The ACCC has revoked a resale price notification lodged by Stanley Black & Decker in respect of Dewalt power tools.
Since November 2017 it has been possible to obtain protection from action for resale price maintenance by lodging a notification with the ACCC rather than seeking an authorisation.
On 17 October 2019, Stanley Black & Decker, a manufacturing company, lodged a resale price maintenance notification with the ACCC for advertised prices of Dewalt brand power tools, accessories and attachments.
Resale price maintenance occurs, for example, when a supplier of goods or services specifies a minimum price below which a reseller must not on-sell or advertise for sale those goods or services.
Stanley Black & Decker argued in their notification that a minimum advertised price was, in its case, necessary for a number of reasons:
- end-user customers need advice about which product will best suit their needs and how to best use the product and any accessories or attachments required;
- in order to provide this advice, dealers need knowledgeable sales staff requiring significant investment in regular training;
- it is essential that dealers carry a wide range of Dewalt products, requiring sufficient display space, whereas dealers were deranging Dewalt products due to low margins; and
- post-sales support is important to ensure customers have a good overall experience of Dewalt.
In a market with very aggressive pricing behaviour and low margins, Stanley Black & Decker argued that dealers are not often prepared to invest in such services if they do not achieve a sufficient return, whereas a minimum resale price would ensure a sufficient return for dealers and support training for improved customer service.
On 27 March 2020, the ACCC issued a draft notice proposing to revoke the notification and requested submissions from interested parties. After receiving no submissions the ACCC issued a final notice rejecting the proposal on 4 June 2020, finding that the detriments of permitting a minimum price outweighed any benefits to consumers.
Benefits v Detriments
The ACCC is required to asses a resale price notification by applying the public benefit test in section 93(3A) of the Consumer and Competition Act 2010 (Cth) (CCA), which requires the ACCC to determine whether or not the likely public benefits from the notified conduct outweigh the likely detriment to the public.
The likely public benefits considered by ACCC included:
- supporting investment in improved retail services and better outcomes for customers. However, the ACCC concluded that it Dewalt power tools do not appear to require a higher level of pre and post sales service than other brands of power tools;
- promoting increased competition by dealers and manufacturers, as well as better ranging leading to increased consumer choice. The ACCC observed that the proposed conduct was likely to result in some specialised power tool dealers offering a greater range of Dewalt power tools and devoting greater resources to explaining and selling them, such that there may be some increase in consumer choice. However, the resulting public benefits were likely to be limited including because only a proportion of dealers would be able to increase the range of Dewalt power tools without de-ranging other brands; and
- the proposed conduct being less restrictive compared to other options to overcome the perceived issues, such as exclusive supply arrangements. However, the ACCC considered that the dealers selling Dewalt products under exclusive supply arrangements would likely compete with each other on price and prices may be lower in this scenario than in a minimum resale price scenario. The ACCC also observed that an option to improve dealer margins, not canvassed by Stanley Black & Decker, would be to reduce the wholesale price charged to some dealers.
The likely public detriments considered by ACCC included:
- a reduction in intra-brand price competition leading to some customers paying higher retail prices for Dewalt Products; and
- a reduction inter-brand competition, resulting in customers paying higher prices for competing products.
Ultimately, the ACCC found that the public benefits of the notified conduct were outweighed by the likely public detriments.
Why is this case different to Tooltechnic in 2018?
This decision is interesting in light of the ACCC’s acceptance of a resale price notification lodged by Tooltechnic for its Festool and Fein brands of power tools in 2018. An application that, on the surface, bears resemblance to Stanley Black & Decker’s application.
The ACCC addressed this in their final notice decision and the accompanying media release, differentiating the two decisions. The ACCC argued that while the loss of discounting through resale price maintenance was a consumer detriment in the Tooltechnic decision, it was outweighed by the benefits to consumers. The ACCC determined that the Festool and Fein power tools were complex and highly differentiated. As a result, there was a benefit to Tooltechnic providing pre and post sales services to customers. Without resale price maintenance, the provision of these services by Tooltechnic were unlikely to be financially sustainable.
The ACCC considered the Dewalt tools were not highly differentiated.
Implications
This is not the ACCC’s first rejection of a resale price maintenance notification, it having revoked Meredith Dairy’s notification on 14 June 2019. The ACCC is sending a message that it will not automatically approve (or, more often not oppose) resale price notifications just because it has approved previous applications for similar products. Furthermore, the ACCC expressly warned business that any attempt to set minimum prices without lodging a notification with the ACCC is a serious breach of the CCA and the ACCC is ready to take action if evidence of this conduct comes to light.
This decision is important to a current notification under consideration by the ACCC. The ACCC published a draft notice on 28 February 2020 proposing to revoke the resale price notification lodged by JWL Marketing Pty Ltd (Weldclass Welding Products) for certain welding and plasma cutting machines. A final decision has not yet been made, awaiting a conference requested by Weldclass that has been adjourned until travel restrictions are lifted.
Image credit: Construction by Greyson Joralemon on Unsplash/ License/ Remixed to B&W and resized
