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Resale Price Maintenance

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Overview

Note: The Harper Review Final Report recommended that the per se prohibition on resale price maintenance be retained, but that the system of notification (currently operating in relation to exclusive dealing) be introduced for resale price maintenance.

Legislation was passed in October 2017 giving effect to this recommendation and the change commenced on 6 November 2017. View the Competition and Consumer (Competition Policy Reform) Act 2017.

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 notification is now also available. The key distinction between the two is that

  • for authorisation the ACCC must make a positive decision to allow authorisation (on public benefit grounds) before it immunises the conduct;
  • for notification immunity commences after a short waiting period (60 days) unless the ACCC withdraws the notification and this can only occur if the conduct would not be likely to result in a benefit to the public or that benefit would not outweigh the detriment associated with any lessening of competition likely to flow from the conduct.

 

The legislation

Section 48 provides that states:

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

This is defined (in s 4) 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

Part I: Definition

Part IV: Prohibition

Part VI: Authorisation

Part VII: Notification

Part VIII: Resale Price Maintenance (inc forms of RPM)

 

The prohibition

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.

See also ACCC Resale Price Maintenance Guidelines.

Specified price

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

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:

 

Forms of prohibited RPM

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.'

 

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).

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

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 involves 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 the public from engaging in the conduct

it may give notice in writing to the company, after which the company will have 60 days to discontinue the conduct or risk contravening the Act.

 

Penalties for contravention | Private remedies

cartelsApplication may be made to the Federal Court for the following:

  • Injunction (section 80)
  • Pecuniary penalties for breach (section 76)
  • Divestiture (section 81)
  • Damages (by persons who suffer loss and damage as a result) (six year limitation period) (section 82)
  • Disqualification from directorship (section 86E)
  • Non-punitive orders (such as community service order) (section 86C)
  • Other orders (Court may make 'such orders as it thinks appropriate' (section 87)

View penalties page for details

 

Cases

Federal Court (alphabetical)

ACCC (Authorisation)

 

History of the provision

HistoryThe RPM provision has remained substantially the same since it was introduced in the Trade Practices Act 1974.

The key changes made followed recommendations by the Hilmer Committee in 1993 (introduced in 1995):

  • to extend the prohibition of resale price maintenance to services (it was previously restricted to goods)
  • to enable parties to seek authorisation on public benefit grounds.

The only other significant change was the introduction of 'notification' for RPM on 6 November 2017.

 

Reading

For a discussion of the law until 1991 and RPM generally Clarke, Vertical Price Fixing, Federation Press (1991).

For research and commentary on RPM in Australia see the reading room.

Reports and studies

International

See in particular

Barak Orbach's RPM Research Project site (predominantly US based but tracks RPM landmarks and provides a bibliography and articles on RPM generally)

2009 Federal Trade Commission (US) Workshop: Resale Price Maintenance Under the Sherman Act and the Federal Trade Commission Act

2009 - Committee on the Judiciary Hearing on “Bye By Bargains? Retail Price Fixing, the Leegin Decision, and its Impact on Consumer Prices’ in April

See also

LinkAlexander MacKay and David Smith, 'The Empirical Effects of Minimum Resale Price Maintenance on Prices and Ouptut' (16 June 2014) (SSRN)

LinkDing Wenlian, 'Judicial Evaluations of Minimum Resale Price Maintenance Behavior' (August 2014 (2)) CPI Antitrust Chornicle (China)

LinkJoshua D. Wright, 'The Economics of Resale Price Maintenance & Implications for Competition Law and Policy' (Remarks of Commissioner, Federal Trade Commission before the British Institute of International and Comparative Law London, United Kingdom April 9, 2014)

LinkPhilip Clarke and Julie Clarke, ‘Resale Price: Australian Experience and Perspectives’ (CPI Antitrust Chronicle, October 2013)

LinkClara Ingen-Housz, 'Resale Price Maintenance in Emerging Competition Regimes in Asia (ex-China)' (October 2013(2)) CPI Antitrust Chronicle

LinkHeather Irvine, 'Behind the Curve? The Treatment of Minimum Resale Price Maintenance in South Africa' (October 2013(2)) CPI Antitrust Chronicle

LinkThomas A. Lambert & Michael Sykuta, 'Why the New Evidence on Minimum Resale Price Maintenance Does Not Justify a Per Se or “Quick Look” Approach' (November 2013(1)) CPI Antitrust Chronicle (SSRN)

LinkChunfai (CF) Lui, 'A Landmark Court Ruling in China: Resale Price Maintenance as Examined in the Johnson & Johnson Case' (October 2013(2)) CPI Antitrust Chronicle

LinkChristian Riis-Madsen & Özlem Fidanboylu, 'Resale Price Maintenance - The Blurred Lines' (November 2013(1)) CPI Antitrust Chronicle

