Techtronic Industries Australia, a major national supplier of Milwaukee tools and accessories, has been ordered to pay $15 million in penalties after engaging in resale price maintenance (RPM) conduct.
The penalties set a record amount for RPM conduct in Australia, but recent legislative changes now impose much higher penalties for the same conduct.
What is RPM under Australian Competition Law?
RPM is when a business supplies goods to a reseller on terms that the reseller must not sell or advertise those goods below a specified minimum price.
RPM conduct is unlawful and attracts pecuniary penalties under the Competition and Consumer Act 2009 (Cth) because it can reduce price competition and result in consumers paying higher prices than they should in a competitive market.
The Australian Competition and Consumer Commission (ACCC) commenced action against Techtronic in November 2021, alleging that the supplier engaged in RPM conduct on multiple occasions including:
- entering into 96 supply agreements that restricted the sale of Milwaukee products below a specified minimum price
- enforcing the RPM provisions on 29 occasions by issuing warnings and breach notices to dealers who advertised or sold Milwaukee products below the specified minimum price, or by withholding supply from two dealers.
Techtronic admitted to the allegations and cooperated with the ACCC. The parties submitted joint proposed orders and the Court ordered that Techtronic pay penalties totalling $15 million, making it the highest recorded penalty for RPM conduct in Australia.
Techtronic was also ordered to post corrective notices on its website and to its dealers, as well as to implement a compliance program.
Since the conduct in this case occurred, the penalties for RPM conduct have been increased by the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) (Amendment Act). These changes came into effect on 10 November 2022.
The new maximum penalties for a business that engages in RPM conduct will be the greater of:
- $50 million
- three times the value of the ‘reasonably attributable’ benefit obtained from the conduct, if the Court can determine this amount
- if the Court cannot determine the benefit, 30 per cent of the adjusted turnover during the breach period.
Despite the record high penalties imposed on Techtronic, the new laws imposed by the Amendment Act mean that engaging in RPM conduct since 10 November 2022 can result in even higher penalties.
In light of the potential for increased penalties, businesses should review their commercial arrangements to ensure that they do not include provisions that would constitute RPM conduct.
Please contact David Grace or another member of our corporate advisory team if you wish to discuss this article or arrange for competition and consumer law training for your organisation.