Competition Law

Australian Competition Law and Policy Discussion

C7 … again

Posted by Julie Clarke on 6 December 2009

Channel Seven believe that a number of media companies conspired to kill it’s pay-TV arm, C7, in contravention of sections 45 and 46 of the TPA.  In 2007 Justice Sackville delivered judgment against Seven, rejecting their conspiracy theory and observing that “Seven was the author of its own misfortune.”  Seven appealed the decision and last week the Full Federal Court delivered judgment rejecting that appeal.  It appears they have decided against further appealing the matter to the High Court, although officially it is still considering its options.

In dismissing the appeal, the majority of the Full Court (Justices Dowsett and Lander) disagreed with the primary judge, Justice Sackville, on two important points.  Both related to the requirement of ‘purpose’.

The first point related to who must have the requisite purpose to establish a contravention. Justice Sackville held that all parties responsible for including the provision must share the requisite anti-competitive purpose.  Justices Dowsett and Lander held that there was no such requirement for a shared purpose – it will suffice if any party to the agreement, responsible for including the provision, had the requisite purpose.

The second point of difference related to the effect of a purpose being ‘impossible to achieve’.  Justice Sackville concluded that for a breach to occur the purpose must be capable of being achieved.  The majority disagreed, holding that the ‘purpose’ element could be established even if that purpose could not, in fact, be achieved.

The c7 case has been a litigator’s dream.  Proceedings commenced in 2002 and trial judgment was delivered in 2007.  The trial lasted 120 days (one of the longest in Australian history), produced 85,654 documents comprising 589,392 pages (only 12849 of which were admitted into evidence), produced 1,028 pages of pleadings, 1,613 statements from lay witnesses, 2,041 pages of expert reports (plus appendices), 2,368 pages of written closing submissions by Seven and 2,594 pages of written closing submission from the Respondents (naturally supplemented by outlines, notes and summaries), a trial transcript running to 9,530 pages and resulted in a 1,200+ page judgment at a cost of more than $200m in legal fees (about the same amount as the claimed damages).  This was all described by Justice Sackville as “extraordinarily wasteful” and “bordering on the scandalous” and led him to caution against appealing the decision (see summary of trial judgment).  During the course of the trial it also led Justice Sackville to worry about the implications of his own mortality – the following passage from day 104 of the trial, is one of the most amusing I’ve seen yet (reproduced in LawyersWeekly):

Noel Hutley for News Ltd had said: “The worst thing that can happen in this case is that the timetable breaks down.”

His Honour: “The worst thing that can happen in this case is that the judge breaks down.”

Hutley: “Your Honour looks in glowing health. We check every morning.”

His Honour: “On January 1, 2006, Mr Hutley, when the temperature was 45 degrees, I climbed up on a ladder in order to clear the garage of our holiday home from leaves.”

Hutley: “You should have told us, your Honour, we would have done it.”

His Honour: “The bushfires were raging four or five kilometres away, so I did what every sensible home owner does, get up in the heat; and I fell and knocked myself unconscious and spent an evening in Gosford Hospital. I was unconscious for about 20 minutes and, when I came to my senses, the very first thought that crossed my mind was, ‘can I remember anything about the C7 case?’

“Unfortunately the answer was yes. It only goes to show, Mr Hutley the fragility of human existence.”

Seven did not heed Sackville’s warnings against appealing to its own detriment – more legal fees, more animosity between the parties and another long (about 350 pages) judgment to read.  The only winners were the lawyers.

I confess to having some interest in seeing the matter appealed to the High Court – the issue of the meaning of ‘purpose’ in the Trade Practices Act continues to fester and it would be useful to have some further clarity on the issue – particularly in light of the introduction of the new cartel laws.  But it is hard to imagine what Seven would gain from the litigation; I await their formal decision with interest.

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