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Barry Lane
27 June, 2005  
Big Australians and competition

Big business sees small competitors as the tasty plat de jour. The ACCC was onto the way the Trading Post’s internet business (now part of Telstra/Sensis) misleadingly used sponsored links on Google to attack an advertising minnow. Watch-out – Sensis says it just wants to lend a “helping hand” to small business.


imageIn the 1980s there was a David and Goliath battle between the original Big Australian, BHP, and a tiny Queensland company Queensland Wire Industries Pty Ltd.

QWI wanted to produce star pickets, millions of which hold up farm fences in Queensland and across the rest of the wide brown land. It sought to buy the feedstock, called Y-bar, from BHP. BHP was the only producer of Y-bar at the time and, not surprisingly, pretty much had an exclusive franchise on manufacturing and selling star pickets in Australia.

QWI thought that BHP was treating it in a beastly fashion by refusing to supply it with Y-bar at a competitive price. The war between them went to the High Court where QWI’s contention was unanimously upheld.

The High Court accepted that QWI had been illegally monstered by the Big Australian under the misuse of market power provisions of section 46 of the Trade Practices Act 1974.

See QWI v BHP

So confident of its position prior to trial was the Big Australian that it sent a letter to QWI during the interlocutory proceedings, saying:

”(BHP’s) policy … was either to refuse supply of steel Y-bar or to offer to supply steel Y-bar at an uncompetitive price because it wished to preserve the business of the manufacture and wholesale sale of fence posts conducted by it there being no market for the supply for any purpose of steel Y-bar to other manufactures.”

BHP’s defence to QWI’s claim was that it had so successfully monopolized the “market” for Y-bar, and hence star pickets, that it could not have breached section 46 because there was no actual market in the goods. That, and other similarly fanciful arguments, found favour with the trial judge and the Full Court of the Federal Court on appeal (including Federal Court judge Gummo).

I can imagine that throughout the BHP bureaucracy at the time “floodgates” would have been regularly mentioned in briefing papers and board discussions. If we let these sprats in they might become mackerels and who knows where it will end? The blighters might want to build a blast furnace next!

Chief Justice Mason and Justice Wilson succinctly summarised the problem that confronts all entrepreneurs, large and small, at page 191:

”... the object of s.46 is to protect the interests of consumers, the operation of the section being predicated on the assumption that competition is a means to that end. Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to “injure” each other in this way … and these injuries are the inevitable consequence of the competition s.46 is designed to foster. In fact, the purpose provisions in s.46(1) are cast in such a way as to prohibit conduct designed to threaten that competition – for example, s.46(1)(c) prohibits a firm with a substantial degree of market power from using that power to deter or prevent a rival from competing in a market. The question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition…”

That was then – the 1980s. Now leap forward to June 17, 2005 and a press release from the Australian Consumer and Competition Commission directed at the conduct of the Trading Post who was bent on undermining a sprat.

The Trading Post, whose business is now largely conducted on the internet, is owned by Sensis Pty Ltd, which in turn, is owned by that other big Australian, Telstra Corporation Ltd.

In its release the ACCC said that it had received a complaint from Stickybeek Australia Pty Ltd alleging that the Trading Post was misleading internet users into believing it was associated with Stickybeek’s business.

Stickybeek is based in the Hunter region of New South Wales and operates a website used by businesses in the region for advertising, including classified advertising by local car dealers.

Stickybeek alleged the Trading Post had used a sponsored link to the Stickybeek name on the Google website to ensure that a link to the Trading Post’s autotrader website appeared adjacent to the search results when internet users entered Stickybeek as a search term.

By buying sponsored links from Google to key words, a business can ensure that internet users are provided with a link to its website when users enter those words into the Google search engine.

The ACCC wrote to the Trading Post saying it was concerned that its Google sponsored link to Stickybeek was potentially misleading as internet users might mistakenly believe that its autotrader website was affiliated with Stickybeek’s business. Of particular concern was the placement of the sponsored link under the word Stickybeek adjacent to the Google search results.

Sneaky.

“The ACCC believed the Trading Post’s conduct may have contravened sections 52 and 53(d) of the Trade Practices Act.” The Trading Post must have thought it was on shaky ground because it agreed to stop using competitors’ names and trademarks in sponsored links on the internet, although it did not admit that its conduct was misleading under the Act. The ACCC said in its statement:

“With the internet increasing in importance as a medium for businesses to advertise and market their goods and services, the ACCC is focused on ensuring the internet is not misused to mislead or deceive consumers. This matter highlights the need for business to remain vigilant when taking advantage of new marketing opportunities offered by the internet that care is taken to avoid potentially misleading consumers.”

imageIn a cheery little puff piece published in The Age on June 11, 2005, Sensis CEO and former big end of town lawyer, Bruce Akhurst (seen here), was reported as saying:

“Most of the Australian population have heard of Sensis, but most still aren’t quite sure exactly what it is. It’s gone pretty well, given it’s just a made up word from scratch, but compare that to say the Yellow Pages – I reckon if you stopped anyone in the street they’d tell you exactly what the Yellow Pages is and what they use it for.”

The article went on to say that Sensis, “has just launched its second multimillion-dollar TV, newspaper and internet advertising campaign in a year, aimed at educating Australians on how they can use Sensis brands to find every conceivable product and service they wish. Akhurst says getting Australia’s small businesses to advertise with Sensis after that should be easy”.

Sensis’ website carries a similar sort of spiel:

“Sensis is a wholly owned subsidiary of Telstra Corporation Limited. As Telstra’s advertising subsidiary, we provide search advertising, information management, mapping and IT solutions to approximately 420,000 Australian businesses.

Sensis is also one of Australia’s most ardent supporters of small business. The small and medium enterprise (SME) sector employs over 6.7 million Australians and is universally seen as the ‘engine room’ of the Australian economy.

Sensis is committed to helping Australia’s SMEs take care of business. Our body of SME support initiatives, which is regularly referenced by businesses, organisations and government all over Australia, includes.”

After the way Sensis tried to “take care” of Stickybeek’s little business we know just how helpful the behemoth can be. With “support” like that, who needs enemies?