Commerce Commission v Air New Zealand Ltd

• Jurisdiction: New Zealand
• Judge: Asher J,Professor M Richardson
• Judgment Date: 24 August 2011
• Neutral Citation: [2011] NZHC 1285
• Court: High Court
• Date: 24 August 2011
• Docket Number: CIV-2008-404-008352 CIV-2008-404-008349 CIV-2008-404-008350 CIV-2008-404-008351 CIV-2008-404-0008354 CIV-2008-404-008356 CIV-2008-404-008357

[2011] NZHC 1285

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

Court:

Asher J

Professor M Richardson (lay member)

CIV-2008-404-008352

CIV-2008-404-008348

CIV-2008-404-008349

CIV-2008-404-008350

CIV-2008-404-008351

CIV-2008-404-0008354

CIV-2008-404-008356

CIV-2008-404-008357

Between

Commerce Commission

Plaintiff

and

Air New Zealand Limited

Defendant

And Between

Commerce Commission

Plaintiff

and

Japan Airlines International Co Limited

Defendant

And Between

Commerce Commission

Plaintiff

and

Emirates

Defendant

And Between

Commerce Commission

Plaintiff

and

Malaysian Airlines System Berhad Limited

Defendant

And Between

Commerce Commission

Plaintiff

and

Korean Air Lines Co Limited

Defendant

And Between

Commerce Commission

Plaintiff

and

Thai Airways International Public Company Limited

Defendant

And Between

Commerce Commission

Plaintiff

and

Singapore Airlines Limited & Singapore Airlines Cargo Pte Limited

Defendants

And Between

Commerce Commission

Plaintiff

and

Cathay Pacific Airways Limited

Defendant

Counsel:

BWF Brown QC, JCL Dixon, KC Francis and LCA Farmer for Plaintiff

AR Galbraith QC, DJ Cooper and SJP Ladd for Air New Zealand

JA Farmer QC and IJ Thain for Cathay Pacific

MR Dean QC, GW Hall and AN Birkinshaw for Emirates

DS Alderslade, JWJ Graham and RM Irvine-Shanks for Japan Airlines

AM Callinan and AE Murray for Korean Airlines

JL Land and I-RL Sheerin for Malaysia Airlines

MD O'Brien, JH Stevens and KJ Dobbs for Singapore Airlines

TC Weston QC, AW Lear and MW McCarthy for Thai Airways

JUDGMENT OF Asher J AND Professor M Richardson

Table of Contents

	Para No
Introduction	[1]
Key agreed facts	[9]
Pleadings	[34]
Is the Commission required to prove a market in New Zealand (issues 2(a) and (b))? The respective positions	[38]
Argument as to the use of extraneous materials	[40]
The relevant sections in the Commerce Act [42] The presumption that Parliament did not intend to assert extraterritorial jurisdiction	[47]
A purposive interpretation	[54]
The effect of the deeming words in s 30 on s 27	[59]
The requirement that the parties be “in competition with each other”	[77]
Authority	[86]
Conclusion on interpretation of s 30	[96]
Do the airlines supply inbound air cargo services in competition with each other in New Zealand (issue 3(a))?	[98]
Is there a “market in New Zealand” for inbound air cargo services (issue 3(b))?	[107]
Background
The air cargo services	[110]
The purposes of market definition	[113]
Judicial definitions of market	[117]
Guidelines	[129]
Our analysis
The economists	[144]
Factual considerations relating to the market	[148]
Demand for the service — the product market	[153]
The role of the freight forwarders	[164]
Application of the SSNIP test	[171]
The geographic market	[183]
Supply of the service	[192]
Bi-directional market	[195]
Authority	[199]
Market wholly or partly in New Zealand?
Background to the issue	[212]
What the Act says	[214]
Section 3(3)	[215]
Section 36A	[220]
An approach that limits the consideration of overseas conduct to those acts that occur in New Zealand	[225]
Authority	[236]
Conclusion on issue 3(b)	[241]
The s 4 interpretation question (issue 4)	[245]
The parties' submissions	[248]
Analysis	[250]
Purposive interpretation	[256]
The limitation defence	[263]
Result	[273]
Costs	[275]

Introduction

1 On 15 December 2008 the Commerce Commission issued these proceedings, claiming that the defendants with others had fixed elements of the price of inbound and outbound air cargo services to New Zealand. The essential allegation is that there have been arrangements to impose fuel and security surcharges at certain agreed rates. All the defendants filed statements of defence. Some have since withdrawn their defences, admitting liability. Eight defendants remain.

