sufficiently capable of exposition (but not necessarily quantitatively so) rather than ephemeral or illusory, to use the words of the Tribunal in Re Rural Traders Cooperative (WA) Ltd at 263.’

It can be seen that as in other ‘likelihood’ judgments in the Act, there is an evaluative and purposive element involved.

47. The level of likelihood of detriment must be relevant to the market with which the Commission is concerned. Benefit is not a concept relevant only in a market. It has a wider application. The assessment of a relevant level of likelihood where a benefit is concerned is in that sense more difficult. No doubt, in the assessment generally a moderate risk of a very significant detriment will weigh more heavily in the balance than a high risk of a minor detriment.
48. The Tribunal is also required to have regard to ‘all the circumstances’ in each of the authorisation tests prescribed by the Act. This is hardly a limiting factor. Of this criterion the Tribunal in Re QIW Ltd (1995) 132 ALR 225 said (at 234):

‘The examination of “all the circumstances” must in our view involve the tribunal in an examination of matters of detriment, including anti-competitive detriment, in order to conclude whether in all the circumstances there is such a degree of benefit to the public that the acquisition should be allowed to proceed ...’

This throws little light upon the range of ‘circumstances’ outside detriment, benefit and likelihood that the Tribunal is required to consider.

49. Perhaps one of the most difficult elements of the authorisation process in the competition test provisions is that which requires the judgment whether benefit to the public would ‘outweigh’ anti-competitive detriment. Where benefit is to be assessed by reference to criteria of economic efficiency, then at least benefit and detriment are more or less in the same universe of discourse. Where a wider range of benefits is brought into the equation the concept of ‘weighing’ cannot import a quantitative basis for comparison. As the Tribunal said in Qantas (at [208]):

‘All other things being equal, detailed quantification is the best option. However, quantification at all costs is not required by the Act, and has never been sought by the Tribunal. There are diminishing returns to the quantification exercise. Benefits should be quantified only to the extent that the exercise enlightens the Tribunal more than the alternative of qualitative explanation.’

And (at [209]):

‘Benefits cannot be quantified in monetary terms, they can still be claimed in qualitative terms. The authorisation test is, after all, a balancing exercise that requires judgment over a wide range of tangible and intangible factors. The final result will depend upon the relative weight assigned to each of these factors.’

50. Where a quantifiable detriment is to be weighed against a quantifiable benefit, assuming the quantification is real and not just a cover for qualitative judgment, then at least there is some conceptual consistency between the quantities being compared. The exercise acquires something of an air of unreality in a quantitative sense when regard is had to possible discounting based on relative likelihoods of detrimental and beneficial outcomes. The assessment of those likelihoods, even if assigned, a number must be qualitative in the sense already discussed.
51. Where quantifiable factors are weighed against unquantifiable factors or a mix of both, the exercise is inescapably one of qualitative judgment.
52. In relation to the per se prohibitions, the question is whether the public benefit is such that the conduct ‘should be allowed’. This goes beyond the consideration of anti-competitive detriment and requires recognition of the unqualified nature of the statutory prohibition that otherwise applies. The Tribunal observed in Qantas that in a number of previous decisions it had expressed the view that the test for authorisation is the same whether or not the provisions under consideration constitute a contract, arrangement or understanding governed by s 90(6) or (7), or an exclusionary provision or acquisition governed by ss 90(8) or (9).[31] However in a later decision in 2004, the Tribunal observed that although weighing of benefit and detriment was involved in both tests, it did not follow that they were precisely the same in all circumstances. While the test under s 90(6) and (7) is confined to a consideration of detriment flowing from a lessening of competition, the test under s 90(8) and (9) may not be so confined and could include a broader category of detriment. [32] The Tribunal in Qantas did not resolve the question of the correctness of the distinction. That is because no detriment was put to it other than detriment arising from a lessening of competition. As a matter of statutory construction however, there does seem to be implicit a distinction reflecting the policies underpinning the different authorisation tests.
53. The various elements of the authorisation process referred to confer upon the Commission considerable room to move. The criteria for decision making that are set out would all qualify, to a greater or lesser extent, as ‘categories of meaningless reference’. That was a term adopted by the late Professor Julius Stone to describe legal criteria whose application is so vague as not to be informed by any meaningful principle. In that sense the authorisation process involves the application of categories of meaningless reference. How then is predictability in its application achieved?

