Erika Serrano and James Keeves outline the key takeaways from the Federal Court of Australia’s decision in ACCC v Qteq
The ACCC has succeeded in its most recent attempt at cartel enforcement action, with a victory in the Federal Court of Australia against Australian mining-services and equipment company Qteq Pty Ltd (Qteq) and executive, Mr Simon Ashton. The decision is a positive result for the ACCC in the cartel space following the High Court of Australia’s recent decision to dismiss the ACCC’s appeal in a proceeding against the CFMMEU and a Queensland-based construction company. The decision also provides a helpful illustration of the principles relevant to attempts to engage in cartel conduct, the competition condition in s 45AD(4) of the Competition and Consumer Act 2010 (Cth) (CCA), as well as the exclusive dealing exception in s 45AR of the CCA.
Facts
Qteq was the market leader of gauge work services to operators of coal seam gas (CSG) wells between 2017 and 2019. Gauges are installed in CSG wells to monitor water levels and adjust pump rates. Qteq was the incumbent supplier of gauge services to a Shell plc joint venture (QGC) and was facing the threat of a competitive tender process for the replacement contract for that work.
In a civil penalty proceeding commenced by the ACCC in December 2022, the ACCC alleged that Qteq and Mr Ashton adopted a strategy to neutralise competitive threats posed by the tender process by attempting to collude with competitors for the supply of gauge works to QGC and other CSG customers. The ACCC alleged that the attempts sought to reduce or preclude competition by way of allocating customers, structuring the tendering bids, sharing the market and agreeing not to compete, and involved Pro-Test Pty Ltd (Pro-Test), Eastern Well Service No 2 Pty Ltd (Eastern Well No 2) and Firetail Energy Services Pty Ltd (Firetail). The ACCC alleged that, by doing so, Qteq and Mr Ashton contravened s 45AJ of the CCA (and its predecessor 44ZZRJ) on six occasions by attempting to induce the competitors into contracts, arrangements or understandings (CAUs) containing cartel provisions relating to the supply of upstream CSG services and related goods.
The decision of the Federal Court
On 17 April 2025, Bromwich J held that Qteq and Mr Ashton had contravened s 45AJ in relation to five of the six attempts. A summary of the Court’s findings in relation to each of the alleged attempts is set out below.
| Attempt # | Relevant competitor | Conduct alleged by the ACCC | Finding by the Court |
| 1 | Pro-Test | Pro-Test 2017 Customer Allocation Understanding: Attempt to, or attempt to induce Pro-Test to, make an arrangement or understanding as to customer allocation (i.e., that Pro-Test would not compete for the supply of gauge works to QGC and Qteq would not compete for the supply of goods or service that Pro-Test supplied to Santos Ltd) | Proven with respect to both Mr Ashton and Qteq |
| 2 | Pro-Test | Pro-Test 2017 QGC Tender Understanding: Attempt to, or attempt to induce Pro-Test to, make an arrangement or understanding that Pro-Test would limit its bet for the QGC gauge tender so as to win only 15% of the work and that Qteq would not compete with Pro-Test for the supply of goods or services to Santos | Proven with respect to both Mr Ashton and Qteq |
| 3 | Pro-Test | Pro-Test 2019 Market sharing Understanding: Attempt to, or attempt to induce Pro-Test to, make an arrangement or an understanding that Pro-Test would not supply gauge works and/or Qteq would not supply DST or completions work | Proven with respect to both Mr Ashton and Qteq |
| 4 | Eastern Well No 2 | Easternwell 2019 Non-Compete Agreement: Attempt to make, or attempt to induce, a contract with Eastern Well 2 to not supply gauge installation services to QGC or any other CSG operators, other than in concert with Qteq | Proven with respect to both Mr Ashton and Qteq
The reliance by Mr Ashton and Qteq on the exclusive dealing exception failed |
| 5 | Eastern Well No 2 | Easternwell 2018-2019 Non-Compete Agreement: Attempt to make, or induce, a contract with Eastern Well 2 to restrict or limit gauge service supply and avoid supplying to particular customers | Proven with respect to both Mr Ashton and Qteq
The reliance by Mr Ashton and Qteq on the exclusive dealing exception failed |
| 6 | Firetail | Firetail Understanding: Attempt to make an arrangement or understanding with Firetail to not supply gauge works | Not proven as the competition condition was not established |
The Pro-Test Attempts
The ACCC alleged, and the Court found, that Qteq and Mr Ashton had attempted on three occasions to arrive at an arrangement or understanding with Pro-Test (or had induced Pro-Test to do so) to allocate customers between Qteq and Pro-Test and to share the markets for gauge works and drill stream testing (DST) or completions work.
In addition to a helpful discussion of the principles relevant to attempts, Bromwich J gave particular focus to two issues. The first was whether it is necessary for the ACCC, where it alleges multiple cartel provisions for an attempt to arrive at CAU, to prove the existence of each cartel provision in order for the attempt to be established, or whether it is sufficient to prove only one of the alleged cartel provisions.
