Home | Business News | Browse by Publication | M | Mondaq Business Briefing

The Baxter Healthcare Decision - The Future Of Derivative Crown Immunity.

Article Excerpt
The Full Federal Court's recent appeal decision in ACCC v Baxter Healthcare Pty Ltd [2006] FCAFC 28 has implications for businesses dealing with government entities and for the general derivative Crown immunity doctrine. This update discusses the issues raised as a result of this appeal for businesses dealing with government entities and evaluating whether their conduct may be subject to the Trade Practices Act 1974 (Cth) (Act).

On 24 August 2006, the Full Federal Court affirmed the doctrine of derivative Crown immunity, under which businesses contracting with the Crown benefit from Crown immunity from Part IV of the Act.

The Full Federal Court dismissed the ACCC's appeal against the initial Federal Court decision of Justice Allsop. It dismissed the appeal as it agreed with the decision of Justice Allsop that, although Baxter Healthcare Pty Ltd (Baxter Healthcare) had engaged in exclusive dealing and misuse of market power, the company was protected from Part IV of the Act by the Crown immunity of the state health purchasing authorities (SPAs) with which it contracted.

The SPAs have immunity from the Act because they represent the Crown and they are not carrying on a business. The SPAs' immunity was found to extend to Baxter Healthcare, shielding it from the operation of the Act.

Background

The ACCC alleged that Baxter Healthcare breached sections 46 and 47 of the Act, in the sale and supply of sterile fluids and peritoneal dialysis products (PD Products), which are used to treat patients with kidney failure, to SPAs in NSW, SA, WA, QLD and ACT.

Section 46 of the Act prohibits a corporation with a substantial degree of market power from taking advantage of that power for the purpose of:

eliminating or substantially damaging a competitor of the corporation in that or any other market;

preventing the entry of a person into that or any other market; or

deterring or preventing a person...