Imposing minimum resale prices
A supplier may recommend that resellers charge an appropriate price for particular goods or services but may not stop resellers charging or advertising below that price.
It is illegal for suppliers to:
- put pressure on businesses to charge their recommended retail price or any other set price, for example by threatening to stop supplying to the reseller
- stop resellers from advertising, displaying or selling goods from the supplier below a specified price.
It is also illegal for resellers to ask their suppliers to use recommended price lists to stop competitors from discounting. In most cases, a supplier may specify a maximum price for retail.
While it is illegal for suppliers to cut off supply to wholesale or retail resellers in efforts to impose a minimum price, suppliers may withhold supplies of goods to a company that engages in ‘loss leader selling’. That is, purchasing goods with the intention of selling the goods below their cost so that:
- the company can promote their business
- the company attracts customers who are likely to purchase other goods or services.
This exemption does not apply to genuine clearances, or to when a supplier has agreed to supply goods to a company for the purpose of loss leader selling.
There is nothing wrong with using a supplier’s recommended resale price (RRP) list so long as it is just that—recommended. However, it would be illegal for the supplier to put pressure on you to charge the listed prices or any other set price (for example, RRP less 10 per cent).
On the other hand, don’t be tempted to ask your supplier to use its price list to stop your competitors from discounting. You and the supplier who agrees with your suggestion would then be breaking the law - inducing resale price maintenance or a price fix.
s.48 — Resale price maintenance
s.96 — Acts constituting engaging in resale price maintenance
s.96A — Resale price maintenance in relation to services
s.97 — Recommended prices
s.98 — Withholding the supply of goods
s.99 — Statements as to the minimum price of goods
s.100 — Evidentiary provisions