LinkAna Paula Martinez and Mariana Tavares de Araujo, 'Resale Price Maintenance in Brazil: A Moving Target' (October 2013 (2)) CPI Antitrust Chronicle

LinkAlan J Meese, 'Assorted Anti-Leegin Canards: Why Resistance is Misguided and Futile' (2013) 40(4) Florida State University Law Review 907

LinkCharles Saumon, 'Resale Price Maintenance in France' (November 2013(1)) CPI Antitrust Chronicle

LinkD Daniel Sokol, 'The Transformation of Vertical Restraints: Per Se Illegality, the Rule of Reason and Per Se Legality' (Working Paper, 23 July 2013)

LinkDing Wenlian, 'Basic Elements for Analyzing Resale Price Maintenance' (October 2013(2)) CPI Antitrust Chronicle

LinkYan Yu, 'The Use of Economic Analysis in RPM Cases in China: Is There Gold at the End of the Rainbow?' (October 2013(2)) CPI Antitrust Chronicle

LinkJohn R Foote and Blaire Z Russell, 'Resale Price Maintenance; Per Se Antitrust Treatment Alive in the States' (Washington Legal Foundation, Legal Backgrounder Vol 27(18), 19 October 2012)

LinkMichael E Jacobs, 'Legal Treatment of Vertical Restraints: Some Lessons from the Ongoing International Debates Regarding Resale Price Maintenance' (October 25, 2012)

LinkJose Alfredo Jaramillo, 'Free Riding and Resale Price Maintenance: A Love and Hate Relationship' (2011) 34 Contexto Revista de Derecho y Economía (22 November 2011, SSRN)

LinkElizabeth M Bailey and Gregory K Leonard, 'Minimum Resale Price Maintenance: Some Empirical Evidence from Maryland' (7 January 2010) (SSRN)

LinkBennett, Fletcher, Giovannetti and Stallibrass, 'Resale Price Maintenance: Explaining the controversy, and small steps towards a more nuanced policy' (30 January 2010) (MPRA)

LinkYves Botteman and Kees Jan Kuilwijk, '(Minimum) Resale Price Maintenance Under the New Guidelines: A Critique and A Suggestion' (June 2010(1)) The CPI Antitrust Journal

LinkDavid Flath, 'Resale Price Maintenance by Japanese Newspapers' (ISER Discussion Paper 787 revised, 30 September 2010) (SSRN)

LinkAndrew Gavil, 'Resale Price Maintenance in the Post-Leegin World: A Comparative Look at Recent Developments in the United States and European Union' (June 2010(1)) The CPI Antitrust Journal

LinkJeffrey Lynch Harrison, 'Dr Miles' Orphans: Vertical Conspiracy and Consignment in the Wake of Leegin' (20 February 2010) (SSRN)

LinkHerbert J Hovenkamp, 'Post-Sale Restraints and Competitive Harm (U Iowa Legal Studies Research Paper No. 10-08, 11 February 2010) (SSRN)

LinkThomas A Lambert, 'A Decision-Theoretic Rule of Reason for Minimum Resale Price Maintenance' (27 January 2010). University of Missouri School of Law Legal Studies Research Paper No 2009-32 (SSRN)

LinkMarina L Lao, ' Resale Price Maintenance: The Internet Phenomenon and 'Free Rider' Issues' (1 March 2010) Antitrust Bulletin, Seton Hall Public Law Research Paper (SSRN)

Roger Blair and Jessica Haynes, 'Leegin, The Political Backlash' (January 2010) 2 The CPI Antitrust Law Journal (online for members)

LinkThomas C Arthur, 'The Core of Antitrust and the Slow Death of Dr. Miles' (2009) 62 SMU Law Review, Emory Law and Economics Research Paper No. 9-46; Emory Public Law Research Paper No 9-68. (SSRN)

LinkLinda Briceño Moraia, 'Resale Price Maintenance and Free Riding - New Insights in the USA Compared to the European Approach' (5 November 2009) GIURISPRUDENZA COMMERCIALE, Milan, Giuffrè (SSRN)

LinkDimitrios Dimitropoulos, 'Sticks and Carrots: Is Resale Price Maintenance Necessary?' (17 December 2009) (SSRN)

LinkEric Gippini-Fournier, 'Resale Price Maintenance in the EU: In Statu Quo Ante Bellum?' (21 September 2009) Fordham Corp. L. Inst - 36th Annual Conference on International Antitrust Law and Policy, 2009 (B Hawk ed, 2010) (SSRN)

LinkMarina L Lao, 'Resale Price Maintenance: A Reassessment of its Competitive Harms and Benefits' (1 June 2009) in Josef Drexl et al, More Common Ground for International Competition Law? Edward Elgar (SSRN)

