It is amazing how a fifteen minute chat on parallel imports and an earlier e-mail ends up with a one-liner that gets it wrong. But that was the case in an article in the Age today. Let me summarise my views and for those interested, the full e-mail to the journalist is below.
- On the information in the article, there is no issue of ‘price fixing’ (or collusion) but may be issues of resale price maintenance (RPM) depending on the actual contracts or agreements. The ACCC has been following this closely for internet sales generally;
- There is almost certainly no issue of abuse of market power with the sort of businesses (small fashion houses) referred to in the article;
- Exclusive distribution licenses for Australia are not illegal but can raise competition law issues if businesses abuse market power or ‘substantially lessen competition’. For a summary of a previous related decision see here.
- The Bricks and Mortar complainants are like children putting a finger in the dyke that is about to breach. Unless they get business models to compete with on-line businesses they will be swept away. Attempts to block parallel importing just hurts consumers and will be ‘avoided’ by clever entrepreneurs. The government should act to assist this form of competition, not to block it, despite the squeals from the vested interests in the retail sector.
So what should the ACCC do? Keep a look out for RPM (and I would be surprised if they were not doing that already).
(Original e-mail to journalist)
Let’s talk in the morning. My number is (deleted). I can ring or vice versa. let me know what time suits you.
A couple of ‘off the top of my head’ thoughts below:
Really interesting issue! While you are looking at fashion the same issue is meant to be the basis of a parliamentary inquiry for electronic products (e.g. software).
The technology case raises the issue of parallel importing. While not an area of the law I know well, my understanding is that there is nothing stopping an Australian from legally buying a product overseas and then shipping it to Australia for resale. For example, Aldi does this with coffee (if you look on the shelves Aldi has Nescafe from Brazil and Indonesia). Of course the issue is whether the company will sell it to you overseas. You could go to an overseas shop and buy it and then resell it (and for some of the small fashion labels I suspect that is exactly what will happen. Websites will set up simply arbitraging the price. “Tell us what you like from the J.C.Penney or Macy’s website, tell us your size and we will buy it and ship it to you.”). But if you want to buy wholesale overseas the (overseas) supplier could stop you. That would not be illegal although it MAY be illegal if the Australian arm of a company puts pressure on overseas affiliates not to sell product to Australian resellers. Universal music ended up in court when it tried to stop parallel imports of music a decade or more ago (when people listened to CDs!).
A small overseas fashion house is unlikely to end up in legal trouble by refusing to sell to Australians if it thinks they will parallel import. If they have an Australian presence (which many will not have) then they are unlikely to have any market power – and the relevant bit of the law requires that the business have ‘market power’.
The fashion case also raises issues of resale price maintenance. This is illegal – so if the supplier is putting pressure on (some) sellers to not price below a certain level then they are probably breaking the law. But that doesn’t stop exclusive distribution licenses.
I guess what we are seeing is long-term price discrimination against Australia becoming transparent and people working around it. We seem to have paid rather high prices in Australia for a variety of products for a long time. To say that it is due to our taxes is complete nonsense. Differences of 50% are not explained by a 10% GST – particularly when Bricks and Mortar stores in the US and Europe often have equivalent taxes that are even higher (the US has state sales taxes – which is why low tax states have factory outlet malls just across the border from high tax states). I am not sure what causes our high prices – but when I can walk into a store in Picadilly Circus in January and buy sports shoes for the equivalent of $120 when they sell for $250 in Australia – there is something really odd going on!
I suspect that the main thing the government needs to do is not to set up new laws but to avoid laws that impede parallel imports. And if it is not obvious already, I have no troubles with international competition pushing down Australian prices and benefitting consumers. The Bricks and Mortar stores are like the blacksmiths facing the advent of the car (or a bit earlier, like the Luddites breaking the machines that raised productivity because they feared that they would lose their jobs).