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The Dangers of Businesses and Franchisors Engaging in Resale Price Maintenance! ACCC v Techtronic Industries Australia Pty Ltd

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On 30 November 2023 the Federal Court of Australia delivered judgment in the matter of Australian Competition and Consumer Commission (‘ACCC’) v Techtronic Industries Australia Pty Ltd (‘Techtronic’) and ordered Techtronic to pay a total of $15 million for engaging in conduct that constitutes resale price maintenance.

Resale Price Maintenance

Resale price maintenance is when a corporation prevents or tries to prevent another party (such as a retailer or distributor) from selling goods or services below a price specified by the corporation. This conduct is illegal under the Competition and Consumer Act 2010 (Cth) (‘the CCA’) unless the corporation applies for an authorisation or lodges a notification with the ACCC that it proposes to engage in this conduct.

The ACCC may grant authorisation of the proposed resale price maintenance conduct if it is satisfied that the conduct would, or likely would result in a benefit to the public that would outweigh any detriment to the public.

The ACCC will revoke the notification (and the conduct will no longer be exempt from being penalised) if the conduct will or is likely to substantially lessen competition, and the benefits of the proposed conduct to the public do not outweigh the detriment.

This conduct is illegal because it prevents businesses from selling products at lower prices, so consumers will pay more than necessary for these products.

Background

Techtronic is a major supplier of power tools in Australia, and is the wholesale supplier of Milwaukee products (‘Products’).

In November 2021 the ACCC initiated proceedings against Techtronic, alleging that the latter:

  • had entered into 96 agreements with buying groups and retailers (‘Dealers’) between 2016 to 2021. These agreements contained a provision that prevented Dealers from selling, advertising or offering to sell Products for less than the price specified by Techtronic (‘RPM provision’);
  • maintained a Product price list which was revised annually and provided to Dealers;
  • tried to enforce the RPM provision by:
    • providing oral and written warnings and breach notices to Dealers that sold or advertised Products above the amount recorded in the price list;
    • suspending Dealer rebate entitlements; and
    • suspending trade with Dealers, (‘enforcement conduct’)
  • caused at least nine Dealers to increase their prices as a result of the enforcement conduct.

Decision

Justice Colvin agreed with the ACCC and found that Techtronic had engaged in the practice resale price maintenance in entering into agreements that contained the RPM provision and by engaging in the enforcement conduct.

The Court ordered Techtronic to:

  • pay penalties totalling $15 million as a result of contravening the resale price maintenance provisions of the CCA;
  • refrain from relying or enforcing the RPM provision;
  • enter into agreements that contains the RPM provision;
  • engage in enforcement conduct;
  • implement a CCA compliance program;
  • send letters to Dealers informing them of this outcome;
  • publish a corrective notice on its website; and
  • pay the ACCC’s costs of the proceedings.

Takeaways for businesses and franchisors

Resale price maintenance is a practice that substantially hinders competition in the market, and is an issue that the ACCC and the Courts will strongly pursue.

In light of this decision, businesses should:

  1. review their agreements with retailers and distributors, and remove any provisions that constitute resale price maintenance. Disclaimers such as ‘subject to all applicable laws’ will not prevent the conduct from being resale price maintenance;
  2. review their business practices and ensure that no enforcement conduct will be undertaken;
  3. educate employees so that they understand the concept of resale price maintenance, and that it is illegal to engage in such conduct.

Franchisors commonly provide recommended retail prices to ensure consistency across the franchise system. Resale price maintenance may be an issue where the recommended retail prices are not a genuine recommendation, but are instead the minimum prices that franchisees must charge for goods or services. It is important for franchisors to consider resale price maintenance when determining and implementing their price policies.

How MST Lawyers can help

MST Lawyers can assist your business with compliance with the Competition and Consumer Act 2010 (Cth), competition law matters and franchising law.

For more information, please contact our Franchising team or Corporate and Commercial team by calling +61 3 8540 0200.