LinkMarina L Lao, 'Resale Price Maintenance: A Reassessment of its Competitive Harms and Benefits 2009' (Paper prepared for the Academic Society for Competition Law (ASCOLA) Conference on 'More Common Ground for International Competition Law?' held in Washington, D.C., June 17, 2009) (SSRN)

LinkBarak Y Orbach, 'The Image Theory: RPM and the Allure of High Prices' (2010) Antitrust Bulletin (Arizona Legal Studies Discussion Paper No 09-39, 20 December 2009) (at SSRN)

LinkThomas C Arthur, 'The Core of Antitrust and the Slow Death of Dr Miles' (2009) 62 SMU Law Review (at SSRN)

LinkFrederik Van Doorn, 'Resale Price Maintenance in EC Competition Law: The Need for a Standardised Approach' (6 November 2009). (SSRN)

LinkTim Brennan, 'RPM as Exclusion: Did the U.S. Supreme Court Stumble Upon the Missing Theory of Harm?' (16 July 2008) (SSRN)

LinkKenneth G Elzinga and David E Mills, 'The Economics of Resale Price Maintenance' (31 December 31) in Kenneth G Elzinga and David E Mills (eds), Issues in Competition Law and Policy (ABA Section of Antitrust Law, 2008) (3-Volume Set) (SSRN)

LinkThomas A Lambert, 'Dr. Miles is Dead. Now What?: Structuring a Rule of Reason for Evaluating Minimum Resale Price Maintenance' (4 September 2008) University of Missouri School of Law Legal Studies Research Paper No 2008-25 (SSRN)

LinkMarina L Lao, 'Free Riding: An Overstated, and Unconvincing, Explanation for Resale Price Maintenance' in Robert Pitofsky ed, How the Chicago School Overshot the Mark: The Effect of Conservative Economic Analysis on US Antitrust 196 (Oxford University Press 2008); Seton Hall Law School, Public Law and Legal Theory Research Paper Series (SSRN)

LinkMarina L Lao, 'Leegin and Resale Price Maintenance - A Model for Emulation or for Caution for the World?' (2008) 39 International Review of Intellectual Property and Competition Law 253-258 (SSRN 30 November 2007)

LinkBarak Y Orbach, 'Antitrust Vertical Myopia: The Allure of High Prices' (2008) 50 Arizona Law Review 261-287 (Arizona Legal Studies Discussion Paper No 07-25, SSRN)

LinkAshley Doty Pavel, 'Leegin v. PSKS: New Standard, New Challenges'(2008) 23(1) Berkley Technology Law Journal (SSRN)

LinkRoger Blair, 'The demise of Dr Miles: Some troubling consequences' (2008) 53 The Antitrust Bulletin 133

LinkMark D Bauer, 'Whither Dr. Miles?' (August 26, 2007) (SSRN)

LinkRichard Brunell, 'Overruling Dr. Miles: The Supreme Trade Commission in Action' (2007) 52(3-4) Antitrust Bulletin, (SSRN)

LinkØ Foros, Hans Jarle Kind and Greg Shaffer, 'Resale Price Maintenance and Restrictions on Dominant Firm and Industry-Wide Adoption' (CESifo Working Paper Series No. 2032, June 2007) (SSRN) (see also CCP Working Paper 10-11)

LinkLino A Graglia, 'Leegin Creative Leather Products, Inc v PSKS, Inc: The Strange Career of the Law of Resale Price Maintenance' (November 2007, U of Texas Law, Law and Econ Research Paper No 115) (SSRN)

LinkIttai Paldor, 'Rethinking RPM: Did the Courts Have it Right All Along?' (2007) (Thesis) (SSRN)

LinkIttai Paldor, 'The Vertical Restraints' Paradox: Justifying the Different Legal Treatment of Price and Non-Price Vertical Restraints' (24 January 2007) (SSRN)

LinkRudolph JR Peritz, 'Nervine' and Knavery: The Life and Times of Dr. Miles Medical Company; in Eleanor Fox & Dan Crane (eds) Antitrust Stories, Foundation Press(NYLS Legal Studies Research Paper No. 06/07-21; American Antitrust Institute Working Paper No. 07-07, SSRN)

Robert W Hahn, Antitrust Policy and Vertical Restraints, Brookings Institution Press (2006)

LinkThomas W Gilligan, 'A Signal Jamming Theory of Resale Price Maintenance' (May 2003) USC CLEO Research Paper No C03-5. (SSRN)

LinkNorbert Schulz, 'Resale Price Maintenance and the Service Argument: Efficiency Effects' (Wuerzburg Economic Working Paper No 53, July 2005) (SSRN)