Highest ever penalty for resale price maintenance against skincare, cosmetics company Jurlique: $3.4 million
The Federal Court of Australia has today ordered penalties totalling $3.4 million against four Jurlique companies* and founder Dr Jurgen Klein.
Justice Spender in the Brisbane Court made the orders in proceedings instituted by the Australian Competition and Consumer Commission. The court declared that the Jurlique companies and Dr Klein engaged in resale price maintenance in the sale of Jurlique products between 1991 and 2003.
Resale price maintenance is prohibited under section 48 of the Trade Practices Act 1974 and occurs where suppliers prevent retailers discounting their products.
Until late 2003 Dr Klein was the managing director of Jurlique, a group of Australian companies which manufactures and sells a range of premium skincare, cosmetic and herbal products. Dr Klein set the policy against discounting and was involved in all aspects of the conduct.
The conduct was deliberate, was the result of a long-standing company policy and affected retailers in Australia and internationally.
The contravening RPM conduct involved:
- attempting to induce retailers not to sell Jurlique products at prices less than the prices specified by Jurlique from time to time
- entering and offering to enter into agreements for the supply of Jurlique products, one of the terms of which included that the products were not to be sold for prices less than a price specified by Jurlique
- withholding supply of Jurlique products for the reason that the retailer had sold the products at prices below the retail prices specified by Jurlique and
- using in relation to Jurlique products statements of prices that were likely to be understood as the price below which products were not to be sold.
The court also declared that one of the Jurlique companies, in operating its day spa stores, entered into an arrangement with Melbourne franchisees in March 2001 to fix prices for Jurlique treatments.
The court further granted injunctions for five years restraining the Jurlique companies and Dr Klein from engaging in RPM conduct in relation to Jurlique products, and restraining J&J Franchising from engaging in price fixing in relation to Jurlique treatments. The court ordered the Jurlique companies to pay $125,000 in costs.
Justice Spender declared that Dr Klein was knowingly concerned in the RPM and price fixing conduct of the Jurlique companies, and ordered him to pay a penalty of $200,000, and $20,000 in costs.
"This is a case of deliberate conduct occurring over several years, and involved the most senior executive of the companies," ACCC Chairman, Mr Graeme Samuel, said today. "The size of the penalties is consistent with the ACCC's view that RPM is serious anti-competitive activity.
"RPM removes the freedom and ability of those affected retailers to discount if they wish to compete on price or promote their businesses this way. In the ACCC's view it consequently affects the prices which we all ultimately see on the shelves, as consumers.
"This outcome should serve as a further warning to business suppliers generally who put pressure on their retailers not to discount – that such conduct will not be tolerated.
"Despite initially denying the conduct, I'm pleased that the Jurlique companies and Dr Klein ultimately admitted the conduct and have saved the time and costs of a trial," Mr Samuel said. "Businesses ought to be aware that cooperating with the ACCC from the outset is to their advantage."
Dr Klein is no longer a shareholder nor involved in the management of Jurlique. The current management of the Jurlique companies has stated it is committed to compliance with the Act, and has offered a court-enforceable undertaking to the ACCC to implement a trade practices law compliance training program.