The Australian Competition and Consumer Commission is considering an appeal to the High Court following yesterday's decision of the Full Federal Court to dismiss its appeal against a decision by Justice Allsop that Baxter Healthcare Pty Ltd was protected by Crown immunity*.
The appeal arose from the decision of Justice Allsop who at trial found that Baxter was protected by Crown immunity in dealing with various state government departments. Justice Allsop found that without that protection Baxter would have breached the exclusive dealing and misuse of market power provisions of the Trade Practices Act 1974.
The Act generally applies to governments when those governments are carrying on a business. The Full Court, comprising Justices Mansfield, Dowsett and Gyles concurred with the findings of the trial judge that because Baxter was supplying state purchasing authorities which were not carrying on a business and therefore entitled to Crown immunity, the Crown immunity extended to protect Baxter from the proceedings brought by the ACCC.
The court noted that state procurement purchases are massive and that: "It is one thing to exempt the executive government from legislative prohibition as to conduct… It is another to have a substantial area of commerce in which restrictive practices can be carried on by all those dealing with a government, perhaps to the disadvantage of the public purchasing authority, but also to the detriment of other suppliers and consumers".
The State Governments of New South Wales, Queensland, South Australia and Western Australia, who were parties to the proceedings, took the position that companies contracting with them should be exempted from the Act in respect of dealings concerning those contracts.
ACCC Chairman, Mr Graeme Samuel said: "Obviously this is not the result for competition and consumers that we were seeking".
*The Full Federal Court dismissed the ACCC's appeal in which it sought findings that Baxter Healthcare Pty Ltd had breached the exclusive dealing and misuse of market power provisions of the Trade Practices Act 1974 when it entered long term contracts with state purchasing authorities bundling the supply of sterile fluids with peritoneal dialysis products used by people with kidney failure.
Release # MR 189/06
Issued: 25th August 2006
Background
The ACCC alleged that Baxter entered into long term, exclusive, bundled contracts of between three and five years which tied the supply of sterile fluids to the supply of peritoneal dialysis products which are used by patients with kidney failure, with each of the purchasing authorities in New South Wales, the Australian Capital Territory, Western Australia, South Australia and Queensland. Each State and Territory purchasing authority acquires these products for supply to publicly funded health facilities, including public hospitals.
On 16 May 2005 Justice Allsop handed down his judgment. He found one contravention of section 46 of the Act (in respect of Baxter's conduct in responding to South Australia's invitation in 2000 for tenders for supply of PD products, LVP fluids, PN fluids and Irrigating solutions for use in SA by health facilities) and a number of contraventions of section 47 (in respect of Baxter's conduct in responding to requests for tenders and negotiating the contracts in New South Wales, South Australia, Western Australia and Queensland). Justice Allsop held that this conduct was likely to hinder competition. However, he dismissed the ACCC's application on the basis that applying the principles of Crown immunity or derivative Crown immunity, the Act did not apply in the circumstances of the case. He held that to apply the Act to Baxter's conduct would be to make unlawful the performance of obligations or the taking advantage of rights bargained for or granted by a State or Territory in its contracts.
