Australian Competition and Consumer Commission v Oobi Baby Pty Ltd

annexure A - letter to retailers [To be placed on Oobi Baby Pty Ltd letterhead] [To Oobi Retailer] [insert address] Dear Sir / Madam (or personalise) Resale price maintenance conduct by Oobi Baby Pty Ltd Following civil proceedings instituted by the Australian Competition and Consumer Commission, the Federal Court of Australia has found that Oobi Baby Pty Ltd has engaged in resale price maintenance. Oobi Baby and I admitted liability and consented to the orders sought by the Commission. We engaged in the conduct in ignorance of the law but accept that ignorance is no excuse and that it is incumbent on everyone to be aware of the law and comply with it. Resale price maintenance involves a supplier setting or seeking to set a minimum price below which its retailers cannot sell, advertise, display, or offer goods for sale. It is prohibited by section 48 of the Trade Practices Act 1974. The Court has also found that I was knowingly concerned in the resale price maintenance. In particular, the Court has declared that Oobi Baby: (a) made statements in emails sent to some retailers that it would not supply them with goods unless they agreed not to sell Oobi Baby products below its recommended retail price; (b) attempted to induce some retailers not to sell Oobi Baby products for less than the RRP by sending them emails; (c) refused to supply Oobi Baby products to some retailers because the retailers had sold or advertised products at less than the recommended RRP; (d) set a price that retailers would understand was the price below which Oobi Baby products were not to be sold; and (e) published trading terms on its website that required retailers not to sell goods at a price less than a price specified by Oobi Baby. As part of the Court's orders Oobi Baby must write to each of its retailers advising them of the outcome of the proceedings and informing them about the prohibition under section 48 of the Act against engaging in resale price maintenance, as defined in section 96 of the Trade Practices Act. Oobi has also been ordered to pay a penalty of $40,000 and I have to undertake practical training in the operation of the Trade Practices Act. The Court has also granted injunctions preventing Oobi Baby from engaging in resale price maintenance for a period of three years. As a retailer of Oobi Baby products, you are free to set the price at which you advertise or sell our products you purchase from us. Any RRP used by us (or any other supplier for that matter) is a suggestion only. Your freedom to independently set your own prices for, and offer any discounts on, products is protected by the Trade Practices Act. I have enclosed for your further information an ACCC publication titled Resale Price Maintenance. You can also obtain further information about the proceedings against Oobi and the Act generally from the ACCC website at www.accc.gov.au. Yours sincerely Alexandra Riggs [Preferred Title and Signature Block]

annexure B - website notice Resale price maintenance prohibited Following civil proceedings instituted by the Australian Competition and Consumer Commission, the Federal Court of Australia has declared that: · Oobi Baby Pty Ltd has engaged in resale price maintenance; and · Oobi Baby's sole director and manager, Ms Alexandra Riggs, was knowingly concerned in the resale price maintenance. Oobi Baby and Ms Riggs admitted liability and consented to the orders sought by the Commission. We engaged in the conduct in ignorance of the law but accept that ignorance is no excuse and that it is incumbent on everyone to be aware of the law and comply with it. Resale price maintenance involves a supplier setting or seeking to set a minimum price below which its retailers cannot sell, advertise, display, or offer goods for sale. It is prohibited by section 48 of the Trade Practices Act 1974. Oobi Baby has been ordered by the Court to publish this notice to alert other businesses to the prohibition on suppliers setting minimum prices below which goods are not to be sold or advertised. Importantly: · Any recommended retail price nominated by a supplier to a reseller is a suggestion only. · Retailers are free to set their own prices for, and offer discounts on, the products they sell. The Federal Court has also ordered Oobi Baby to pay a penalty of $40,000. For more information on resale price maintenance and your rights under the Trade Practices Act generally, please visit the ACCC website at www.accc.gov.au. IN THE FEDERAL COURT OF AUSTRALIA

