CAN I ENFORCE A RECOMMENDED RETAIL PRICE?

In Australia, suppliers are prohibited from enforcing a minimum price in relation to their goods sold by third parties.  This means that a wholesaler cannot require a retailer to sell their products at a certain price.

The Australian Consumer Law (ACL) operates consistently nationally and in each State and Territory.  The ACL provides specific sections in relation to imposing minimum resale prices and offering recommended retail price guides.

Section 48 of the Competition and Consumer Act 2010 (CCA), states that a corporation or other person shall not engage in practices of resale price maintenance.  Resale price maintenance can be defined as:

• a supplier not supplying goods to another person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier;

• the supplier inducing, or attempting to induce, a second person not to sell, at a price less than the price specified by the supplier;

• the supplier entering into an agreement, or offering to enter into an agreement, for the supply of goods to a second person on the basis that the goods are not sold at a price less than a price specified by the supplier;

• the supplier withholding the supply of goods to a second person for the reason that the second person is not willing to sell the goods at the price specified by the supplier;

• the supplier using, in relation to any goods supplied, or that may be supplied, by the supplier to a second person, a statement of a price that is likely to be understood by that person as the price below which the goods are not to be sold.

Consequently, suppliers are prohibited from preventing customers from selling its products below a certain price, displaying goods below a certain price or preventing them from offering its goods for resale at a lower price than a price authorised by the supplier.  The supplier is also prohibited from entering into agreements which would result in the prohibition of the supplier’s customer selling its products at a lower price or preventing the stocking or supply of its customers, should they sell the suppliers products at a lower price than a price authorised by the supplier.

It is also illegal for a supplier to ask its customers to use a recommended price list to stop competitors from discounting.  Suppliers can however set a maximum recommended price for the sale of its goods.

Despite the above provisions, section 97 of the CCA states that a company or person may provide to its customers a recommended price list, so long as the following statement is included in the recommended price list:

“the price set out or referred to herein is a recommended price only and there is no obligation to comply with the recommendation”.

Section 98 of the CCA further deals with the withholding of supply and suppliers are specifically precluded from withholding the supply of goods, or refusing to supply goods unless goods are accepted on terms disadvantageous to the customer, in circumstances where its customers have sold products at a lower price than authorised by the supplier.

While suppliers are prohibited from refusing the supply of products in the above circumstances, a supplier may withhold supply to a customer if the customer has, within the preceding year, obtained goods from the supplier and are selling those goods at less than cost so that it can promote its own business, and attract consumers who are likely to purchase other goods and services.  In essence this is called ‘loss leader selling’ and involves selling goods less than cost so that it can promote its own business.  In these circumstances a supplier may withhold supply.

Section 99 of the CCA, also deals with statements being placed on goods in respect of the price of goods.  This section refers back to resale price maintenance and prohibits suppliers placing a price on products which would lead consumers to understand that the price of the product should not be sold below the price advertised.

Chelsey Grbcic at Wallace Law Group can assist with legislative compliance for your wholesaling and supplier needs and all other contractual needs.  Please contact her chelsey@wallaceweir.com.au 1300 011 123.

Please note that this article is written as an informative piece and that you must not take the contents of this article as legal advice. Wallace Law Group accepts no liability from your reliance on this article.