ACCC Brings Resale Price Maintenance Enforcement Action

Jones Day

Jones Day

A new ACCC resale price maintenance case provides a timely reminder that manufacturers and suppliers must tread carefully with distribution arrangements related to price in Australia.

The Australian Competition and Consumer Commission ("ACCC") has commenced proceedings against FE Sports, alleging it engaged in Resale Price Maintenance ("RPM"). The ACCC is seeking injunctions, penalties, a compliance program and costs. RPM occurs when a supplier of goods or services sets (or attempts to set) a minimum price below which resellers cannot resell or advertise its products. Australia's competition law prohibits RPM and assumes it harms competition without any consideration of its competitive impact. However, a company can notify the ACCC of its RPM plan and obtain legal protection if the ACCC does not object within 14 days. If the ACCC does object, it commences an assessment (usually taking around six months), after which the ACCC either accepts the conduct or revokes the notification.

In this case, the ACCC alleges that FE Sports, a wholesaler of high-end cycling products and accessories, included RPM clauses in its retail agreements without prior ACCC approval. The retail agreements specified that "under no circumstances" were products to be "advertised for Sale by the [Retailer] at a discount" from the recommended retail price (which FE Sports maintained for all products, and provided to retailers upon request). The alleged conduct is significant in scope: despite three RPM warnings from the ACCC, FE Sports sought RPM clauses 328 times over more than two years, 242 of which were adopted.

This case highlights the ACCC's recent and renewed focus on RPM enforcement. In late 2019, the ACCC settled allegations that Bromic, an outdoor heating distributor, engaged in RPM when it introduced a minimum advertised price ("MAP") policy. By comparison, in the United States, MAP policies are generally lawful provided they restrict only advertised, not actual, resale prices, and are unilaterally adopted and implemented. Similarly, in the United States, both minimum and maximum RPM agreements are subject to rule of reason, rather than per se unlawful, treatment under federal antitrust law (although, as in Australia, some U.S. states continue to treat minimum RPM as per se unlawful). RPM can be a difficult area for suppliers to manage; however, the ACCC is unlikely to be lenient when it detects clear RPM conduct. Although ACCC notification can provide protection, the ACCC will require strong evidence that the public benefit from proposed RPM (such as underpinning necessary investments in staff training and facilities) outweighs the harm. As a result, companies should seek experienced competition advice prior to implementing RPM in Australia.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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