ACCC v Eternal Beauty Products Pty Ltd

Federal Court of Australia
[2012] FCA 1124
Justice Murphy

Conduct

Resale price maintenance

Catchwords

COMPETITION – Resale price maintenance – admitted contraventions of prohibition – director knowingly concerned in contraventions - contraventions in respect of online beauty product sales – appropriateness of relief sought by consent – pecuniary penalty - whether appropriate to order payment of penalty by instalments – declaratory relief – compliance program

Legislation

Competition and Consumer Act, s 48, s 96, s 76, s 84

Parties

Applicant

Australian Competition and Consumer Commission

Respondents

Eternal Beauty Products Pty Ltd (first respondent)

Penny Rider (second respondent)

Overview

[Taken from reasons for judgment]

The ACCC alleged ‘that Eternal Beauty engaged in seven separate acts of resale price maintenance, and that Ms Rider was directly knowingly concerned in and a party to those acts.‘ (para 1 reasons)

Parties subsequently field an agreed statement of facts, joint outline of submissions and proposed consent orders.

Summary of conduct from reasons (para 3-4)

[para 3] … From early 2010 to mid 2011 Eternal Beauty was the sole Australian distributor of two beauty products, “Eyesential” eye cream and “The Lift Petite” face cream (collectively “the Products”). The Products were supplied to Eternal Beauty by a UK company pursuant to an exclusive distribution licence, and sold by it to online retailers through an intermediary wholesaler.

[para 4] Eternal Beauty admits that during the relevant period it engaged in acts of retail price maintenance in its dealings with two online retailers of women’s beauty products, Bepharmacy Pty Ltd (‘Bepharmacy”) and Slender Body Pty Limited (“Slender Body”). The admitted conduct involved Eternal Beauty and Ms Rider inducing and also attempting to induce Bepharmacy and Slender Body not to sell Eyesential below the price of $99.00 or The Lift Petite below the price of $235.00 (collectively “the Minimum Price”) on their online retailing websites.

[further detail is set out in the judgment]

…

Admitted contraventions

It was admitted that Eternal Beauty contravenedd s 48 by engaging in RPM of the kind referred to in s 96(3)(b) ‘by inducing Bepharmacy and Slender Body not to sell the Products at prices below the Minimum Price’ and by ‘attempting to induce Bepharmacy and Slender Body not to sell the Products at prices below the Minimum Price.’ (para 22). Ms Rider admitted being knowingly concerned in those contraventions (para 23)

Relief

Against Eternal Beauty the Court ordered declaratory relief, pecuniary penalties ($80,000) and institution of a compliance program.

Against Ms Rider the Court ordered declaratory relief, pecuniary penalties ($10,000) and that she undergo compliance training.

The penalties sought and accepted by the court were said to be in the combined range of $120-160,000, with discounts of 25% applied from the lower end for cooperation and early acknowledgement of liability (para 41). The court accepted the proposed penalties were appropriate - in particular (taking account of the standard principles derived from TPC v CSR Limited (1991) ATPR 41-076 and ACCC v NW Frozen Foods Pty Ltd (1996) ATPR 41-515 :

• the penalties would ‘have a sufficient deterrent effect both generally and specifically and pay proper regard to both the aggravating and mitigating factors in the circumstances of this case’ (para 49). Justice Murphy further observed that there was .no allegation that the respondents withheld supply of the Products to Bephramacy or Slender Body, an element generally considered to be at the more serious end of the scale of resale price maintenance conduct.’

• although there was no evidence about loss or damage caused, that was irrelevant because RPM is per se prohibited (para 51)

• there was no evidence that the parties had previously contravened the CCA;

• there was no evidence that Eternal Beauty had market power in the relevant market and the revenue of the company was modest, with Ms Rider’s taxable income being less than $300,000 (para 53)

• the conduct was largely a result of lack of knowledge and attention to compliance ‘and not a deliberate disregard for the prohibition against retail price maintenance’ (his Honour noted that RPM has ‘long been illegal in Australia before event he commencement of the Trade Practices Act’ (para 54)

• Ms Rider is the most senior office in Eternal Beauty’s day-to-day business and admits direct involvement (para 55)

• the company did not have a compliance program or corporate culture conducive to compliance with the CCA (para 56) but they have since engaged lawyers to provide competition and consumer law training

• the parties cooperated with the ACCC, avoiding need for trial; instituting compliance training also suggests an attitude of compliance (para 57)

• penalties sought are broadly in accordance with penalties in other RPM cases (para 58)

• penalties sought are consistent with totality principle (para 59)

‘Having considered the relevant factors. I am satisfied that the penalties sought by the consent of the parties are within the range appropriate in the circumstances, and should be ordered by the Court.’ (para 60)