ACCC v Baxter Healthcare (2008)
Federal Court of Australia (Full Court)
[2008] FCAFC 141 (11 August 2008) (on sections 46 and 47)
Justices Mansfield, Dowsett and Gyles
See also
[2005] FCA 581 (16 May 2005) (first instance)
[2006] FCAFC 128 (24 August 2006) (on derivative immunity)
[2007] HCA 38 (29 August 2007) (on derivative immunity)
[2010] FCA 929 (26 August 2010) (on penalties)
Facts and summary
This case involved supply by Baxter Healthcare Pty Ltd to a number of State purchasing authorities of sterile fluids used for dialysis treatment. Baxter manufactures and supplies intravenous (IV) solutions, peritoneal dialysis (PD) fluids and parenteral nutrition (PN) products. It has an effective monopoly in relation to sterile fluids but faced real competition in relation to PD fluids. During the relevant time Baxter tendered for the supply of sterile and PD fluids to State Purchasing Authorities (SPA's). If offered products either as (prohibitively) high item-by-item prices or 'bundled' at significantly lower prices. The 'bundled' price was only available on condition Baxter was the sole supplier of both sterile and PD fluids to the SPA's.
Allegation
The ACCC alleged that Baxter had contravened the exclusive dealing and misuse of market power provisions of the Act by using the market power it enjoyed in relation to sterile fluids to effectively compel the SPAs to enter into exclusive supply contracts including the PD products
Application of the Act (derivative Crown immunity)
It was conceded by the ACCC that the SPAs were not ‘carrying on a business’ for purposes of the Act and therefore had Crown immunity from Part IV. The issue then became whether Baxter benefited from ‘derivative’ Crown immunity in its dealings with these authorities. At first instance and on appeal to the Full Court, it was held that they did benefit from derivative immunity (based on the earlier High Court decision in Bradken v Broken Hill Proprietary Co Ltd (1979) 145 CLR 107). The majority of the High Court held that parties did not benefit from derivative Crown immunity when dealing with Crown authorities.
Exclusive dealing
The majority of the Full Federal Court held that Baxter had contravened s 47; in particular, it had the purpose and effect of substantially lessening competition.
Misuse of market power
The Full Court unanimously held that Baxter had substantial market power in relation to sterile fluids and that it had taken advantage of this power. The majority (Dowsett J dissenting) also held that Baxter had a prohibited purpose (s 46(1)(c)) and therefore contravened s 46.
Overview of the various decisions
The matter first came before Justice Allsop in the Federal Court. His Honour held that:
The Act did not apply to Baxter's conduct because they had the benefit of derivative Crown immunity
If the Act did apply to Baxter their conduct:
contravened s 46 in relation to one of the transactions involved
contravened s 47 in relation to all transactions involved
The ACCC appealed to the Full Federal Court.
The Court dismissed the appeal, agreeing with the Primary Judge that Baxter benefited from derivative Crown immunity. The Court did not consider the other grounds of appeal (the ss 46 and 47 claims)
The ACCC appealed to the High Court on the issue of immunity
The majority of the High Court (Justice Callinan dissenting) upheld the appeal, finding Baxter did not benefit from derivative Crown immunity. They remitted the matter to the Full Federal Court to consider the ss 46 and 47 claims.
The Full Federal Court then considered the ss 46 and 47 claims
On misuse of market power the Court unanimously held that Baxter had substantial market power and had taken advantage of this power. The majority (Dowsett J dissenting) also held that Baxter had a prohibited purpose (s 46(1)(c)) and therefore contravened s 46.
On exclusive dealing the majority (Dowsett J dissenting) found that the various 'bundled' contracts contravened s 47; in particular, they had the purpose and effect or likely effect of substantially lessening competition
The issue of penalties was subsequently considered by Justice Mansfield. His Honour ordered pecuniary penalties totaling $4.9million against Baxter as well as imposing cost orders.
External case links
ACCC v Baxter Healthcare Pty Ltd [2005] FCA 581 (16 May 2005) (AustLII) (first instance)
ACCC v Baxter Healthcare Pty Ltd [2006] FCAFC 128 (24 August 2006) (AustLII)
ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38 (29 August 2007) (AustLII) (High Court on immunity)
ACCC v Baxter Healthcare Pty Ltd [2008] FCAFC 141 (11 August 2008) (AustLII) (Full Federal Court - following remission)
ACCC v Baxter Healthcare Pty Ltd [2010] FCA 929 (26 August 2010) (AustLII)