Competition

• Author: International Law Group

Dermalogica PTY (respondent) is a wholesaler of skin care products.

It is the Australian subsidiary of a United States corporation of similar name and markets the parent company's products to retailers across Australia. As of the hearing date, over 700 retailers within Australia were acting as outlets for Dermalogica products.

Two of these retailers were doing business as "Fatal Attraction" and "Café Beauty Advanced Anti-Aging (Café Beauty)." Both are beauty shops offering a range of personal services to customers.

The former is located in Melbourne, the latter in Sydney. Both of them were operating a website on which they offered respondent's products for retail sale at discounted prices. Respondent looks upon its products as "premium" brands.

Suzette Cassie is the General Manager of Dermalogica in Australia; she is the sole resident director of the company, and a company secretary. In her view, the company prices its products towards the higher end of the market. It is a "professional product" that professional beauty salons use and sell. One cannot buy them in supermarkets or other retail stores.

This upscale image of its products is a main element of respondent's marketing strategy. Respondent also has a system of recommended retail prices and it makes those recommended prices known to retailers on order forms and price lists that respondent sends out from time to time.

Respondent's U.S. parent runs a website jointly with its Australian management. It provides the public and professional stockists with data about respondent's products. It includes guidelines for stockists for retailing respondent's products via the internet. Specifically, there are guidelines for the use of respondent's name, logos and other images, plus declarations of respondent's views about the retail pricing of its internet products.

Both Café Beauty and Fatal Attraction offered respondent's products for sale on their websites at prices lower than respondent's recommended retail price. It was respondent's reaction to the salons' discounting that gave rise to charges before the Australian Competition and Consumer Commission (ACCC or applicant) that respondent has transgressed the Trade Practices Act 1974 (Cth) (the TPA).

The TPA defines resale price maintenance (RPM) as follows: "(a) the supplier making it known to a second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than...