RE­SALE PRICE MAIN­TE­NANCE

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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.

Next Week: Bait Ad­ver­tis­ing

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