Back home, Australian consumers continue to spend big online, with online sales in Australia projected to grow between 10 and 15 per cent per annum over the next three years.
The Australian Competition and Consumer Commission (ACCC) last year announced its intention to focus investigation and enforcement resources towards identifying conduct which may impede emerging competition involving online traders. The ACCC is particularly on the lookout for current “bricks and mortar” retailers seeking to dominate the online space in a way that sees new online competitors unable to break through. A case in point is the 2011 decision by the Federal Court of Australia to fine Ticketek $2.5 million for misusing its market power against a small online business selling discount tickets.
The ACCC is also focusing on clothing importers who are reaching agreements with international suppliers to stop selling their products to Australians on overseas websites or directing these suppliers to increase the prices being asked for their products on the web.
Simply because overseas retailers do not have a physical presence in Australia, does not mean that Australian “bricks and mortar” retailers are entitled to exercise anti-competitive conduct against them in the Australian marketplace. These online retailers may be considered effective competitors of more traditional retailers if their products and services are considered substitutable. This means that Australian retailers are not able to misuse their market power to damage or eliminate a competitor in the Australian marketplace, no matter where their fixed location may be.
In the context of manufacturers/suppliers that supply goods to an online retailer, requiring that online retailer to sell at or above a specified price for any purpose is likely to breach the prohibitions on resale price maintenance. Similarly, refusing to supply online retailers who don’t agree to sell above a specified minimum price, or because they discount goods, is also likely to breach the same prohibition.
In the Australian context, conduct which has the intention of driving online retailers out of the market, or substantially causing them damage or preventing them from entering the market may amount to a misuse of market power, if the party exerting the pressure has a substantial degree of market power.
Crossing borders
The implications of the European cases and the ACCC’s current focus on promoting a competitive marketplace online are good reminders for manufacturers and retailers alike to assess current practices and procedures. The message is clear: ensure compliance within your own distribution networks and towards the market as a whole.
For more information about legal issues affecting the fashion industry, including the implications of your business arrangements and selling online, contact Lisa Egan, Partner at K&L Gates - lisa.egan@klgates.com or Caroline Cossio, Senior Associate at K&L Gates - caroline.cossio@klgates.com. Contributing author: Hoda Solaymani-Jamal.