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Resale Price Maintenance overview

 

Prohibition of resale price maintenance in Australia

Australia's competition laws contains a per se prohibition against resale price maintenance (defined as various forms of minimum RPM).

Authorisation on public benefit grounds is available (provided sought and obtained in advance of the conduct) and it has been recommended that notification (a simpler and cheaper process) also be made available. The Government has accepted that recommendation and draft legislation is expected in 2016.

 

The relevant legislation

Australia's competition laws are contained in the Competition and Consumer Act 2010 (Cth). The key provision in relation to mergers is section 48 which prohibits a corporation from engaging in the practice of resale price maintenance.

Section 48 simply states:

'A corporation or other person shall not engage in the practice of resale price maintenance.'

This is defined as the practices referred to in Part VIII of the Act (commencing at section 96).

The defined forms of conduct in Part VIII include various forms of minimum RPM (see s 96(3)), both in relation to goods and services (including withholding supply as a result of failure to agree to or adhere to a RPM requirement). Maximum RPM is not prohibited under the RPM prohibition, although it could theoretically be prohibited as a misuse of market power in appropriate circumstances

Authorisation is available for RPM on public benefit grounds. It had recently been recommended (as part of the Harper Report) that notification also be available. This is a simpler and cheaper process than authorisation.

 

Authorisation of RPM

Although RPM is prohibited per se in Australia, it is possible for parties to seek authorisation of their conduct. Parties wishing to do so must apply before engaging in the RPM conduct and must be able to demonstrate that the proposed conduct would result (or be likely to result) in such a benefit to the public that it should be allowed to take place: section 88(8A) and section 90(8). If successful, section 48 will not prohibit the authorised conduct.

The option for authorisation was introduced in 1995, following a recommendation of the Hilmer Committee, which noted that 'economic theory associated with RPM [presents] a convincing argument that RPM can, in certain circumstances, enhance economic efficiency' (para 58 Hilmer Report).

Until 2014, however, there had been no authorisation applications. The first authorisation of RPM (following the first application for RPM authorisation) was granted in December 2014:

 

Notification of RPM

In 2015 the Harper Report recommended (rec 34) that ther per se prohibition of minimum RPM be retained, but that 'notification' be made available for RPM.

Briefly, notification would involve a corporation, which is proposing to engage in RPM, notifying the ACCC setting out the particulars of the proposed conduct. While the notification is in place the conduct referred to in the notice will not contravene the Act. However, if the ACCC is satisfied that the corporation is:

  • engaging in conduct of a kind that would constitute RPM (and referred to in the relevant notice); and
  • that conduct would not result in a benefit to the public likely to outweigh the detriment to hte public from engaging in the conduct

it may give notice in writing to the company, after which the company will have 30 days to discontinue the conduct or risk contravening the Act.

See my summary of proposed RPM changes, including new model notification provision.

 

Penalties and remedies for contravention

Civil remedies are available for contraventions of s 48 of the CCA. In addition to direct contravention, remedies are against any person who has attempted, aided or abetted, induced, conspired with others to contravene or otherwise been 'directly or indirectly, knowingly concerned in, or part to, the contravention'

The civil remedies are available for contraventions of both Division 1 and Division 2 of Part IV of the CCA include:

(1) pecuniary penalties (s 76) up to the greatest of:

  • AU$10 million
  • three times the total value of benefits obtained that are reasonably attributable to the conduct (if that can be determined)
  • if benefits cannot be determined, 10% of the annual turnover of the corporation during the 12 month period ending at the end of the month in which the act or omission occurred

(2) damages (s 82)

(3) injunctions (s 80)

(4) divestiture (in relation to mergers) (s 81)

(5) non-punitive orders (eg, community service) (s 86C)

(6) punitive orders - adverse publicity orders (s 86D)

(7) disqualification from directorship (s 86E)

(8) other orders (s 87)

 

Case law

Details about the key cases relating to misuse of market power in Australia can be found on my RPM page (cases).

 

Commentary

For research and commentary on resale price maintenance in Australia and elsewhere see the RPM reading room.