The second issue concerned what was required to satisfy the ‘competition condition’ in s 45AD(4). In order to prove that a provision of a CAU is a cartel provision contrary to s 45AD(1), it is necessary to establish that the parties are, or are likely to be, in competition with each other (competition condition), and that either the cartel provision has a particular proscribed purpose (purpose condition) or a particular proscribed purpose or effect (purpose/effect condition).
While it was common ground that Pro-Test and Qteq were in competition or likely to be competition in relation to gauge works, there was an open question as to they were in competition in relation to DST. This meant that for Attempt 3, where the ACCC had alleged that Pro-Test and Qteq were in competition in relation DST or gauge works, it was sufficient for the ACCC to establish the attempt without proving that Pro-Test and Qteq were in competition in relation to DST. However, for Attempts 1 and 2, the ACCC alleged that Pro-Test and Qteq were in competition in relation to DST and gauge works, and so an issue to arose as to whether, in order to establish the competition condition, the ACCC would need to prove that Pro-Test and Qteq were in competition in both markets.
Although it was not strictly necessary to decide, Bromwich J concluded that the ACCC did need to prove that Pro-Test and Qteq were in competition in relation to both DST and gauge works. His Honour was persuaded that it was necessary for the ACCC to meet its pleaded case, observing that ‘where a regulator has pleaded that the purpose condition for a provision is a particular way, it must satisfy the Court that the competition condition is met in respect of it. Otherwise, it is no cartel provision at all’ (at [278]).
Bromwich J was also persuaded that Pro-Test and Qteq were likely to be in competition for DST, in the sense of there being a ‘real chance’ of Pro-Test being in competition with Qteq for the provision of DST services. His Honour relied on evidence that Mr Ashton had presented Qteq as withholding its capability to provide DST services in return for Pro-Test withholding its capability to provide services for permanent downhole gauges. This, his Honour said, was a ‘form of competitive behaviour, expressed as potential rivalrous behaviour of a reasonably immediate kind’ (at [292]).
The Eastern Well No 2 Attempts
The Eastern Well No 2 attempts were notable because the respondent sought to rely on the exclusive dealing exception in s 45AR(1) of the CCA. This is an anti-overlap provision and provides an exception to the application of section 45AJ for CAUs that would otherwise breach the exclusive dealing prohibition in section 47 of the CCA.
In relation to Attempts 4 and 5, the Court found that Qteq attempted to enter into, or induce entry by Eastern Well No 2 into, two non-compete agreements containing cartel provisions. The respondents submitted that the non-compete agreements should each be viewed as an exclusive dealing arrangement where Qteq would be the exclusive subcontractor of gauge services to Eastern Well No 2. The ACCC responded by submitting that there was no exclusive dealing because the relevant provision of the agreements, clause 8 and clauses 4(B) and 4(e), did not form part of a supply arrangement, but rather sought to form part of an agreement as to confidentially and non-disclosure, which was in force for a period of three years, irrespective of whether a supply agreement was reached. The ACCC further submitted that the clauses went beyond the scope of s 47 because they would have prevented Eastern Well No 2 from supplying gauge installation service to any other CSG operator, and even more restrictively, prevented Eastern Well No 2 from competing with Qteq at all.
Justice Bromwich agreed with the ACCC that the exclusive dealing exception did not apply because the relevant non-compete clauses were not conditional on the supply or acquisition of services and were not limited to the scope of section 47. As his Honour emphasised, ‘[s]o long as the restraint sought to be imposed [is] capable of operating more widely than the scope of s 47, it [is] unable to receive the protection of s 45AR’, because exclusive dealing in s 45AR ‘is not such a broad protective umbrella’ (at [414]). His Honour also rejected the respondents’ reliance on Kirby J’s reasoning in Visy Paper Pty Ltd v ACCC [2003] HCA 59 that the exclusive dealing exception is typically confined to vertical restrictions rather than horizontal restrictions, noting that the use of concepts of horizontal and vertical restraint was specifically disavowed by the plurality of Gleeson CJ, McHugh, Gummow and Hayne JJ.
Key takeaways
The decision is a successful attempt by the ACCC to enforce Australia’s cartel laws. It provides a helpful illustration of the principles relevant to attempts to contravene the CCA and what is required to satisfy the competition condition in s 45AD(4). In this regard, it features a warning to the ACCC that where it pleads the purpose condition for a cartel provision in a particular way, it must also prove the competition condition in respect of it. The decision also provides helpful guidance on the exclusive dealing exception in s 45AR, emphasising that where a restraint is capable of operating more widely than the scope of s 47, it cannot receive the protection of the exception.
The proceeding now moves to the penalty phase, with a penalty hearing to be listed in due course. It remains to be seen how the Court will gauge the penalties to be imposed on Qteq and Mr Ashton.
