Beer wars - the supplier strikes back!

I read with interest an article in the Age today about the 'Beer wars'. Fosters found out (through 'intelligence received') that Coles was preparing a brochure which advertised VB for $28 per slab, which usually wholesales for $33 per slab. This flagged for Fosters a looming price war between Coles and Woolies on Foster's beer product.

Fosters was having none of it. It didn't want its brands devalued by this ongoing war between Coles and Woolies. Fosters shut down its supply of beer and refused to deliver any of its beer to Coles and Woolies.

There are usually legal consequences in engaging this behaviour. Part VIII of the Competition and Consumer Act 2010 (Cth) prohibits 'resale price mainteance'. An ACCC summary on the topic describes this conduct and the consequences of it, as follows:

Any arrangement between a supplier and a reseller that means the reseller will not advertise, display or sell the goods the supplier supplies below a specified price is illegal.

It is also illegal for a supplier to cut off, or threaten to cut off, supply to a reseller (wholesale or retail) because they have been discounting goods or advertising discounts below prices set by the supplier.

The full extent of the prohibition is set out in full in section 96 of the Competition and Consumer Act 2010 (Cth).

In the Age article, the author notes that Fosters was relying on an exception to the prohibition against 'resale price maintenance' that Coles and Woolies were engaging in 'loss leading'. The author describes 'loss leading' as 'the practice of deliberately selling a product at a loss in the hope of attracting customers who will also buy other products that are not discounted'.

The exception of 'loss leading' to the prohibition against 'resale price maintenance' is set at section 98(2) of the Competition and Consumer Act 2010 (Cth) and is as follows:

(2) Paragraph 96(3)(d) [the prohibition against witholding supply] does not apply in relation to the withholding by the supplier of the supply of goods to another person who, within the preceding year, has sold goods obtained, directly or indirectly, from the supplier at less than their cost to that other person:

(a) for the purpose of attracting to the establishment at which the goods were sold persons likely to purchase other goods; or

(b) otherwise for the purpose of promoting the business of that other person.

There are many cases which consider the prohibition on 'resale price maintenance'. Some examples of 'resale price maintenance' are as follows:

• Clothing: ACCC v Oobi Baby Pty Ltd [2008] FCA 1488.
• Sunglasses: ACCC v Sundaze Australia Pty Ltd [1999] FCA 1642.
• Petrol: TPC v BP Australia Ltd (1985) 7 FCR 499.

Happy to discuss.