Guidelines, policies and precedents

54. It is evident that the only way in which predictability can be achieved in this area of administration of the competition laws is through the build up of a body of decisions over many years reflecting generally consistent approaches to like cases. There is, however, no doctrine of stare decisis which binds administrative decision makers. On the other hand, the unequal treatment of identical cases may give rise to a judicial review challenge on the basis that there has been discrimination by reference to some irrelevant consideration. The regulator may make lists of things which it has treated in the past, and generally in the present, treats as benefits and detriments. Given the scope of those concepts such a list can never be exhaustive. Nor can it lead to confident predictions of the relative weightings accorded to different combinations of benefit and detriment in particular cases. There is no principle to be derived from the statute which confines the inescapably evaluative and normative and policy judgments which are involved.
55. The publication of policies and guidelines to the way in which the Commission approaches its task is, of course, perfectly legitimate. Many administrative agencies exercising wide statutory discretions publish such guidelines. However they cannot bind the decision maker in such a way as effectively to fetter the narrow the discretion or range of considerations open to its consideration.
56. The build up over time of a body of precedents, the attempt so far as possible to achieve consistency and the familiarity of the regular actors with the practices and approaches of the decision maker will assist in achieving a degree of predictability.
57. The criteria by which authorisation is given involve categories of meaningless reference which allow the regulator to make policy-based choices. But there is nothing new about that. Judges have been doing it for years.

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[1] These words rephrase the message from Commodore Perry to General Harrison in 1813 after the Battle of Lake Erie, ‘We have met the enemy and they are ours.’
[2] R v Russell [1827] EngR 487; (1827) 6 B & C 566.
[3] Attorney General v Terry (1874) LR Ch App 423 at 427.
[4] Ibid at 428.
[5] Chitty on Contracts, Vol 1, General Principles, 29th ed Sweet and Maxwell 2004 at 16-075.
[6] Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] UKLawRpAC 52; [1894] AC 535 at 565. See also Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1967] UKHL 1; [1968] AC 269 and the recent discussion of the doctrine in the High Court in Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126.
[7] Texaco Ltd v Mulberry Filling Station Ltd [1972] 1 WLR 814 at 827-828.
[8] Chitty,op cit at 16-094 referring to the Competition Act 1998 (UK) and Articles 81 and 82 of the Treaty of Rome.
[9] Halsburys Laws of England, 4th ed, Vol 47, par 72.
[10] Halsburys Laws of England, 4th ed, Vol 47, p 408, Minute Note 5.
[11] Halsburys Laws of England, 4th ed, Vol 47, par 209.
[12] Halsburys Laws of England, 4th ed, Vol 47, par 242.
[13] Trade Practices Act 1965 (Cth) s 50(2).
[14] Trade Practices Act Review Committee, Report to the Minister of Business and Consumer Affairs (1976) pars 11.14 and 11.15.
[15] It has been said that the tests are for all intents and purposes identical – Re Media Council of Australia (No 2) (1987) ATPR 40-774.
[16] Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169
[17] Ibid at 182-183.
[18] Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385; Re Rural Traders Co-operative (WA) Ltd (1979) 37 FLR 244 and see Qantas Airways Ltd [2004] A Compt T 9 at [199] excluding certain benefits to foreign shareholders.
[19] Breen v Amalgamated Engineering Union [1971] 2 QB 175 at 190 and see generally Wade and Forsyth, Administrative Law, (9th Ed, Oxford University Press, 2002) at 356-359.
[20] Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at [69] – [70]. See also Hot Holdings Pty Ltd v Creasy [1996] HCA 44; (1996) 185 CLR 149 at 171.
[21] Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 (Dixon J), 496 (Latham CJ); R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd [1979] HCA 62; (1979) 144 CLR 45 at 49-50; FAI Insurances Ltd v Winneke [1982] HCA 26; (1982) 151 CLR 342 at 368 (Mason J); Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40 (Mason J); O’Sullivan v Farrer [1989] HCA 61; (1989) 168 CLR 210 at 216 and Oshlack v Richmond River Council [1998] HCA 11; (1980) 193 CLR 72 at 84.
[22] Hospital Benefit Fund of Western Australia v Australian Competition and Consumer Commission (1997) 76 FCR 369.
[23] Re 7-Eleven Stores Pty Ltd (1994) ATPR 41-357 at 42,683 and see also Qantas at [150].
[24] QCMA at 184.
[25] Re Southern Cross Beverages Pty Ltd (1981) 50 FLR 176.
[26] Federal Commissioner of Taxation v Munro [1926] HCA 58; (1926) 38 CLR 153.
[27] Ibid at 178 and see Aston v Irvine [1955] HCA 53; (1955) 92 CLR 353.
[28] Pasini v United States of Mexico (2002) 209 CLR 246
[29] Farbenfabriken Bayer Aktiengesellsthaft v Bayer Pharma Pty Ltd (1959) 11 CLR 652; R v Quinn; Ex parte Consolidated Food Corporation [1977] HCA 62; (1977) 138 CLR 1.
[30] Australian Competition and Consumer Commission – Authorising and Notifying Collective Bargaining and Collective Boycott Issues Paper, July 2004 at p 3.
[31] Re Media Council of Australia (No 2) (1987) 88 FLR 1 at 9; Re 7-Eleven Stores at 42,654.
[32] Re Australian Association of Pathology Practices Inc (2004) 206 ALR 71 at [86] – [93].