FEDERAL CONSTITUTIONAL LAW
LAWS2011 SUMMARY AS AT SEMESTER ONE 2020
PG. 11
5 – FREEDOM OF INTERSTATE TRADE
Per s 92: On the imposition of uniform duties of customs, trade, commerce and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.
(If State Act): Being a State Act, it is prima facie valid as State governments have plenary power to enact legislation however it is subject to prohibitions in the Constitution, most relevantly here, s 92, which mandates that trade, commerce and intercourse among the States shall remain absolutely free.
(Main test): [section X] will be invalid if amounts to a discriminatory burden in the protectionist sense so as to confer a competitive or market advantage to local goods or removing a competitive advantage it otherwise would have (Cole v Whitfield). [Is section
discriminatory in law or de facto? The section applies equally to [state] goods and interstate goods [what liability?] so prima facie non-discriminatory. However, it’s practical operation may be discriminatory]. [Protectionist in intention or effect? Anything which indicate State intention? Effect? Does the measure make local goods more appealing or preference over interstate goods? Conclude.]
Nevertheless, the measure may nevertheless survive a challenge under s 92 if it can be shown that [section X is necessary or appropriate and adapted to that object and any burden imposed on interstate trade is incidental and not disproportionate (Castlemaine Tooheys confirmed in Betfair (No 1)). It is a legitimate end to [State purpose]. [Are the measures RAA? Is the burden incidental? Compare to Castlemaine Tooheys (environmental concerns) and Betfair (No 1) (protection of integrity of racing industry but banned all betting exchanges) and Cole v Whitfield (undersized crayfish) and Bath (tax on wholesalers easier to collect)]
(If different goods): As we are dealing with goods that are strictly different, the necessary nexus is supplied if the two goods are of
“the same kind” (Cole v Whitfield 407-8) ie. there is cross-elasticity of demand between them both such that one is a substitutable good for the other (Betfair (No 1)). [As the price of X goes up, the demand for Y goes up, so they may be said to be within the same market so that discriminatory measures of a protectionist kind will affect the other. Do this with reference to the producers and suppliers of the two products also]. [Like how betting exchanges and wager operators were both considered to be part of the betting industry in Betfair (No 1) OR bottles of varying characteristics (refillable v non-refillable) in Castlemaine Tooheys, (same here)].
(If new economy or internet) because the goods/services here are intangible or operating in the ‘new economy’ (Betfair (No1)) speaking of competition between trade within the state and interstate is unsuitable. Questions of protectionism must be informed by the supply side and demand side, here, much like Betfair (No 1), the out of state supply side for [x] and in-state demand side and vice versa. This liberal approach is necessary to account for the significant changes in the structure of Australia’s economy, namely the rise of businesses which are not impeded by geographic barriers (ie. internet-dependent businesses).
(Conclude) the impugned law discriminates by burdening intrastate trade and commerce to its competitive disadvantage or by benefiting interstate trade and commerce to its competitive advantage. This is in line with the ultimate goal that the framers had in mind (as determined by high court in Cole v Whitfield with recourse to historical documents), that is, intercolonial free trade through elimination of intercolonial free trade and elimination of intercolonial border duties and discriminatory burden and duties
1) Preliminaries
a) Trade and commerce: given ordinary meaning as understood by a business person:
- All the commerce arrangements of which transportation is the direct and necessary result form part of “trade of commerce”.
The mutual communing’s, the negotiations, verbal and by correspondence, the bargain, the transport and the delivery are all, but not exclusively, parts of “trade and commerce”: W & A McArthur v Qld
b) Context: s 92 created many interpretation issues due to what ‘absolutely’ and ‘free’ (from what?) meant.
- Battle between individual rights theory (laissez-faire economy) or whether it pertained to freedom of trade only
- Initially laissez-faire accepted in Bank Nationalisation Case (with two qualifications by Privy Council - some Cth regulation might be okay and the restriction on trade and commerce must be direct)
- Then period of uncertainty. Uebergang highlights this well – a confused bench emerged with Barwick CJ on one side (vehemently defending the strict free trade interpretation) and Murphy J on the other (who argued the interpretation of section 92 undermined and destroyed much social legislation)
- Modern position: s 92 guarantees freedom from discriminatory burdens in the protectionist sense: Cole v Whitfield – done with recourse to historical documents to examine what the framers had in mind ie. That ultimate goal was intercolonial free trade through elimination of intercolonial free trade and elimination of intercolonial border duties and discriminatory burden and duties
PG. 12
2) ‘Absolutely free’: s 92 guarantees freedom from discriminatory burdens in the protectionist sense: Cole v Whitfield - History of section points to elimination of protection as the section’s object
- [Note the difficulty in applying this test and how reasonable minds may differ – see Bath]
a) Discriminatory either de jure or de facto
- ‘Discriminatory’: departure from equality of treatment
- NOT something that applies to both local and interstate goods equally such as a standard for a product or a norm of
commercial conduct eg. Minimum crayfish standards for all Tasmania: Cole v Whitfield OR state-wide marketing board: Barley v Norman (both instate and outstate purchasers required to purchase from NSW Barley Board)
b) Protectionist either in intention or effect/operation
- ‘Protectionist’: protection of local industries against competition from foreign, out-of-state industries such as by granting a competitive or market advantage to local goods or removing a competitive advantage it otherwise would have
̶ Ie. does the law discriminate against out-of-state goods so as to confer a competitive or market advantage to in-state goods?
