Heavy penalties warn business against resale price maintenance

Date: Apr 02, 2009
Document Type: Newsletter

A recent court decision to penalise a business over $200,000 serves as a grave warning against engaging in resale price maintenance.

On 5 March 2009, Justice Spender in Australian Competition and Consumer Commissioner v Telwater Pty Ltd [2009] FCA 263 declared that Telwater engaged in resale price maintenance by making it known to its dealers that they could not advertise certain boating packages below a specified price, referred to as the 'brochure price'. It was also found that one of Telwater's directors knowingly concerned in the conduct.

Justice Spender made orders by consent, which included a penalty of $210,000 for Telwater and $28,000 for the director, in addition to declarations, injunctions and costs.

Resale price maintenance a "serious matter"

Justice Spender recognised that engaging in resale price maintenance is a serious matter in contravention of section 48 of the Trade Practices Act 1974 (Cth). This is further reflected in the maximum civil pecuniary penalty imposed. In an earlier proceeding of Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd, Justice Weinberg observed that contraventions of section 48 are "serious violations":

"The prohibition upon resale price maintenance is intended to create conditions under which the public will benefit from traders competing with each other in respect of prices, unfettered by price constraints impose by supplies of goods upon retailers" at [29].

The seriousness of resale price maintenance was further highlighted by Merkel J in Australian Competition and Consumer Commission v Humax Pty Ltd FCA 706at [5]:

"Engaging in resale price maintenance is a serious offence. That is particularly so given that it must now be taken to be known generally that resale price maintenance, as defined in section 96 of the Act, is unacceptable and illegal conduct" at [5].

Businesses must give distributors of their products, freedom to determine prices - ACCC

According to ACCC chairman Mr Graeme Samuel in a statement dated 17 March 2009, this case is a "timely reminder" that businesses must allow independent distributors of their products the freedom to determine the prices at which they both advertise and sell.

"Ultimately, it is the consumer who benefits from such freedom in the market," he stated.

Mr Samuel explained resale price maintenance takes many forms, including requiring independent dealers not to advertise below a specified price.

The ACCC acknowledged that Telwater have now:

  • cooperated in the resolution of the matter;
  • voluntarily stopped the conduct; and
  • Initiated a trade practices law compliance program when the ACCC initially raised concerns about their conduct.

The imposed penalty took into account this co-operative conduct.

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