RESALE PRICE MAINTENANCE
What is Resale Price Maintenance?
Resale price maintenance occurs when a supplier of goods enforces, or tries to enforce, a minimum price at which the reseller must on-sell those goods. A reseller may be a distributor or a retailer. Resale price maintenance can occur in several ways, including if the supplier makes a condition of supply that the business must (or threatens to withdraw supply if the business does not): Sell at a certain price; Not to sell below a certain price; Only discount to an extent that is agreed or not discount at all;
Comply with a recommended retail price or not price a certain percentage below it.
Resale price maintenance prevents resellers from setting their prices independently and can lead to increased prices for consumers. It is a form of anti-competitive conduct and is unlawful under the Section 70 of the Commerce Commission Decree 2010 (CCD2010). Ultimately resale price maintenance can lead to higher prices paid by consumers. It is a breach of the resale price maintenance provisions of CCD2010 if a supplier of goods:
Specifies a price; and Takes or proposes or attempts to take certain action to enforce that specified price.
Forms of Specified Price
A specified price is where a supplier imposes a minimum price beyond which certain goods or services cannot be sold. The specified price does not have to be an exact figure, but could also be a reference to a formula, a price range, a document containing prices or a price list.
Some examples of specified prices include but not limited to the following are:
A price in dollar terms: for example - “you must sell at no less than $20.00”;
A retail margin: For example “you must sell at price at least 30% above the wholesale price”; and
A reference to another reseller’s price: For example – “you must not sell less than your competitor’s price. In terms of the Recommended Retail Price, this price is where a supplier recommends a price at which their goods should be sold. It is acceptable for a supplier to recommend a price to its resellers but it cannot do anything to try to enforce that recommended price.
Breach of the Resale Price Maintenance Provisions
A supplier will breach section 70 of the CCD 2010 if they:
Tell a reseller that they will not supply them with goods unless those goods are sold, advertised or offered for sale above a specified price. For example, we will not supply you with these goods unless you sell them for at least $20.00;
Persuade or attempt to induce a reseller to sell, advertise or offer for sale goods above a specified price. For example, if you sell these goods below $20.00 we will raise our wholesale price to you;
Enter or offer to enter into written or oral agreement for the supply of goods where one of the terms is a specified minimum price. For example, a contract that stipulates the goods must be sold for at least $20.00 or;
Withhold supply of goods to a reseller because: the reseller has not agreed to sell the goods above a specified price; or the reseller has sold the goods at less than a specified price.
Resale Price Maintenance by a Third Party
Resale price maintenance also extends to situations where a third party (a person who is not the supplier or reseller) makes it known to another person that they intend to hinder or prevent the supply (or purchase) of goods unless agrees not to sell below a specified price. For example, the third party may be a retailer who is putting pressure on the supplier not to supply a different retailer who has been discounting goods. This could be a likely breach section 70 of the CCD 2010.
Authorisation of Resale Price Maintenance
The Commission can authorize resale price maintenance if it is satisfied that the resale price maintenance will result, or be likely to result, in benefits to the public that will outweigh the harm.
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