Competition Law

Australian Competition Law and Policy Discussion

RPM – On everyone’s agenda but ours

Posted by Julie Clarke on 24 November 2009

Resale Price Maintenance (RPM) law seems open to debate everywhere – except in Australia of course.  RPM has not been a serious policy issue here since the enactment of the TPA.  The 1993 Hilmer report recommended extending it to services (it was restricted to goods) and s 96A achieved this (although in a slightly dodgy way).  Authorisation was also made possible in the ’90’s, but otherwise we’ve stuck with our per se approach to minimum RPM without any real political push for change.  It didn’t really rate a mention in the Dawson Report (it had a chapter on per se provisions, in which the Committee listed RPM as one of the forms of conduct prohibited per se, but it reted no further mention).

The courts have been a little more keen to express their view; in Jurlique, Justice Spender held that Jurlique had contravened the RPM provisions of the TPA, but expressed some reservations about the per se classification of RPM (after setting out what he considered to be some of the benefits of RPM he stated: “In the present proceedings, the difficulty is that … I am bound by the law … It is therefore somewhat of an indulgence to consider whether the law ought to be different from what it is presently is”).

This did not, however, prompt any political action (the focus has been cartels, meaning of understanding, predatory pricing, misuse of market power, access, mergers (creeping acquisitions) – pretty much everything competition law related except RPM).  This is not terribly surprising; nobody’s really pushing hard for a change and it’s not likely to find much public support.  I am not suggesting change either, but am following the debate elsewhere in the world with great interest.

The RPM research and policy revision currently taking place in north America and Europe has largely been prompted by the US Supreme Court decision in Leegin.  This split decision overturned the near-century old precedent in Dr Miles which classified both maximum and minimum RPM as a per se offence.  The per se prohibition on maximum RPM was replaced with a rule of reason test a number of years ago (State Oil v. Khan (1997)), but until Leegin minimum RPM remained a per se breach of the Sherman Act.  The US (at least at a federal level; a number of state laws still impose a per se ban) now subjects all RPM conduct to a rule of reason analysis.  This has prompted much debate, including the introduction of a bill into the Senate seeking to restore the Dr Miles position, supported by 41 US Attorneys General.  Some of the recent news items, articles and reports are listed below.

US Dr Miles related activity

Europe

Canada

OECD

Warren Pengilley also recently published on the topic in the Competition and Consumer Law Journal, comparing the Australian/US experienced: ‘Resale price maintenance: An overview of the per se ban in light of recent court observations’ (2008) 16 Competition and Consumer Law Journal 1-45 (it includes a nice discussion of the history of RPM in this country).

Personally, I’ve always been a bit miffed that maximum RPM gets such a free ride in this country.  Not only does it escape per se prohibition as RPM under s 48 of the Act (which is fair enough – I’m not suggesting it should be per se prohibited) but even if it can be proven that a maximum RPM arrangement substantially lessens competition it is safe, courtesy of some strangely worded anti-overlap provisions).  This seems somewhat nonsensical to me, but it’s not worth making a huge fuss about; there don’t appear to have been any such cases to prompt Parliament to remedy this anomaly.

The debate raging in US and Europe over the appropriate mechanism for prohibiting RPM is interesting and worth following – but as far as Australia is concerned the current per se ban is appropriate.  While there might be some RPM that doesn’t cause much harm, demonstrable consumer benefit from RPM conduct is more difficult to demonstrate.  Consequently, the benefits associated with banning RPM for the bulk of cases in which consumers would be worse off outweigh the harm (if any) caused to those companies whose RPM conduct might not cause consumer harm; if there is a demonstrable public benefit in engaging in RPM the option for authorisation remains (imperfect though it may be).

2 Responses to “RPM – On everyone’s agenda but ours”

  1. Good info!

  2. Nichol said

    Hi. Very interesting Post. Not really what i have searched over Google, but thanks for the information. Can you email me back, please. Thank you.

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