Suppliers may try to impose a resale price to maintain brand positioning or to give resellers attractive profit margins.
Any arrangement between a supplier and a reseller that means the reseller will not advertise, display or sell the goods the supplier supplies below a specified price is illegal.
It is also illegal for a supplier to cut off, or threaten to cut off, supply to a reseller (wholesale or retail) because they have been discounting goods or advertising discounts below prices set by the supplier.
A supplier may recommend an appropriate price for particular goods but may not stop retailers charging or advertising below that price. In most cases, a supplier may specify a maximum price for resale.
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
attract 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.
Relevant sections of the Competition and Consumer Act
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).
Don’t be tempted to ask your supplier to use its price list to stop your competitors from discounting. You, as well as the supplier who agrees with your suggestion, would then be breaking the law, that is, inducing resale price maintenance or a price fix.
