Bottoms-up: two liquor producers rethink RPM

Published On 21/02/2013 | By Hanna Gyton | Enforcement, Litigation

Two of China’s most famous liquor producers, Maotai and Wuliangye, have been fined RMB 449 million (approx. A$69.4 million) by China’s National Development and Reform Commission (NDRC) for resale price maintenance (RPM).  The fine amounts to approximately 1% of the companies’ 2012 turn-over and is the largest ever imposed in China for anti-trust violations of the law to date.

Under China’s Anti-Monopoly Law (AML) Article 14, RPM is prohibited. Whether RPM is prohibited per se or requires a negative impact on competition before it amounts to a breach of Article 14, however, has been unclear under Chinese law. This decision may indicate a strict per se approach to RPM will be taken.

This decision comes after the two distilleries allegedly issued notices to their distributors in early January, announcing that they were changing their pricing behaviour and indicating that distributors would be punished for selling their products below a minimum price set by the producers following interest from the NDRC.  The Chairman of Maotai even stated at a countrywide distributor meeting the retail price of one of its brands of rice wine and that Moutai would sternly punish those who breach the “price fortress”.

Only a few weeks after Maotai and Wuliangye’s notices to distributors, Maotai publicly declared that it would withdraw its punishments for distributors, reimburse affected distributors and immediately repeal any policies which were in violation of the AML.  Wuliangye made similar statements a day later.

In recent years in Australia, several high profile companies have incurred significant penalties for engaging in RPM.  In particular, the ACCC has bought proceedings for RPM against luxury skincare companies Dermalogica (A$250,000), Jurlique (A$3.4 million) and Eternal Beauty (A$100,00) as well as against Navman Australia (A$1.25 million).

King & Wood Mallesons’ China Law Insight has a new blog on recent developments in and case law on RPM in China, available here.

Photo credit: Foter.com / CC BY

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