Posted by Elizabeth Gore-Jones
on 17 May 2024
Resale price maintenance is illegal in Australia and a recent case has provided examples of what constitutes resale price maintenance and the actions the ACCC may bring in those circumstances.
In this case, four-wheel drive accessory manufacturers MSA 4x4 Accessories Pty Ltd (MSA) and Offroad Animal Pty Ltd (Offroad Animal) have admitted their involvement in resale price maintenance. This practice involved instructing resellers to adhere to minimum price guidelines, effectively stifling competitive pricing in the market.
Between January and April 2022, MSA directed its resellers to maintain a particular discount ceiling on their products. The directive was clear: if one or more resellers did not comply, MSA would prohibit any discounting from the recommended retail price (RRP). This move was designed to control the market pricing, ensuring that the products were not sold below a specified discount percentage.
Offroad Animal's involvement in similar practices spanned a longer period, from September 2020 to June 2023. The company instructed both existing and prospective resellers to not advertise its products below the RRP. By doing so, Offroad Animal aimed to maintain price uniformity across various sales channels, effectively curbing any competitive price reductions.
Resale price maintenance (RPM) is a practice where suppliers set a minimum price below which resellers cannot sell or advertise their products. This practice is illegal under Australia's competition laws because it hinders competition among resellers, leading to artificially higher prices for consumers.
ACCC Commissioner Liza Carver emphasized the severity of the issue, stating, “Resale price maintenance prevents resellers from being able to compete with each other on price, leading to higher prices for consumers. Businesses should be aware that the ACCC takes resale price maintenance very seriously and will take appropriate enforcement action against businesses that engage in this illegal practice.”
Indeed, the ACCC has taken decisive action against MSA and Offroad Animal. Both companies have entered into court-enforceable undertakings, committing to several corrective measures:
- Corrective Notices: MSA and Offroad Animal are required to issue notices to their resellers, informing them that they are free to set their own prices.
- Public Declarations: Both companies must publish corrective notices on their websites, ensuring transparency and public awareness of their previous misconduct.
- Compliance Programs: For the next three years, MSA and Offroad Animal will establish, implement, and maintain comprehensive competition and consumer compliance programs. These programs aim to prevent future violations and ensure adherence to Australian competition laws.
The actions against MSA and Offroad Animal serve as a stern reminder to businesses about the importance of adhering to competition laws. Suppliers are prohibited from dictating minimum resale prices, which can distort the market and harm consumers by keeping prices artificially high. Moreover, suppliers must resist any pressure from resellers to enforce minimum pricing, particularly from those with lower-cost business models that benefit consumers through more competitive pricing.
For expert legal guidance in navigating competition and consumer laws, trust The Franchise & Business Lawyers.
Contact us today for tailored solutions to protect your business interests.
