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Woolworths gambles... and loses

The recent Federal Court decision in relation to the Australian Competition and Consumer Commission (ACCC) action against Woolworths Limited and Liquorland (Australia) Pty Ltd has been an interesting case study of both issues relating to anti-competitive behavior, as well as in the different paths taken by the companies involved.

There's been a few good commentary pieces on the decision worth reading, such as these by people at Minter Ellison and Freehills; the latter with some discussion as to the trade practices law limits on action to protect one's business. One interesting aspect not particularly examined was the decision by Woolies to fight through to the a hearing, especially after its co-accused, Liquorland, bowed out in the face of what seems to be rather clear evidence.

The basic facts

The facts set out in the judgement relate to a number of separate incidents.  In each case, a smaller retailer applying for a liquor licence was met with Woolworths and Liquorland availing themselves, or threatening to avail themselves, of a right to object to the grant of the licence that had been applied for.  These smaller retailers were persuaded by Woolies and Liquorland to accept restrictions on their liquor licence applications as a condition for their applications to proceed un-hassled.

A Smoking Gun - Two competitors, one Deed

The ACCC got wind of their behaviour and commenced proceedings in the Federal court against the pair.

With a public trial looming, Liquorland offered up a “mea culpa” of sorts and reached a settlement with the ACCC.  The deal involved Liquorland admitting five (5) contraventions, the ACCC dropping some twenty-five (25) alleged contraventions against Liquorland, and Liquorland paying $950,000 per admitted contravention – that's $4.75 million, plus costs.  Not too bad in the end considering the maximum penalty is $10 million for each contravention.

But Woolies decided to go to a hearing. Conveniently for the ACCC, both Woolworths and Liquorland appeared together on settlement deeds which recorded the threatening behaviour (as in the example on the right).

Whilst Justice Allsop recognised the legitimate right to object to the grant of a liquor licence, he viewed it as "a ready weapon to impede or prevent a rival or potential rival establishing a place of business in the neighbourhood."

Allsop J concluded that the purpose of certain provisions of these Deeds was to prevent or restrict or limit the supply of takeaway packaged liquor to particular classes of persons and therefore contravened trade practices law.  In some cases the Deeds also contained provisions which were "exclusionary provisions" and which the court found had the purpose of substantially lessening competition.

So why did Woolworths, unlike Liquorland, elect to fight the allegations?  Did they wager the negative publicity that one would expect from such a seemingly unpopular stance was better than the negative publicity from straight-out admitting they did act wrongly?  Were they advised their legal position was defensible?  Or is the technique of threatening small liquor retailing applicants with its “right to object” so successful in limiting their licences that it's worth fighting for?

Lightbulb notes that the penalties are to be determined on 15 December 2006. 


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