Is buying your partner a bike for Christmas a good idea?
On 9 December 2014, two manufacturers of bicycle components provided court-enforceable undertakings to the Australian Competition and Consumer Commission – admitting to conduct that contravened or was likely to contravene the prohibition on resale price maintenance (“RPM”) under section 48 of the Competition and Consumer Act 2010 (Cth) (“CCA”).
Both Italiatech Australia Ltd and TMO Sports Pty Ltd import and wholesale bicycle components. In this case, Italiatech tried to induce local retailers only to sell its products at the recommended retail price, and in fact ceased supply to one retailer which did not to comply, while TMO attempted to set a minimum resale price for its products. The ACCC alleged a breach of section 48 of the CCA in respect of each company.
S 87B undertaking
An enforceable undertaking (“EU”) is an alternative compliance mechanism available to the ACCC in response to anti-competitive conduct under the Competition and Consumer Act. A business that agrees to an EU effectively promises to abide by a series of conditions negotiated with the ACCC to remedy an actual or alleged breach.
EUs as an enforcement tool
EUs are an effective enforcement tool since they hold a number of advantages. Those advantages have been expressly acknowledged by the ACCC in its guide to the use of EUs.
- First, an undertaking under section 87B is enforceable in court. The ACCC can seek court orders to remedy any breach of the terms of an undertaking, including orders for the party to pay an amount up to the amount of any financial benefit that can be reasonably attributed to the breach or to compensate persons that have suffered loss or damage as a result of the breach. Importantly, the ACCC need only establish a breach of the EU, and not a breach of the relevant provisions of the CCA.
- Second, an EU provides a flexible alternative to achieving the ACCC’s policy aims. In addition to rectifying the damage and deterring future breaches, the terms of an EU can also include customer compensation, corrective advertisements, mandatory compliance training and pecuniary penalties.
- Third, unlike court proceedings, EUs impose a far lesser financial burden upon both parties. EUs do not require the ACCC to conduct large scale investigations into conduct or resort to litigation to achieve an enforcement result.
- Lastly, EUs provide a higher certainty of outcome as compared to litigation.
In 2014, the ACCC accepted twenty-five EUs under section 87B. This number has remained relatively constant and demonstrates the ACCC’s continued commitment to the use of EUs as an effective compliance mechanism in appropriate circumstances. As Commissioner Jill Walker has said, “it is hard to contemplate life without s.87B”.
Resale Price Maintenance – the Harper Review
The Competition Policy Review Panel has recently examined the appropriateness of a continuing per se prohibition against RPM in its Draft Report, with numerous parties submitting that a move to a competition-based effects test was now appropriate. After considering the position in various overseas jurisdictions, the Panel recommended that the current prohibition on RPM be retained.
The Panel has however recommended the introduction of a less onerous process by which businesses may seek exemptions for RPM. Instead of the current process requiring business to seek authorisation, the Panel favoured a notification process on the basis that it would be quicker and less financially burdensome (Draft Recommendation 29).