Home Page / The Law / Resale Price Maintenance

Image of saleResale Price Maintenance

Please see new RPM page

 

About RPM

Overview

Section 48 of the CCA prohibits a corporation from engaging in the practice of resale price maintenance. Resale price maintenance is defined in Part VIII. It captures 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 (even if it substantially lessens competition!) A person does not engage in RPM merely by providing a statement of recommended prices (s 97). Authorisation is available for RPM on public benefit grounds.

Note: The Harper Panel's Final Report recommends that RPM remain per se prohibited but that a notification option be available. See my summary of proposed RPM changes, including new model notification provision.

 

* Note, the video indicates that no party has yet applied for authorisation for RPM in Australia; there has now been one successful authorisation application (December 2014) - see below.

Types of RPM prohibited

Section 4 defines resale price maintenance as the type of RPM referred to in Part VIII, which in turn defines resale price maintenance in section 96 as the acts referred to in sub-section 96(3). This provision refers only to goods, but the addition of s 96A in 1995 has the effect of extending the prohibition to the supply/re-supply of services.

Section 96(3)(a)
Refusal to supply without agreement as the minimum resale price

It is RPM for a supplier to make known 'to a second person that the supplier will not supply goods to the second person unless the second agrees not to sell those goods at a price less than a price specified by the supplier'.

RPM Diagram subsection a

For purposes of this sub-section, a supplier can 'make it known' to the supplier either directly or indirectly. There remains some uncertainty about what is meant by the term 'agrees', although it is suggested that it is not necessary that any 'binding' agreement be reached in order for this requirement to be satisfied.

See, for example, TPC v Sony (Australia) Pty Ltd (1990) ATPR 41–031 (on the issue of 'second person') and LinkThe Heating Centre Pty Ltd v TPC (1986) 9 FCR 153.

Section 96(3)(b)
Inducing or attempting to induce second person not to sell below a specified price

It is RPM for the supplier to induce or attempt to 'induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier'.

This sub-section will not be contravened in the case of genuine 'recommended price' statements: section 97.

However, a recommended price can be a price specified if it not a genuine recommended price: see, for example, LinkTPC v Bata Shoe Co of Australia Pty Ltd (1980) 44 FLR 149; [1980] FCA 18

'The fact that the specification of a price is couched in terms of recommendation does not prevent it from being a price specified by the supplier: see Festival Stores v Mikasa (NSW) Pty Limited ... (1971) 18 FLR 260 per Spicer CJ and Smithers J and the judgment of the High Court in the appeal: LinkMikasa (NSW) Pty Limited v Festival Stores [1972] HCA 69; (1972) 127 CLR 617.'

RPM SUB-SECTION B

Section 96(3)(c)
Agreement (or attempted agreement) not to sell below specified price

It is RPM for the supplier to enter 'into an agreement, or [offer] to enter into an agreement, for the supply of goods to a second person, being an agreement one of the terms of which is, or would be, that the second person will not sell the goods at a price less than a price specified, or that would be specified, by the supplier'.

RPM sub-section c

Section 96(3)(d)
Withholding supply because second person would not agree not to sell below specified price or has sold or is likely to sell below specified price

It is RPM for a supplier to withhold supply to a second person because that person has not agreed to sell below a price specified or has sold, or is likely to sell, goods supplied by the supplier at less than a price specified by the supplier.

See loss leader defence, below.

RPM diagram - subsection d

Section 96(3)(e)
Withholding supply to a second person because a third person would not agree not to sell below specified price or has sold or is likely to sell below specified price

It is RPM for a supplier to withhold supply to a second person because a third person (who obtains goods directly or indirectly) from the second person has not agreed to supply at less than a price specified by the supplier or has sold (or is likely to sell) goods supplied by the second person at a price less than the price specified.

Sub-section ei RPM

Sub-section eii RPM

Section 96(3)(f)
Supplier using a statement of a price likely to be understood as the price below which the goods are not to be sold

It is RPM for a supplier to use, 'in relation to any goods supplied, or that may be supplied, by the supplier to a second person, a statement of a price that is likely to be understood by that person as the price below which the goods are not to be sold.'

