LWZ204 Constitutional Law Week 8

SECTION 92 Section 92 : “trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.” I. Pre-Cole v Whitfield- No clearly established interpretation. II. What is trade, commerce and intercourse? III. What is intercourse among the States? IV. What is meant by absolutely free? V. Does s 92 apply to State and Commonwealth laws?

TWO DIFFERING INTERPRETATIONS OF SECTION 92 IN THE PRE-COLE ERA I. Free Trade Theory- The purpose of including s 92 in the Constitution was to provide a free trade area throughout Australia. The colonies had passed laws and imposed tariffs on goods produced in other colonies, giving preference to local traders over competition from other colonies. S 92 sought to prevent protectionism. A. Fox case

TWO DIFFERING INTERPRETATIONS OF SECTION 92 IN THE PRE-COLE ERA Con’t II. Individual Rights or Laissez Faire Theory- Individuals have a fundamental right to freedom of contract. The state should not intervene in the market so as to protect this individual right. Section 92 viewed as providing a guarantee to individual traders from regulatory intermeddling. A W&A McAurthur v Queensland (1920) B Commonwealth v Bank of NSW (1949) Unreasonable regulations violate s 92 Reasonable regulations do not violate s 92 Criterion of operation test- Concerned with legal operation rather than practical operation or economic consequences. Only direct as opposed to indirect and remote restrictions on trade and commerce violate s 92. Criticisms of Criterion of Operation Test

TWO DIFFERING INTERPRETATIONS OF SECTION 92 IN THE PRE-COLE ERA Con’t III. Which theory should prevail? “By the mid-1980s the law regarding s 92 was an unpredictable mess, which unduly frustrated attempts by both the Commonwealth and State governments to regulate trade and commerce effectively..”Joseph & Castan

The New Era COLE V WHITFIELD (1988) Facts: Crayfish trader in Tassy prohibited by Tassy law from importing SA Crayfish into Tassy. The law mandated a certain minimum size for crayfish to be dealt with commercially in Tassy. The minimum size in Tassy was greater than SA because of different breeding requirements in SA which resulted in SA regs. allowing crayfish to be caught that were smaller than those caught in Tassy.

The New Era COLE V WHITFIELD (1988) Con’t A. Court notes judicial concern over interpretation of s 92 (CB 1253) B. Court, for the first time, looks at Convention debates to ascertain framers intention. C. Purpose of s 92 transparent. CB 1209—Free trade and absence of protectionism—protection of local trade from interstate competition.

The New Era COLE V WHITFIELD (1988) Con’t D. Court identifies several methods by which Such protectionism might take place: “Tariffs that increase the price of foreign goods”; “Non-tariff barriers which include; “Quotas on imports-limitation on the numbers allowed to import”; “Differential railway rates”; “Subsidies on goods produced”; and “Discriminatory burdens on dealings with imports…” E. Discrimination can arise from the legal operation of the law (on its face) or from the practical operation of the law (factual operation).

The New Era COLE V WHITFIELD (1988) Con’t F. Court will consider issues of fact and degree. A law could be facially neutral but its effect might be discriminatory against interstate trade in favour of intrastate trade: CB 1212 [407] “It is possible for a general law enacted under S 51(i) to offend s 92 if its effect is discriminatory and the discrimination is upon protectionist grounds. whether such a law is discriminatory in effect and whether the discrimination is of a protectionist character are questions raising issues of fact and degree. The answers to these questions may, in the ultimate, depend upon judicial impression.”

The New Era COLE V WHITFIELD (1988) Con’t G. State laws applying to both inter and intrastate commerce less likely to be protectionist than a facially discriminatory law unless it has a discriminatory effect in favour of the local market of a protectionist kind. Result: Tassy regulations do not violate s 92 because the regulations do not constitute a discriminatory burden on interstate trade of a protectionist nature. The Tassy regs had no facially discriminatory purpose. Court looks to see if such regs had an impermissible discriminatory effect. Limitation on size of crayfish is a burden on interstate trade and commerce in crayfish caught in SA but sold in Tassy. But the burden is non-discriminatory b/c the prohibitions on size of crayfish sold apply to crayfish caught in Tassy and in other States. The purpose of the law was also non-protectionist: to protect and conserve a valuable natural resource, the stock of Tassy crayfish.