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

REASONS FOR JUDGMENT 1 The first respondent, Oobi Baby Pty Ltd, is a company that is controlled by the second respondent, Ms Riggs, she being the company's sole shareholder and director. Oobi Baby designs and imports clothing and toys for babies and young children which it sells to retailers. The applicant, the Australian Competition and Consumer Commission, alleged that during the course of its business Oobi Baby engaged in resale price maintenance in contravention of s 48 of the Trade Practices Act 1974 (Cth) and that Ms Riggs was knowingly concerned in those contraventions and brought their action to obtain appropriate relief. Oobi Baby and Ms Riggs conceded the contraventions occurred and that Ms Riggs performed them. They joined with the ACCC in filing submissions as regards the appropriate orders that should be made. I granted the relief sought which took the form of declarations of contraventions, injunctions restraining future contraventions, the imposition of a penalty of $40,000 and publication and compliance training orders. What follows are my reasons for granting that relief. 2 Oobi Baby sells its products through its website. It makes no sales directly to the public. Oobi Baby has only a small part of the children's toy and clothing market. It employs four full-time employees, including Ms Riggs and her husband, and engages one independent contractor. In the 2006/2007 financial year, Oobi Baby had a turnover of $958,541 from which it derived a net profit after tax of $128,622.90. The net profit for the 2007/2008 financial year is estimated to be $268,041.34. 3 Section 48 prohibits resale price maintenance. It is a per se offence. Sections 96 and 96A describe the conduct that constitutes resale price maintenance. Relevantly for present purposes, the following conduct by a supplier when dealing with another person (the recipient) constitutes resale price maintenance: (1) making it known that the supplier will not supply goods unless the recipient agrees not to sell them at a price below the supplier's recommended price (s 96(3)(a)); (2) the supplier inducing, or attempting to induce, the recipient not to sell the goods at less than the supplier's recommended price (s 96(3)(b)); (3) the supplier entering into an agreement to supply goods, or offering to enter into such an agreement, which includes a term that the goods not be sold at a price less than the supplier's recommended price (s 96(3)(c)); (4) the supplier withholding goods where the recipient has sold, or is likely to offer for sale, the goods at a price less than the supplier's recommended price (s 96(3)(d)); and (5) the supplier using, in relation to goods, a statement of price likely to be understood by the recipient as the price below which the goods should not be sold (s 96(3)(f)). 4 The infringing conduct engaged in by Oobi Baby arose out of dealings with 15 retailers. The offending conduct occurred over a period of approximately nine months between April and December 2007. It occurred when retailers sold the products purchased from Oobi Baby at below what Oobi Baby regarded as an appropriate price. Sometimes this happened by virtue of the mode of sale, for example by offering Oobi Baby products for sale via internet auction sites. 5 In most cases the contravening conduct is evidenced by 24 emails sent by Oobi Baby to its retailers, comprising 19 separate acts of resale price maintenance. The emails were sent at the direction of Ms Riggs. In broad outline the emails can be grouped into four categories. Category one emails contained statements in which Oobi Baby made it known to the retailer concerned that products would not be supplied unless the retailer agreed not to sell at a price less than the recommended retail price (s 96(3)(a)). An example reads: "Anyone who is unwilling to adhere to the RRP will in the future no longer be able to stock Oobi". Category two emails contained statements by which Oobi Baby attempted to induce the retailer not to sell products at a price less than the recommended retail price (s 96(3)(b)). An example of this type of email reads: "I think that absolutely everyone will be putting up their prices if they haven't already (if you see anyone who isn't drop me a line and I'll confidentially have a word with then)." Category three emails contained refusals by Oobi Baby to supply retailers by reason that the retailer was selling products at a price less than the recommended retail price (s 96(3)(d)). An example reads: "Although we have asked you to adhere to the RRP (as is stated in our Terms and Conditions on our website: http://www.oobi.com.au) you have been discounting and we feel that we are unable to monitor this. Therefore we reluctantly have to discontinue supply to your store as we cannot guarantee that you will commit to our terms." 