Trade Practices Act - Third Line Forcing

Published Thursday, 17 October 2002 by Matthew Brazier assisted by Phillip Cornwell and Diccon Loxton at Allens Arthur Robinson

Australian Competition & Consumer Commission v IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402)

Opportunity to join future Leagues Club not a service – “packages” not generally third line forcing.

Background

A company began promoting a scheme for a syndicate to be formed to enter a team in the national rugby league competition. Integral to the scheme was the sale of investment policies to willing participants. The policies were sold by the company as agent of the insurers. The funds generated through the sale of the policies were to be used to finance the syndicate. Several seminars were conducted in which the company and the agent would sell the investment policies.

The ACCC argued that the company had offered to supply persons attending the seminars an opportunity:

  • to acquire shares in the leagues club company; and


  • to become a foundation life member, on the condition that those persons acquire a policy. In doing so, the company contravened (among other sections) s47(6) of the Trade Practices Act 1974 (Cth) which prohibits third line forcing.


    • Decision

    The company had not engaged in third line forcing. In order to establish third line forcing, there must be 2 discrete products or services, the supply of one from the company being conditional on the acquisition of the other from a third party.

    The term “services” does not include an offer of an opportunity to acquire shares or to become a life member of a club or to use the best endeavours to procure that membership. The company was not able to make such a supply of shares or life membership at the time they made the offer to consumers and may never have been able to make such a supply.

    To be a service under s47(6), the forcing company must be in a position to supply the service immediately, or if under an offer, when that offer is taken up.

    Third line forcing does not occur where a single package containing a number of products is supplied (even where an unrelated party supplies services or products). However, it is necessary to scrutinise such packages to ensure that the real arrangement between the parties is not different to that reflected in the documents presented to third parties. The critical element of the arrangement in this case, was that the investment policies were not acquired directly from the third party insurance company but from the company itself.

    The ACCC argued that due to the agency relationship between the company and the insurers, the offerees acquired the policies indirectly from the insurers. However, this ignored the “critical fact” that the ability to make the promised shares and membership available was dependent on the company supplying the policies. What was offered by the company was characterised as a package rather than 2 separate services.

    The fact that there was not a separate supply of distinct services meant there could not be a contravention of s47(6).