COLE V WHITFIELD CONSIDERATIONS Is there a burden on interstate trade? Is the law imposing a discriminatory burden of a protectionist nature? Consider text of law (facial discrimination) and practical operation (actual economic effects-not just legal effects). Does the law have a discriminatory protectionist effect? (Eg. Bath infra where court denies equalization defence of levelling the playing field). Is the protectionist effect in accordance or incidental to some non-protectionist purpose? Is the law appropriate and adapted to achieving such non-protectionist purpose? If so, law valid. (Castlemaine Tooheys infra) Joseph & Castan at 401 [Nb. Remark of Sir Garfield Barwick CB 1214]

BATH V ALSTON HOLDINGS (1988) Facts: 1974 Vic law prohibits sales of tobacco without a licence. Certain provisions of the law mandated that a retail licence would cost a nominal fee plus 25% of the value of the tobacco sold during the previous 12 month period & purchased outside Vic. Tobacco purchased in Vic from a trader with a wholesale tobacco licence did not have to pay the 25% variable fee b/c Vic wholesalers already paid wholesale licence fees with an ad valorem component. Purpose of the regulatory scheme: Ensure that each lot of tobacco sold was charged an ad valorem amount only once. Thus, for tobacco produced in Vic, wholesaler pays licence fees. For tobacco produced outside Vic, retailer pays such fees. Easier to target wholesalers rather than retailers b/c there are fewer of them in the state. Alston Holdings, a tobacco retailer, challenges the regulatory scheme as violative of s 92.

BATH V ALSTON HOLDINGS (1988) Con’t Result: Violation of s 92 (4-3 split). Mason CJ, Brennan, Deane and Gaudron hold the provisions place a discriminatory burden on interstate commerce which is facially and practically discriminatory and protectionist in effect b/c differences are drawn on the basis of tobacco purchased in Vic from a licensed wholesaler from tobacco purchased from an interstate wholesaler. Protectionist laws can arise: where a state law bestows a relative advantage on a local market or industry; where a state law removes a relative advantage from an interstate industry. (Joseph & Castan)

BATH V ALSTON HOLDINGS (1988) Con’t Dissent: Wilson, Dawson & Toohey. Critical of majority’s failure to examine the practical operation of the legislation which is the determining factor over whether discrimination is on protectionist grounds. See CB 1216 “The legislation does not seek to operate to the advantage or disadvantage of the retailer according to whether he obtains his tobacco within or outside the state.” The only reason for the scheme of imposing fee on wholesaler is to make it easier and reduce administrative costs in collecting the fee b/c fewer wholesalers than retailers. This isn’t protectionism!

BATH V ALSTON HOLDINGS (1988) Con’t WHICH JUDGMENT IS MORE COMPELLING AND WHY? WHICH JUDGMENT IS MORE CONSISTENT WITH THE RESULT IN COLE? WHY?

CASTLEMAINE TOOHEYS V SOUTH AUSTRALIA (1990) Facts: South Australia Law has a deposit system for beer containers. In 1975, 5 c deposit was included in the price of non-refillable bottles. Refillable bottles had no deposit. Bond Brewing Group used non-refillable bottles whereas local brewers use refillable bottles. By 1986, Bond Brewing has a larger market share in the sale of beer in SA. Amendments made to 75 law. 4 c deposit added to refillable bottles that were returnable to depots. 15 c deposit for non-refillable bottles returned to retailers obliged to accept them. Law facially neutral. No overt discrimination between interstate and intrastate trade.

CASTLEMAINE TOOHEYS V SOUTH AUSTRALIA (1990) Con’t WHAT s 92 ARGUMENTS DID THE BOND BREWING GROUP ADVANCE? The object and effect of the law was to discriminate against the sale in SA of packaged beer brewed interstate to protect the beer brewed in SA from interstate competition. HOW DID SA RESPOND? The purposes of the law were (1) to promote litter control by forcing non-glass containers and non-refillable bottles into a return system by encouraging return; and (2) to promote energy and resource conservation by discouraging the use of non-refillable containers by imposing a higher deposit and by requiring acceptance of returns at the point of sale (thus discouraging retailers from handling them). WHAT WAS THE RESULT? Violation of s 92. State legislature has power to pass laws for the well being of the people of that State unless the law is relevantly discriminatory. The court will not normally second guess Parliament. But the court uses a test that is arguably political in that it involves balancing competing social and economic policy interests. Joseph & Castan

CASTLEMAINE TEST Is there a legitimate local interest in need of protection? Yes Are the means necessary or appropriate and adapted to protecting the local interest? Neither the need to protect the environment from the litter problem nor the need to conserve energy resources offers an acceptable explanation or justification for the differential treatment given to the products of the Bond brewing group. The discrepancy between the 15 c refund and the 4 c refund goes beyond what is necessary to ensure the return of non-refillable bottles at the same rate as the refillable bottles.