6 One additional email was specified in category four. Emails in each of categories one, two and three, as well as the email in category four, amounted to Oobi Baby using, in relation to products to be supplied or that may be supplied to the retailers, a statement of price likely to be understood as the price below which goods are not to be sold (s 96(3)(f)). An example from the category four reads: "If you are a web-based reseller then there is 100% mark-up plus GST (for example $10 w/s plus GST x 100% = $22.00 RRP)." 7 In one case the contravening conduct (s 96(3)(c)) was constituted by the publishing of "Supply Terms" on Oobi Baby's website containing the following term: Oobi Baby&Kids does not supply Ebay stores, auction sites or any discount stores, websites or similar. Stores found selling our products on Ebay or undercutting on current stock will be immediately deleted from our system. We reserve the right to insist that you remove all items from any auction, underselling or Ebay store should we find that you are selling Oobi Baby in this way. By acceptiing [sic] our orders you accept these terms. 8 The despatching of the emails and the publication of the "Supply Terms" justified the making of declarations of contraventions and the grant of injunctions restraining future contraventions. 9 So far as the penalties were concerned many cases have examined the Court's task in considering a joint position on penalties. The applicable principles are authoritatively dealt with in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 and Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; [2004] ATPR 41-993. I do not need to recite them here. The upshot of the authorities is that the Court should not depart lightly from a joint position put forward by the parties. The inquiry to be undertaken is not whether the Court would have arrived at the same figure as the parties, but whether the proposal fixes an appropriate amount "within the permissible range" of penalties that might properly be imposed: NW Frozen Foods at 291. 10 The parties suggested a $40,000 penalty be imposed on Oobi Baby, payable by four six monthly instalments. No separate penalty was sought against Ms Riggs. 11 Ordinarily, when there have been 20 contraventions of s 48 a penalty greater than $40,000 ought to be imposed. It is clear that Parliament views acts of resale price maintenance seriously, deeming them to be contraventions without proof of any adverse effect on competition. It is simply assumed that a contravention will have that effect. In my view, however, a penalty at the lower end of the scale was justified in the circumstances. A number of factors led me to that conclusion. It is a well settled proposition that the imposition of penalties is directed at deterrence, both specific and general. In this case a penalty of the size proposed would have the requisite deterrent effect. It represents a significant financial obligation for a small company in its fledgling years, but it is not so high as to be oppressive. Additionally, while the conduct was undertaken deliberately and systematically, it was done in ignorance of the law. That is, Ms Riggs simply did not know what she was doing was illegal. I had the impression she was somewhat shocked to discover that her attempt to prop up her brand was unlawful. I also took into account by way of mitigation the small scale of the conduct in the context both of Oobi Baby's business operation and its market share. Finally, there was the willingness of Ms Riggs to co-operate fully in the investigation by the ACCC at an early stage. 12 I accepted that a separate penalty should not be imposed on Ms Riggs, despite her orchestration of the conduct. As sole shareholder of Oobi Baby, Ms Riggs will feel the burden of the penalty imposed against the company. In the 2007/2008 financial year, Ms Riggs drew a salary of $50,000, having previously drawn $20,000 per annum since the company's inception in 2005. Ms Riggs' husband likewise also draws a salary of $50,000. When the penalty is accounted for they will take less from the company. In these circumstances it is a legitimate course to avoid punishing Ms Riggs twice over for what is, in effect, the same conduct: Australian Competition and Consumer Commission v Visy Industries Holdings Pty Limited (No 3) [2007] FCA 1617; (2007) 244 ALR 673 at [294], Australian Competition and Consumer Commission v Commercial and General Publications Pty Ltd (No 2) [2002] FCA 1349;[2002] ATPR 41-905 at [27]-[29], Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2000] FCA 997; [2000] ATPR 41-777 at [13]. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate: Dated: 7 October 2008 Counsel for the Applicant: D Star

Solicitor for the Applicant: Corrs Chambers Westgarth