Hypothetical Question
Macquarie University Hypothetical Problem Questions Question (worth 25%) John, Paul, George and Bingo were musicians in a band called the Beagles. The Beagles were about to release their latest smash hit album called Sgt. Salt and Pepper's Happy Hearts Club Band (Salt and Peppers). Before going on the LSD Tour, the Beagles decided to paint their Studio named Rotton Apple. The Beagles hired a painter named Henrik. Henrik charged the Beagles $50,000 to paint the inside and outside of the Rotton Apple. When painting the inside of the studio, Henrik did not remove the old paint, and simply painted over the walls and ceiling. Henrik also dropped paint on John’s expensive $10,000 guitar. On the outside of the studio, Henrik used the wrong paint. He used indoor paint rather than outdoor paint. The Beagles gave Henrik clear instructions that the outside of the studio must be in red (i.e. the colour of an apple). Given that Henrik was colour-blind, he painted the outside of the Studio orange. Later, the Beagles discovered that Henrik was not a professional painter, but rather he was an ex-barrister (without a wig), who started painting on the side to pay for his expensive chamber fees. To promote the Salt and Peppers album, the Beagles also started a world tour called, Lucy in the Sky with Diamonds (LSD Tour). The Beagles wanted to ensure that the sales of Salt and Peppers were high and that the records were distributed carefully around the world. From their previous record promotions around the world, the Beagles had already established a selective distribution system by which the retail market was divided into segments, each segment being exclusively served by a selected wholesale distributor. In the past, the distribution system served the Beagles well. However, for the promotion of Salt and Peppers, the Beagles, for various reasons, terminated distribution agreements with the following distributors: (i) Bill Spector (Spector); amd (ii) Bruce Li (Li). The Beagles terminated the distribution agreement with Spector because the Beagles entered into another distribution agreement with Martin George (George), which gave George exclusive rights to sell Salt and Peppers in the areas that Spector distributed Beagles albums in the past. Upon learning that his distribution agreement was terminated, Spector immediately placed two orders for 100,000 and 10,000 copies of Salt and Peppers. The Beagles refused to supply Spector. The Beagles terminated the distribution agreement with Li because Li would not agree to maintain the price of a rebate on Beagles albums with another distributor named Claude-Jean Damn Van (Van). Li did not want to provide a rebate on Salt and Pepper, as he thought that retailers will buy large quantities of the album as it was a smash hit. In the past, the Beagles often wrote to all distributors stating: “All distributors must offer a rebate of two per cent on any Beagles albums sold to retailers. This is part of our overarching arrangement and it is understood that every distributor will comply with it.” Li never took the letters seriously. Li hoped and expected that other distributors thought the same. In fact, in the past, Li only offered a two per cent rebates to around two-thirds of retailers he supplied Beagles albums to. John knew everything about that happened and participated in all of the conduct outlined above. Paul suspected what had happened, and intentionally refused to ask questions as he had a feeling that something was wrong, and he may learn the truth if he asked too many questions. George, however, knew what was happening, but did not participate in any conduct, and Bingo did not know what was happening, but participated in the all of the conduct, as he trusted his friends. Advise 1. The Beagles whether they have a claim against Henrik for non-compliance under the Australian Consumer Law (ACL)? (5 marks) 2. The Beagles what remedies, if any, they can seek from Henrik for non-compliance of the ACL? (5 marks) 3. Has Beagles contravened the Competition and Consumer Act 2010 (Cth) (CCA) for terminating the distribution agreement with Spector? (5 marks) 4. Has Beagles contravened the CCA for terminating the distribution agreement with Li? (5 marks) 5. Could John, Paul, George and Bingo be personally liability under the CCA? (5 marks) someTitle Chapter 10 Resale Price Maintenance [10.10] INTRODUCTION ................................................................................................................................. 611 [10.20] PART I: ECONOMIC BACKGROUND ............................................................................................. 612 [10.30] PART II: ELEMENTS OF A SECTION 48 CLAIM ............................................................................ 616 [10.30] Structure of s 48 and Pt VIII ............................................................................................... 616 [10.40] Key terminology ................................................................................................... 618 [10.70] Making it known: s 96(3)(a) ................................................................................ 621 [10.80] Inducing or attempting to induce: s 96(3)(b).................................................... 623 [10.100] Agreements or offers: s 96(3)(c) .......................................................................... 626 [10.110] Withholding supply: s 96(3)(d) and (e) ............................................................. 626 [10.150] Using a statement of price: s 96(3)(f) ................................................................. 630 [10.160] Agency exception ................................................................................................................ 631 [10.170] Franchising and RPM ......................................................................................................... 632 [10.180] RPM in relation to services ...........................................