Section 45AQ
Resale Price Maintenance

Amended Competition and Consumer Amendment (Competition Policy Reform) Act 2017 (Act 114 of 2017)

Introduced by Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009

Operative: 24 July 2009

ACCC v Olex Australia Pty Ltd [2017] FCA 222
Case dismissed - cartel allegations

The insertion of this provision was part of the package of reforms introducing criminal penalties for cartel conduct. The reforms also created a parallel civil cartel prohibition, replacing the former s 45A which dealt directly with price-fixing.

The reforms were initially recommend by the Dawson Committee as part of its 2002-2003 inquiry into the Competition Law provisions of the Trade Practices Act.

This anti-overlap provision was raised by one of the defendants in ACCC v Olex Australia Pty Ltd [2017] FCA 222. Justice Beach observed:

[785] It is contended that even if the ACCC could prove its pleaded allegation, the effect of any such proof would be to satisfy the elements of s 44ZZRR(1)(c) insofar as Prysmian as the supplier to Rexel Electrical would have induced Rexel Electrical not to sell to Caltex at a price more than a specified price (s 96(3)(b)); or agreed to supply Rexel Electrical goods on terms that Rexel Electrical would not sell the goods to Caltex at more than a specified price (s 96(3)(c)); or Prysmian using in relation to goods supplied to Rexel Electrical a statement of price that is likely to be understood by Rexel Electrical as the price above which the goods are not to be sold to Caltex.

[786] It is said that the alleged bidding agreement between Rexel Electrical and Prysmian cannot contravene ss 44ZZRJ or 44ZZRK because even if the ACCC could establish the alleged bidding agreement, it would amount to “maximum” resale price maintenance conduct within the meaning of s 44ZZRR(1)(c).

[787] According to the ACCC’s alleged bidding agreement, Prysmian was obliged to make its quote to Rexel Electrical, and Rexel Electrical was obliged to make its price to Caltex with Prysmian’s cable, lower than Prysmian’s direct price to Caltex. It is said that this conduct constitutes maximum resale price maintenance, because it involves Prysmian inducing, or by agreement requiring, Rexel Electrical not to sell Prysmian cable to Caltex at a price higher than a price just below Prysmian’s direct price (see ss 96(3)(b) and 96(3)(c)), or using a statement of price that is likely to be understood by Rexel Electrical as the price above which its cable is not to be sold (s 96(3)(f)). It is said that the requirement that Rexel Electrical not price higher than a price just below Prysmian’s direct price is sufficient to constitute a “price specified” within the meaning of ss 96(3)(b) and 96(3)(c), because the specified price can be within a range of a particular figure, or an approximate figure, such as the supplier’s prices from time to time: Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd (No 2) (1980) 44 FLR 149 at 159 to 160; Trade Practices Commission v Penfolds Wines Pty Ltd [1991] FCA 631; (1991) 104 ALR 601 at 612.

[788] But in my view, Prysmian’s and Rexel Electrical’s contention leads to perverse outcomes. If accepted, it would mean that manufacturers and suppliers could evade the intention of the Act to prohibit bid rigging by the particular price fixing mechanism they agree upon, for example, by agreeing that one party’s bid should not exceed a particular amount, rather than agreeing that the other party’s bid should be greater than a certain amount. The rationale for allowing maximum resale price maintenance, which is that it can be pro-competitive and consumer welfare enhancing for a supplier to prevent distributors reselling its product above a certain price, cannot apply to a bid rigging scenario where the outcome is not lower prices for consumers but rather an intentionally uncompetitive price offered to the acquirer. The legislature cannot have so intended in relation to s 44ZZRR(1)(c).

[789] Further, I also agree with the ACCC that the carve out in s 44ZZRR(1)(c) does not apply because the corollary of the pleaded provision (Rexel Electrical’s bid price to be lower than Prysmian’s direct bid) is that the parties also agreed that Prysmian’s direct bid price would be higher than Rexel Electrical’s bid price. So, it is implicit in the pleaded allegation that the parties agreed that Prysmian’s direct bid price would not be less than Rexel Electrical’s bid price. Accordingly, even if the carve out was to apply to a provision of a bid rigging agreement that related to the maximum price one of the parties would bid, it would not apply to a provision that related to the minimum price that the other party would bid.

[790] Prysmian also argues that the ACCC’s “unpleaded” allegation is answered by s 44ZZRR(1)(c) in any event. I do not need to address this.

[791] In my view, Prysmian’s and Rexel Electrical’s reliance on s 44ZZRR(1)(c) is artificial and should be rejected.

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