The Full Court’s View in Arnotts of the Emphasis in s 4E
In a conclusionary remark consequent upon the above observations, the Court noted at p 332 that s 4E speaks of “goods or services that are substitutable for, or otherwise competitive with, the first mentioned goods or services” [original emphasis]. The Court’s emphasis upon the phrase “or otherwise competitive with” in the context of the above “tea and coffee” example must be taken to be a reference to a reinforcement of the statutory importance of “close competition” for the purposes of s 4E.
The Court accepted as correct the observations in United Brands v European Communities Commission  1 CMLR 429 that for bananas to constitute a separate product market it must be possible for bananas to be singled out by special features distinguishing the fruit from other fruits such that “it is only to a limited extent interchangeable with them and is only exposed to their competition in a way that his hardly perceptible”.
Some Comments about Expert Evidence
In reaching its conclusions on the market, the Court, as it did in the AMH case, extensively examined the primary documents and the evidence of market participants. The entire evidence of Arnott’s expert witness was rejected as inadmissible. The expert was taken to various parts of the Statement of Claim and asked to consider extensively large parts of the evidence. He was asked to comment from the standpoint of economic principle upon each of the matters in the Statement of Claim and to do so having regard to all of the evidence he had seen in the proceedings while attending Court extensively and through his reading of the statements and transcript. Although the expert made reference to economic principle, a large part of the evidence was directed to the expert’s own view of the facts. Counsel for the Commission contended that the expert could properly express opinions based upon assumed facts but could not be asked whether there was evidence of a particular fact and pressed the notion that the expert had to state the basis on which he expressed his opinion. Any assumed facts had to be properly identified.
The expert then commented upon a range of matters reflected in the lengthy opening by counsel for the Commission when the case began. The expert was asked by Mr Sweeney QC for his opinion as to whether or not the appropriate market definition would be the market for “all biscuits”. Counsel for the Commission objected contending that the question should be prefaced by asking what facts or what assumptions the expert was making in expressing his opinion. The response was that the assumption is the “whole of the transcript and the whole of the documentary evidence”. The question was allowed and the expert responded “my opinion would be that the evidence and the exhibits have not succeeded in establishing such a market to my satisfaction”. The expert also said that he was not satisfied that the evidence and exhibits had established that Arnotts was, prior to the acquisition, already in a state of dominance in a relevant market, which was then a relevant integer of the contended contravention.
The Full Court in dealing with the challenge to the inadmissibility ruling, set out at pp 350 to 356 the correct methodology for framing and giving expert evidence. At p 351, the Court said this:
… [i]t seems to us that an expert economist may legitimately give an opinion, for example, as to the proper method of defining a market. The economist may go further, rendering that opinion more apposite to the case by proffering a definition relevant to a particular case. By way of example, we point to the evidence given by expert witnesses, on each side, in Australia Meat Holdings; some saying that the relevant market was the Queensland fat cattle market, some suggesting that there was a separate North Queensland market … What [matters] is that the assumptions upon which the opinion is based are identified and articulated. Of course, if the assumptions made by the witness turned out to be different to those ultimately found by the Court, the opinion might have little relevance.
The Court also noted that a further function of an expert is in the nature of acting as a “librarian”. In many cases the expert does not know the answer to the problem from his own study or experience but being trained in the relevant discipline, he is able to refer to works of authority in which the answer lies. In such a case the expert is not generalising but is making available the fruits of generalisations of other people, either from their own experience or from the experience of others whose writings form part of the literature: p 351.
The third function is to act as a statistician in the sense of applying proper statistical methods to data from a range of sources and draw significant conclusions. This function is one particularly appropriate to an expert economist. The Court noted that the fourth function represents an area where experts find themselves in the greatest trouble, that is, an expert acting as an advocate. As to that, the Court embraced this approach at p 352.
It is of course not permissible for the expert to take over the role of advocate from counsel in the case. But the expert has a legitimate role of advocacy in that, having expounded to the Tribunal the rules applicable to the case, his evidence may then consist of argument as to the conclusions that should be drawn from the facts interpreted in the light of the identified rules or economic principles. The difficulty arises however because the expert often finds it difficult to distinguish between argument as to principles falling within the expertise, assuming the facts put forward by his side are correct, and telling the Court which facts should be accepted, as true. If the expert makes the assumptions clear, there is no objection to the expert identifying the consequences, as a matter of economic principle, of accepting those assumptions. The expert must strive to avoid becoming an advocate as to the ultimate questions in issue or as to inferences open on assumed facts.
It might usefully be noted that a contention was put to the Court by counsel for Arnotts that in Part IV cases the Court ought to accept economic opinion evidence concerning the effect of the evidence given in a case where it is in any practical sense impossible to reduce the entirety of the evidence to assumptions, particularly when one could not predict the permutations and combinations necessary to cover all possible findings by the Court. As to that, the Court said this:
Nothing could be more mischievous. There are two reasons why we are of that opinion. The first is the very justification advanced by counsel, the difficulty in predicting “the permutations and combinations necessary to cover all possible findings by the Court”. If an economist were permitted to express opinions upon the effect of the evidence given, without identifying the facts which he or she assumed for the purpose of those opinions, it would be impossible for the Court to know how to apply the evidence. One of the permutations or combinations may have rendered the opinion inapplicable, in the expert’s eyes, but the Court would never know.
A further aspect of the proof of the scope of the market concerned survey evidence sought to be put to the Court. The appropriate way to go about formulating survey evidence of utility is discussed at pp 358 to 365.
A further useful example of recourse to the evidence of industry participants as providing persuasive probative evidence of the market in preference to reliance on the economic evidence is Davids Holdings Pty Ltd v Attorney General of the Commonwealth (1994) 49 FCR 211 per von Doussa J.
It is of course important to now have regard to the Federal Court’s practice direction concerning expert evidence.
I now want to turn to a consideration of the C7 litigation.