This article will briefly overview the practice of Resale Price Maintenance before providing an update on the ACCC’s activities in prosecuting entities engaging in Resale Price Maintenance.
Resale Price Maintenance
Section 48 of the Competition and Consumer Act 2010 (Cth) (CCA) prohibits Resale Price Maintenance (RPM). No, not the Les Mills workout! RPM occurs where a supplier or manufacturer prohibits a reseller discounting the supplier’s products, preventing the supplier from competing on price. Competition and competitive markets are a central tenet of Australian Competition Law. RPM is then prohibited by the Competition and Consumer Act without exception (or is it? More on this at the end). Although a supplier can recommend that resellers charge a certain price for goods, it can’t prevent a reseller advertising or charging below this price. A supplier is also prohibited from pressuring a reseller to maintain their prices.
Resale Price Maintenance in Court (2015 Edition)
We set out three cases that attracted the ACCC’s attention and unpack what prohibited conduct companies engaged in and what consequences they potentially face.
OmniBlend has two black marks against its name in the eyes of the ACCC. The ACCC alleges OmniBlend attempted to engage in price fixing with a competitor and resale price maintenance. OmniBlend engaged in RPM by refusing to supply the competitor unless it ceased discounting the price of blenders. The case is still ongoing.
Italiatech and TMO Sports
Italiatech and TMO Sports are importers and wholesalers of bicycle parts plus accessories, selling to shops all round Australia. The companies were exclusive distributors of a particular brand of bike helmet and a bike. The companies engaged in RPM by attempting to stop three retailers of the helmets and bikes discounting the products. The companies committed to not engage in RPM for five years, write to retail customers informing them of the undertaking and implemented a staff training program.
The Case of Festool
As discussed, the CCA prohibits Resale Price Maintenance. Significantly, the ACCC permitted the first instance of RPM by ‘authorising’ the practice in late 2014. Tooltechnic Systems is a supplier of Festool power tools Australia wide. Because Festool tools require significant pre and post-sale services, the ACCC allowed Tooltechnic to prohibit retailers who offered post sales support from offering a lower price. Retailers who did not offer sales service could lower their prices because they did not benefit from being able to charge for sales service, therefore needed to compete on price.
In summary, Resale Price Maintenance is the practice of preventing a retailer from competing on price by discounting. Section 48 prohibits the practice and in 2015, the ACCC took a blender supplier and bike supplier to court. In 2014, the ACCC gave the first authorisation to an entity to engage in RPM.
Questions? Please get in touch on 1300 544 755. LegalVision’s experienced competition and consumer lawyers would be delighted to assist.