Re Ron Hodgson (Holdings) Pty Limited v Westco Motors (Distributors) Pty Limited; Westco Australia Pty Limited

Federal Court of Australia
[1980] FCA 3; (1980) 29 ALR 307
Justice Franki
(resale price maintenance)

See also Trade Practices Commission v Kensington Hiring Co Pty Ltd (1981) ATPR 40-256

Issue

Resale price maintenance.

Case number

G 27 of 1979 (NSW registry)

Catchwords

Trade Practices - resale price maintenance - withholding the supply of goods for the reason that the applicant sold or had advertised or was likely to sell or advertise such goods at a price less than a price specified by the first respondent as the price below which the goods were not to be sold or advertised for sale - inducing or attempting to induce the applicant not to sell or advertise goods at a price less than the specified price. Proper case for injunctive relief.

Overview

The case arose as a result of Wesco terminating Ron Hodgson’s car dealership.

Justice Franki described it as follows:

Broadly, it was alleged that the first respondent had terminated the franchise and was withholding the supply of Mazda vehicles and parts for the reason that the applicant sold or had advertised or was likely to sell or advertise such goods at a price less than a price specified by the first respondent as the price below which the goods were not to be sold or advertised for sale. Such action would constitute resale price maintenance within s.96(3)(d)(ii)

The Court found there were ample commercial reasons for the termination but also had to consider if there was a prohibited RPM reason:

“A reason falls within the reasons enumerated in s.96(3)(d) of the Act if that reason was one of the reasons for the act under consideration and it was a "substantial reason". “

His Honour noted several complaints about the applicant’s discounting of Mazda vehicles, with the respondent expressing great concern about the discounting and pointing to concern about discounting hurting and cheapening the ‘image’ of the vehicle.

The following sentences were included in a circular sent to dealers:

"Westco Motors as with other Mazda Distributors throughout Australia have spent many hundreds of thousands of Dollars to project an image of quality over the years and do not intend to have this standard lowered with blatant price discount advertising."

"Should you have any doubt at any time as to whether your advertising will be acceptable to the Distributor or not, please do not hesitate to contact the writer and discuss the format which you may desire your advertising to take. It is far better to ensure that your advertising is acceptable than to be sorry at a later date."

A subsequent circular also stated:

1. Discounts should not be offered in advertising.

2. Give aways, bonus offers, introductory offers in lieu of discounts should not be offered.

In a recorded conversation a representative of the respondent said:

"We cannot terminate you as dealers if you run discount ads. You know, as well as I, that this is contrary to the Trade Practices Act. I regard discount advertising as detrimental to the name of Mazda . . . We believe that discount advertising will not increase our penetration, you will simply be taking sales from other dealers."

And following inquires about what would happen if further discount advertisements were run:

"I can't stop you but there are more ways than one of skinning a cat than hanging it by its heels."

Justice Franki noted:

I am satisfied that at least from September 1977 and probably well before Mr. Anderson was generally aware of the resale price maintenance provisions of the Act but that he had decided to prevent discount advertising of Mazda products if he could. I am satisfied that Mr Blair approved of the advertisement of 23 September 1977 of which complaint was ultimately made by Mr. Anderson and in respect of which Mr. Anderson threatened to terminate the applicant's franchise. When asked in cross-examination about this Mr Anderson said he could not recall having any conversation with Mr. Blair about the advertisement and he also said that he could not recall whether or not he had used the expression that there were more ways of skinning a cat than hanging it by its heels. I reject the evidence of Mr. Anderson that the first respondent had no policy of preventing discount advertising of Mazda vehicles.

In February 1979 the franchise was terminated.

Wesco was successful in restraining the cancellation of dealership.