On 26 August 2010, the Full Federal Court handed down penalties
of $4.9 million against Baxter Healthcare Pty Ltd
(Baxter) for breaches of sections 46 and 47 of the
Trade Practices Act 1974 (Act).1
The penalty decision follows the 2008 Full Court decision that
Baxter breached sections 46 and 47 of the Act by bundling its
sterile fluids (SF) product with its peritoneal dialysis fluids
(PD) product.2 Section 46 of the Act prohibits taking
advantage of market power. Section 47 prohibits exclusive
In terms of section 46, Baxter had substantial market power in
its SF product but faced competition in its PD product. Baxter
offered to supply four States (NSW, Queensland, South Australia and
Western Australia) its SF and PD products bundled together at a
substantial discount to the price at which it offered to supply the
products separately. The bundling was done for the purpose of
deterring or preventing others from competing in the PD market.
The section 47 breaches arose from Baxter negotiating and
entering exclusive supply agreements with the four States for the
purpose, and with the likely effect, of substantially lessening
competition in the PD market.
The ACCC had sought penalties against Baxter of $27.3 million.
The ACCC also sought injunctions against Baxter restraining it from
similar conduct for 3 years.
In determining the final penalties of $4.9 million Justice
Mansfield took the following factors into account:
the four States had some degree of bargaining power in
negotiations with Baxter and had permitted bundled offers;
the price of the bundled products was not inappropriate and
there was no suggestion of price gouging by Baxter;
Baxter's competitors had not been driven from the market
and could still participate in future tenders;
Baxter did not deliberately intend to breach the Act, but it
did deliberately engage in the contravening conduct and that
conduct occurred on several occasions; and
a lack of contrition, claimed by the ACCC, was not a factor
– Baxter was entitled to vigorously defend against the
Justice Mansfield did not grant the injunction sought by the
ACCC as this would have created uncertainty in how Baxter could
participate in future tenders and it would be too difficult to
distinguish between bundling that breached the Act and bundling
that was acceptable.
Successful prosecutions under section 46 of the Act are rare.
However, this decision highlights that section 46 investigations
and prosecutions continue to play an important role in the
ACCC's activities. It also demonstrates that advice should be
sought when considering bundling products, especially by a company
that has market power in relation to one or more of the bundled
1. ACCC v Baxter Healthcare Pty Ltd  FCA
2. ACCC v Baxter Healthcare and Ors  FCAFC
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