̶ Eg. [at 393] tariffs that increase the price of foreign goods, non-tariff barriers such as quotas, differential railway rates, subsidies on goods produced, discriminatory burdens on dealing with imports (may be fiscal or non-fiscal)
• NOT a measure which restricts margarine sales (applying to both in and out-of-state indiscriminately) to protect its butter industry – PH Lane Example Textbook 667 n3
• NOT where all purchasers (in and out of state alike) must purchase from centralised board as no discrimination or conferral of competitive advantage to an instate purchaser: Barley Marketing Board
̶ Interstate trade: Protectionist effect on an interstate trader must have that effect due to its capacity, not merely because the practical operation imposes a burden on an interstate trader: Betfair (No 2) (ie. not sufficient that the trader is an interstate trader and is discriminated in a protectionist sense against; must be discriminated against due to the fact they are an interstate trader, in Betfair, the lower margins they operated on caused the imposed fee to have a higher burden on them, not the fact they were interstate)
- Removal of competitive advantage: The removal of a competitive advantage that interstate trade may have over local trade may amount to discriminatory protectionism in the relevant case.
̶ Bath v Alston (close maj. 4:3): Fixed license and ad valorem fees payable by Vic retailers/wholesalers. Fixed fee was not protectionist (applying to Vic sellers and not out-of-state tobacco) but the ad valorem tax does because it taxes a retailer only because of, and by reference to the value of his purchases of out-of-state tobacco (with Vic tobacco excluded from the calculation). The AV fee thus removed any competitive advantage that out-of-state tobacco had by not being subject to the wholesaler tax
• NB: Minority thought no discrimination because all tobacco trade in Victoria was subjected to the expense at point so the economic effect of the tax is the same. If to avoid breach of s 92, VIC govt. could collect all tax from Vic retailers (no discrimination or protectionism then) however this achieves the same economic result but is more costly because there are many more retailers than wholesalers
- Price Increase of Exports: although not found in Barley (wheat), where a scheme burdened exports of a scarce resource so as to give an advantage to in-state users over interstate users (eg. Significant price increase or prohibiting its export), may constitute a breach of s 92: Barley Marketing Board
̶ Eg. NSW Barley Board created to increase price of barley. This burdened exports of barley (in-state trade = fine) which is not generally an issue UNLESS that resource is scarce and can say an indirect benefit conferred to in-state users of that product over out-state
c) ‘Interstate’ trade and the new economy: States cannot make laws which intrude in a national/international market (or one without geographic barriers)
- Cross-elasticity of demand: there is ability to compare ‘like’ products (and the competition between them) where they are of
“the same kind” (Cole v Whitfield 407-8) ie. there is cross-elasticity of demand between them both such that one is a substitutable good for the other: Betfair (No 1)
̶ Eg. Betting exchanges and wagering operators (both gambling: Betfair) or different bottles having same characteristics (Castlemaine)
̶ Rationale: Significant changes in the structure of Australia’s economy, namely the rise of businesses which are not impeded by geographic barriers (ie. internet-dependent businesses) cause issues in determining how the protectionist
PG. 13 measure affects the competition posed by internet businesses.
- Betfair (No 1): WA legislation which made it an offence to use betting exchange (Betfair was one) and to require a license to publish a WA race in WA or elsewhere (Betfair needed for publication over internet but was denied it) – both invalid.
3) QUALIFICATION: where legislation seeks to secure a legitimate non-protectionist end for the well-being of the people of a particular State and yet in operation it results in a discriminatory protectionist measure, it may nevertheless survive a challenge under s 92 if the law is necessary or appropriate and adapted to that object and any burden imposed on interstate trade is incidental and not disproportionate: Castlemaine Tooheys
- as States have plenary power to enact legislation for the well-being of the people of its state, interstate trade must submit to such regulation
1) First, ask what the legitimate non-protectionist end is, and whether the State law is necessary or appropriate and adapted to that object. Do this with reference to the alternative means available which could involve no or a lesser burden on interstate trade. Is the distinction justified because they contribute differently to the legitimate problem? (Eg. Castlemaine – different treatment of non and refillable bottles not justifiable because both contribute to litter issues and energy conservation and the different rates did not alleviate this problem except to a trifling amount)
̶ But also be careful to note not to veer into political considerations as ultimately up to the legislature to choose the appropriate means, however can conclude the measure in question is disproportionate.
2) Second, does the burden inflicted by the law on interstate trade one that is incidental or disproportionate? The fact that a law imposes a burden on interstate trade and commerce that is not incidental or that is disproportionate to the
attainment of the legitimate object of the law may show that the true purpose of the law is not to attain that object but to impose the impermissible burden (Castlemaine at 472)
- Castlemaine Tooheys: scheme enacted as litter control and resource conservation went beyond encouraging the rate of return of non-refillable bottles) went to disadvantage the sale of beer in non-refillable bottles. The rates prescribed were disparately high for non-refillable bottles (without justification). Moreover, the distinction between non and refillable bottles was not justified because the distinction’s contribution to energy conservation and litter ameloriation was trifle (Gaudron, McHugh). They could have prohibited manufacture of the non-refillable bottles or prohibited the sale of non-refillable bottles (to protect the gas used in its manufacture). Funnily enough, Castlemaine’s bottles were manufactured interstate so actually were assisting SA’s concerns about natural gas because they were using outofstate gas.
- Betfair: State WA tried to argue it wanted to ban betting exchanges (Betfair) to protect the racing industry as they
jeopardised the market. Rejected as not appropriate or adapted because it prevented instate customers from using out-of- state services and expanded beyond the racing industry and
- Cole v Whitfield: penalties for undersized crayfish (to protect crayfish industry) applying to all Tas and out-of-state crayfish are not discriminatory in a protectionist sense because the Tas crayfish were not protected; also appropriate and adapted measure because all crayfish are indistinguishable so cannot check crayfish origins and apply the fee only to Tas crayfish
