ACCC v Baxter Healthcare Pty Ltd
Australia – 27 June – LAWFUEL – The Law News Network – The recent Federal Court decision in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (1) puts a question mark over the effectiveness of the Trade Practices Act 1974 (the Act) in combating anti-competitive conduct in connection with State and Territory government procurement.
Justice Allsop found that Baxter, a manufacturer and supplier of sterile fluids, had engaged in conduct that would have contravened sections 46 (as a misuse of market power) and 47 (as exclusive dealing) of the Act. However, his Honour held that the Act did not apply to that conduct by virtue of the principles of derivative Crown immunity.
The case related to long-term contracts between Baxter and the health purchasing authorities in NSW, QLD, WA and SA for the supply of sterile fluid products to public hospitals. The ACCC alleged that Baxter took advantage of its market power in the sterile fluids market (where it had a monopoly) for the purpose of harming competitors or preventing competitive conduct in a separate market for peritoneal dialysis (PD) products.
The ACCC claimed that Baxter did this by offering prohibitively high item-by-item prices to compel the States to agree to exclusive supply contracts for the supply of sterile fluids, bundled with PD products, for lengthy periods, in contravention of s46 of the Act. With respect to s47, the ACCC alleged that Baxter engaged in this conduct for the purpose and with the effect or likely effect of substantially lessening competition in the relevant PD products and other markets.
His Honour found that Baxter’s conduct in relation to one tender would have contravened s46 and in responding to requests for tender and negotiating the contracts in question with NSW, SA, WA and QLD would have contravened s47.
Despite these findings, Allsop J held that the principles of Crown immunity were applicable. To extend the operation of the Act to Baxter’s conduct would make it unlawful to perform obligations or take advantage of rights bargained for or granted contractually by the relevant State or Territory. His Honour said that the legal rights of the Crown would be directly affected.
Allsop J also held that the principle of Crown immunity shielded Baxter’s conduct from the application of the Act in relation to the commercial negotiations leading up to the formation of the impugned contracts. His Honour considered that the Act does not operate to make it unlawful for non-government parties to respond to tenders or invitations or to participate in negotiations with governmental bodies in an anti-competitive manner. His Honour recognised, however, that in some factual circumstances a party may not in fact be responding to a government requirement.
The ACCC has lodged an appeal to the Full Federal Court.
If the ACCC ultimately fails, there is likely to be a call for legislative change to ensure that those dealing with the State and Territory governments are fully subject to the operation of the Act – regardless of the impact on the legal position of the States and Territory governments themselves.
(1)  FCA 581. The judgment was issued on 16 May 2005, however, it was not published until 21 June following the resolution of confidentiality issues.