Australia: Federal Court imposes a $350,000 penalty on FE Sports for resale price maintenance

By Lynne Lewis, Rohit Dighe

03-2021

On 24 March 2021, the Federal Court imposed a pecuniary penalty of $350,000 on a wholesale distributor, B & K Holdings (QLD) Pty Ltd trading as FE Sports (FE Sports), for resale price maintenance in relation to bicycle products and accessories sold under the brands Wahoo Fitness, Pirelli, 100%, 3T, and Stages: Australian Competition and Consumer Commission v B & K Holdings (QLD) Pty Ltd [2021] FCA 260

Further, the Federal Court ordered FE Sports to refrain from seeking to enforce a term in any agreement that a current or prospective retailer (Dealer) not advertise goods for sale below the recommended retail price (RRP), and to write corrective letters to affected Dealers indicating that they are free to advertise or offer for sale goods supplied by FE Sports at a price less than the RRP or at a discount. FE Sports was also ordered to establish a Competition and Consumer Compliance Program, which includes staff training and implementing complaints handling procedures.

Resale price maintenance is the illegal practice where a supplier prevents, or attempts to prevent, independent retailers from advertising or selling products below a specified minimum price. This practice is strictly prohibited under section 48 of the Competition and Consumer Act 2010 (Cth) (Act), and it is not subject to a substantially lessening competition test. Types of conduct constituting resale price maintenance are listed in section 96 of the Act. For example, it is illegal for suppliers to put pressure on businesses to charge their RRP or any other set price, such as by threatening to stop supplying to the reseller. Similarly, it is illegal to stop resellers from advertising, displaying or selling goods from the supplier below a specified price.

The Federal Court found that on 328 occasions between 5 February 2017 and 26 June 2019, FE Sports made it known to Dealers that it would not supply goods to each Dealer unless the Dealer agreed not to advertise for sale those goods at a price less than RRP. On each such occasion, FE Sports therefore engaged in the practice of resale price maintenance in contravention of section 48 of the Act. Further, on 242 occasions (comprising a subset of those above), FE Sports entered into agreements for the supply of goods to a Dealer, one of the terms of which was that the Dealer would not advertise for sale the goods at a price less than RRP (Dealer Agreements). On each such occasion, FE Sports therefore engaged in the practice of resale price maintenance in contravention of section 48 of the Act.

In March 2021, after the Federal Court’s decision was handed down, ACCC Commissioner Sarah Court commented that “Resale price maintenance is harmful to competition and limits the freedom of retailers to compete on price to maximise sales.” Further, Ms Court stated that the Federal Court’s order is “an important reminder to manufacturers, wholesalers and distributors, including those based overseas, that it is illegal to require independent retailers to sell goods or services at minimum or set prices”.

This is a timely reminder of the dangers of resale price maintenance.