Section 99 deems certain statements to be used in relation to goods for purposes of this subsection. Pursuant to this subsection statements applied to goods, covers, labels or used in signs, advertisements, invoices etc will all be deemed to have been used in relation to goods.

See, for example, LinkBP Australia Ltd v TPC (1986) 12 FCR 118; [1986] FCA 152 (Full Court of the Federal Court of Australia):

Lockhart J: 'The fact that a price is stated to be within a range of a particular figure, or that otherwise an element of approximation is introduced, does not detract from the true character of the price as being a specified price: see Trade Practices Commission v. Pye Industries Sales Pty. Limited 1978 A.T.P.R. 40-088.'

Requirement for a price to be specified

Most of the forms of RPM referred to in section 96 require there to be a 'specified price'. Section 96(4) assists by setting out a number of circumstances in which a price will be deemed specified by the supplier. For example, it makes clear that where a formula is specified by a supplier which enables price to be ascertained by reference to the formula, that will be deemed to be a price specified.

See, for example, LinkThe Heating Centre Pty Ltd v TPC (1986) 9 FCR 153 and LinkTPC v Penfold Wines Pty Ltd (1992) ATPR 41-163.

The courts have also found that an approximation will be sufficient to constitute a specified price. See, for example, LinkTPC v Bata Shoe Co of Australia Pty Ltd (1980) 44 FLR 149; [1980] FCA 18 and LinkPeter Williamson Pty Ltd v Capitol Motors Pty Ltd (1982) 61 FLR 257.

See also Re Trade Practices Commission v Penfolds Wines Pty Ltd; James Llewellyn Williams and George Keys [1991] FCA 631; (1992) 14 Atpr 41-163 (1991) 104 ALR 601 (13 December 1991):

Pincus, French and Foster JJ: (para 31) '... Reliance was placed upon Trade Practices Commission v Bata Shoe Co. of Australia Pty Ltd (No.2) [1980] FCA 18; (1979) 44 FLR 149 and Peter Williamson Pty Ltd v. Capitol Motors Pty Ltd (1982) 61 FLR 257. They are authorities for the proposition that the fact that a price is stated to be within a range of a particular figure or that otherwise an element of approximation is introduced, does not detract from the true character of the price as a specified price. And that proposition can be accepted without reservation. It does not, however, set out the criteria for identifying a mere approximation or the limits of the range within which a price may be said to be "specified". ... The onus was on the Commission, if there were a variance which was not obviously trivial between the direct deal prices and those which Penfolds was prepared to tolerate, to support by evidence the characterisation of the variance as mere approximation. The limits of the range of prices which may be treated as approximating a specified price will, no doubt, depend upon what is significant to competition in the relevant market.'

Meaning of withholding supplies

Subsections (d) and (e) require proof of withholding. Section 98 deems certain conduct to constitute 'withholding' for purposes of these sub-sections, including failing to supply as requested, refusing to supply except on disadvantageous terms, supplying on less favourable terms than others to whom the supplier supplies or causing or procuring a person to withhold supply in any of these ways. For purposes of section 96 it is sufficient if RPM is a 'substantial' reason for withholding (it need not be the sold reason); see s 4F(b). Section 100 further provides that where withholding is established, it will be presumed (unless the contrary is established) that the alleged RPM was the reason for the withholding.

See further:

Loss leader defence

It is a defence to a claim of RPM as defined in s 96(3)(d) (withholding) that the second person has, within the preceding year, sold goods obtained from the supplier at less than cost for the purpose of 'attracting to the establishment ... persons likely to purchase other goods' or 'otherwise for the purpose of promoting the business of that other person'. In making this assessment genuine seasonal or clearance sales will normally be excluded: see section 98(2).

Authorisation

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).

Despite the availability for this option since 1995, the first authorisation application for RPM was not made until 2014 and it was successful - see Tooltechnic Systems (Aust) Pty Ltd - Authorisation - A91433. See further below.

 

The Law

 

Cases relating to RPM

Australia - Courts

Australia - Authorisation

It is possible to authorise RPM of public benefit grounds. However, until 2014 there had been no authorisation applications. The first ever authorisation of RPM (following the first application for RPM authorisation) was granted in December 2014:

United States

 

Articles, working papers and conference papers relating to RPM

Australia

Other

 

Reports relating to RPM

Guidelines

 

Useful links