In 1992, a consortium of three companies including Gambro raised concerns about the manner in which the NSW sterile fluids contract was structured for and awarded.

Baxter adopted a strategy of leveraging the monopoly of the IV fluids market to attain favourable terms of sole supply for PD and PN solutions, excluding competition.

[7] Baxter put in multiple bids for the contracts, one was a cherry pick (line-by-line) offer where there were no commitments to purchase any particular amount of products.

[8] IV fluids are an essential life-saving product line upon which the health sector relies[9] and are purchased in exceptionally high volumes; the effect of the tenders was to eliminate competition.

[14] Prior to Baxter, the leading case on derivative governmental immunity in Australia was the 1979 High Court judgment in Bradken Consolidated Ltd v Broken Hill Pty Co Ltd.[15][16][17] In Bradken, the High Court upheld a claim for derivative governmental immunity by equipment suppliers to the Queensland Commissioner for Railways.

Robertson Wright SC, a Senior Counsel specialising in competition and trade practices law,[19] argued there are "a number of difficulties" with the judgment, including the "unsatisfactory nature" of the authorities it relied on.

[24] Allsop J's judgment was upheld unanimously on appeal to the full bench of the Federal Court (Justices Mansfield, Dowsett and Gyles presiding).

[25] The full bench expressed unease about its own judgment, stating that the question of derivative governmental immunity should be left to the High Court for reconsideration of Bradken.

The Australian Government Solicitor acted for the ACCC, with Lindsay Foster as Senior Counsel; Blake Dawson and David Yates SC represented Baxter.

In determining the scope of whether governmental immunity from a statutory provision extends to a party dealing with the government, the judgment adopted the following position of Justice Kitto, then dissenting, in the 1955 High Court case of Wynyard Investments v Commissioner for Railways (NSW):[31][32] The object in view is to ascertain whether the Crown has such an interest in that which would be interfered with if the provision in question were held to bind the corporation that the interference would be, for a legal reason, an interference with some right, interest, power, authority, privilege, immunity or purpose belonging or appertaining to the Crown.

[34] Having examined the characteristics of the TPA as a law to promote competitive behaviour, the joint judgment held that the extension of derivative governmental immunity from the TPA to a trading corporation would be a "remarkable" conclusion and "far beyond what is necessary to protect the legal rights of governments, or to prevent a divesting of proprietary, contractual or other legal rights and interests.

[40] Nicholas Seddon, a lawyer and academic specialising in commercial and government law,[41][42] claimed the High Court's judgment leaves "many uncertainties", particularly regarding whether derivative governmental immunity will extend to private sector providers carrying out governmental functions that have been contracted to them (as opposed to merely providing goods or services to the government).

[43] Robertson Wright echoed these concerns, arguing the joint judgment did not "set out in as helpful detail" as it might the factors to be taken into account in deciding whether governmental immunity will derive to a party dealing with the government.

[47] The full bench declared that Baxter breached Sections 46 and 47 of the TPA, but left it to the ACCC to seek pecuniary penalties.