2 Harrison J heard an application to formulate a preliminary question before trial on 3 May 2010. That hearing developed into a conference where it was agreed by counsel and accepted by the Court that there would be a two-stage trial. The issues that were to be determined in the first stage were defined in a memorandum of counsel that was annexed to a Minute of 6 May 2010. This first stage hearing has proceeded on the basis of these issues which were further refined and added to during the hearing.

3 The parties have agreed a statement of facts. The statement of facts comprises a summary of 131 pages and various appendices. Two of the appendices contain written responses by the defendants to questions posed by the Commerce Commission (“the Commission”), and responses to questions from a sample of freight forwarders and exporters/importers. These are referred to as the schedules. The terms of the admission of the statement of facts and an accompanying agreed bundle of documents are set out in a joint memorandum, referred to as the protocol. The parties agree that the statement of facts has the status of evidence in both stages of the trial in accordance with s 9 of the Evidence Act 2006 and r 9.57 of the High Court Rules. In the event of any material inconsistency between the summary contained therein and the schedules, the evidence in the summary prevails. If there is any inconsistency between any document within the agreed bundle of documents and the statement of facts, the statement of facts prevails. The protocol also records the parties' consent position on various market issues.

4 The level of agreement meant that it was not necessary for the parties to call any evidence, save for expert economic evidence. Ultimately the Commission called two economists and the defendants three. The experts gave their evidence over a period of five days in a process known in New Zealand as the hot tub process. They presented summaries of their evidence, brief comments on the evidence of each other, and then during cross-examination any of the experts could be called upon by counsel to respond to, or comment on, an answer. The Bench asked further questions at the end.

5 The final version of the statement of issues was as follows:

1

There is no dispute that the Court has jurisdiction to determine claims relating to air cargo services from New Zealand to an overseas country or region. The Stage 1 trial is intended to determine whether the Court also has jurisdiction in relation to alleged fixing of prices for air cargo services from an overseas country or region to New Zealand. 2. Section 30 Issue: For the purposes of its claims under section 27 via section 30, is it: (a) sufficient for the Commission to prove that the defendants supply services the subject of the alleged price fixing arrangement in competition with each other in New Zealand; or (b) necessary for the Commission to prove that each of the pleaded services subject to the alleged price fixing arrangement were supplied by the defendants in competition with each other in a market in New Zealand? 3. Follow-on Issues: (a) Do the activities described in the evidence undertaken by the defendants with respect to inbound air cargo services constitute the supply by them of air cargo services in competition with each other in New Zealand. [The defendants accept that they supply inbound air cargo services in competition with each other but deny that they do so in New Zealand.1] (b) Are the relevant pleaded markets (i.e. the pleaded markets listed in the attached Schedule) markets in New Zealand? 4. Section 4 issue: Does the Act apply to the engaging in conduct outside New Zealand by any person resident or carrying on business in New Zealand where: (a) as the Commission says, that conduct comprises any act (or refusal to act) to the extent that such an act (or refusal to act) has some impact or influence on any market in New Zealand; or (b) as the Defendants say, the conduct: (i) would be prohibited by a substantive provision of the Act if it occurred in New Zealand; and (ii) “affects a market in New Zealand” by affecting competition in the market in New Zealand in respect of which that substantive provision is alleged to have been breached. 5. Bi-directional Market Limitation issue: Are the amendments in the Commission's Fourth Amended Statements of Claim to introduce a pleading of “bidirectional markets” for air cargo services statute barred under section 80(5) of the Act because they were first introduced more than three years after the matters giving rise to that pleading were discovered or ought reasonably to have been discovered?

6 It was also hoped that the parties could agree on the consequential orders that would follow findings on the various issues, but understandably the definition of such consequences has proved too difficult.

7 In this judgment the lay member has not participated in the determination of the s 30 issue as this is a determination for a High Court Judge sitting alone under s 78(4)(b) of the Commerce Act 1986 (“the Act”) (although we make no decision as to whether it is impermissible for a lay member to participate in such a determination).

8 The summary contained in the statement of facts is voluminous, as are the accompanying schedules and the bundle of documents. Given that the essential facts are not in contention they can be set out in a relatively short compass, adopting in the main the exact words used in the summary.

Key agreed facts

9 The defendant airlines all transport freight by air to and from New Zealand. The freight is transported in the belly hold...