The Federal Court of Australia has found Skins Compression Garments Pty Ltd (Skins), the supplier of sports compression attire, guilty of engaging in "Resale Price Maintenance" (RPM) in contravention of the Trade Practices Act.
Broadly speaking, RPM refers to conduct whereby a supplier prevents, or attempts to prevent, a purchaser of its goods from reselling those goods below a specified price. As many franchisors act as suppliers of goods to their franchisee networks, awareness of what constitutes RPM, and the serious penalties that can follow from it, is essential.
In the Skins case, the court found that a representative of Skins' South Australian agent had once succeeded, and twice attempted, to induce a retailer not to advertise Skins products at a discounted price, constituting RPM.
These 3 acts were sufficient for the court to impose the following serious penalties on the parties involved:
- Skins was ordered to pay a fine of $120,000 and the ACCC's costs of the proceedings;
- Skins was required to write to all of its retailers regarding its conduct and implement a Trade Practices Act compliance program (a costly exercise); and
- the agent involved was ordered pay a personal fine of $14,000.
All franchisors that supply goods to their franchisees should ensure that none of their policies, employees or agents encourage franchisees not to sell the goods supplied below a specified price, or penalise franchisees for doing so.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.