CASTLEMAINE TEST Con’t Is the impact on interstate trade and commerce incidental and not disproportionate to the achievement of the objective of protecting the public interest? No. There was no need to discriminate between the two types of bottles. Controlling litter could have been equally well achieved by a non-discriminatory law which encouraged equally the return of refillable and non-refillable bottles. The non-discriminatory alternative shows the regulation is not proportionate.

CASTLEMAINE TEST Con’t WHAT IS MEANT BY THE TERM ‘INTERCOURSE’ AMONG THE STATES? Brennan in Nationwide News- CB 1226 “There must be some border crossing involved before any phenomenon of trade commerce or intercourse comes within the reach of the section. The protection of s 92 is given to the movement of people, the transport of goods, the transmission of communications, the passage of signals of any kind and any other means by which ‘interchange, converse and dealings between States in the affairs of life’ are carried on across State boundaries. The protection is given to the movement of the persons and things across the border or, in the case of intangibles, to the means by which their movement is effected…it is essential that something (or some person) is moved. Ideas cannot be moved. The expression of ideas can be moved, whether in literary or other form, can be moved and a movement of that kind across State borders is capable of attracting the operation of s 92…”

Betfair Pty Ltd v Western Australia (2008) 235 CLR 418 Facts: A betting exchange system was introduced in the 1990s whereby members of the public bet against each other in relation to horse trading and other sporting events. Tasmania set up a licensing scheme to allow for betting exchanges and Betfair was licensed to carry on such an exchange. Western Australia subsequently passed legislation prohibiting betting exchanges. WA justified the law as necessary to protect the integrity of the racing industry.

Betfair contd. Result: Invalid as violative of s 92 (unanimous judgment). The WA law burdened the freedom of Betfair to deal with customers in WA and it disallowed WA punters from using an interstate betting exchange. The court emphasizes the national economy, market forces within a national economy and the new economy. There was no evidence of an increase in Australia of dishonest practices attributable to the operation of the betting exchanges by Betfair. But, even if the objective was legitimate, the means adopted (prohibition) was not reasonably appropriate and adapted to achieve the purpose of protecting the integrity of the racing industry given the avenue of non-discriminatory legislation taken by Tasmania.

Betfair contd. Test adopted by Court: Is the impediment to interstate intercourse greater than reasonably required to achieve the object of the legislation? Same test as one for proportionality of Castlemaine.   Is there a burden on interstate intercourse? Is the purpose of the law to burden interstate intercourse? If it is, it is not valid. If there is another purpose for the law, is the burden on interstate intercourse appropriate and adapted to achieving that other purpose? If it isn’t, the law is invalid.

Betfair 2 Betfair challenged the validity of the license fees imposed by the NSW racing authorities which required wagering services to pay up to 1.5% on their wagering turnover in license fees. Betfair conducted its business with low profit margins, compared to other traders, including local NSW traders, who operated with higher profit margins. Betfair argued the effect of the law was to discriminate against it, because the license fee claimed a disproportionate share of its profits compared to those of intrastate traders.

Betfair 2 Result: Betfair unsuccessful because it failed to establish a relevant protectionist effect. There was no evidence the law operated to reduce its competitiveness or share in the NSW gambling market. If Betfair could establish interstate traders generally ran on low margin while intrastate traders did not, they might have had more success. Discriminatory impact on interstate profits doesn’t necessarily translate into an impact on interstate competitiveness. Joseph and Castan p.406

ALPA Facts: Restrictions on legal advertising by lawyers in NSW. Restrictions also applied to ads by lawyers in other states or by lawyers in NSW whose websites were located in other states. Result: The impediment to interstate commerce is no greater than is reasonably required to achieve the object of the regulations. : “That object cannot be fully achieved if the legal practitioners were permitted to direct from outside NSW to persons in NSW ads promoting the provision in NSW of the particular legal services with which the legislation is concerned.”