We’re joined once again by Kathryn Edghill, who’s Partner in the Competition and Regulatory Group at Truman Hoyle in Sydney, but joins us from holidays in Milan. Kathryn thank you so much for taking the time out to speak with us today.
It’s a pleasure Kate.
Now Kathryn the ACCC announced that it will be focussing on competition in the online shopping space, after reports that certain clothing importers are making deals with international online stores requesting that they either increase their prices or stop selling certain brands to Australian consumers. Does this kind of behaviour breach our competition laws?
Well it certainly can do Kate and to me it’s not surprising, and in fact it’s very pleasing that the ACCC is interested in this. Because this sort of behaviour has meant for a while that Australian consumers are paying prices which probably aren’t the result in many instances of true competition. This sort of behaviour can breach a number of prohibitions of the Competition and Consumer Act, and the behaviour in question is that of the suppliers, whether they be international suppliers or Australian suppliers, and there is some behaviour perhaps of some of the bricks and mortar retailers in Australia which may also come under scrutiny. The sorts of things we’re talking about are suppliers who are imposing or seeking or threatening to impose on resellers a minimum or a threshold price below which they can’t sell their products. They’re going to breach the prohibition on resale price maintenance in the Act. And that’s an absolute prohibition, by that I mean it doesn’t depend on its effect on competition, so that all the ACCC needs to do is to be able to prove that these people made that attempt, even if they aren’t successful. If suppliers are stopping the supply because a reseller isn’t selling, you know, prices below the Australian retail prices, then that’s also resale price maintenance. But as I hinted earlier it doesn’t stop there; imposing conditions on supply which had the purpose or effect or likely effect of substantially lessening competition is also a breach. And in this sort of situation that can happen for example, by some suppliers preventing international online retailers from selling into Australia or only selling into Australia at prices that are equal to Australian prices. That’s a form of exclusive dealing and that will breach the Act if it substantially lessens competition. You can sort of see where there are some really important and well-known brands stopping a online reseller from selling into Australia could quite easily have a substantially lessening effect on competition.
Kathryn one question I have is the investigation of this kind of behaviour; is it difficult for the ACCC to investigate and get evidence around this kind of behaviour?
It can be difficult Kate. It really does require I think some of the international online retailers to step up and say what’s been happening, but for them they’re often placed in a very difficult position. For example if they’re having their supply threatened and that supply might take place overseas, not only at risk for them is their Australian business but also potentially their business elsewhere. Just because it’s happening, outside Australia doesn’t mean that it’s not caught by Australian competition laws. If the supplier, the international retailer, if they’re carrying on business in Australia and its affecting an Australian market, they’re going to be caught. So this sort of stuff will eventually come to the ACCC’s attention if it’s wide spread enough.
Okay well Kathryn moving onto penalties, what kind of penalties could companies be facing for these various activities?
Penalties are severe. They’re up to $10 million, or three times the value of the benefit gained, which could be quite significant if it’s keeping the price margins high, or 10% of the annual turnover of group companies in the 12 months prior to the breach. If you add to that claims for loss and damage that are being suffered by third parties, plus the legal costs involved and the cost of an ACCC investigation, it can become a real costly business to prop up what are artificially high Australian prices.
Yes certainly. Well Kathryn just finally what then would the key considerations for companies be before they enter into agreements that could potentially be seen as either restricting distribution or controlling prices?
Kate there’s a number of different considerations and it probably depends on where you are in the supply chain. If you’re an international online retailer, perhaps the key consideration is don’t assume that Australian or indeed international suppliers can legitimately dictate to you the prices at which you can sell product into Australia. Don’t exceed to threats to cease supply outside Australia, you need to have those assessed in light of Australian law. So what I’m really saying is they key consideration is don’t be bluffed into thinking that this is something that can necessarily legitimately happen. If the international supplier, I think the key consideration there is don’t assume that you can use a threat to cease supply outside Australia to achieve price protection for your prices in Australia, you really need to look at the whole situation and see whether or not you are in fact caught by Australian law. And then something I mentioned earlier, if you’re an Australian bricks and mortar retailer, protecting your margins absolutely fine, but if it’s done by illegal means or if you’re a party to a supplier threatening your online competitors, then you too are going to be caught into these sorts of breaches. Think above all the key consideration to bear in mind is that the ACCC is interested, and it’s investigating these sorts of complaints and it’s only a matter of time before someone is brought to brook for that sort of conduct.
Well Kathryn some great tips there and as you say I think the ACCC will be watching this kind of behaviour and I think many Australian consumers will be happy with that. Thank you so much for taking the time to speak with us today.
Thank you Kate.
That was Kathryn Edghill, a Partner in the Competition and Regulatory Group at Truman Hoyle. Listeners if you have any questions for Kathryn, either send them through using the panel on your screen or otherwise via email to firstname.lastname@example.org.