Businesses small and large often complain to the ACCC that manufacturers or distributors have refused to supply them with goods or services. 'Refusal to deal' is the technical term for a firm refusing to supply goods and/or services to business (or consumer) customers.
In general, businesses may decide for themselves with whom they wish to deal. The Competition and Consumer Act 2010 does not give everybody an absolute right to be supplied, whatever the circumstances.
As long as you are not refusing supply for an illegal reason, it is perfectly legitimate for you to refuse to deal with businesses if you wish—even if you have previously supplied them. There is no automatic right to be supplied and there is no obligation on a supplier to justify its decision to refuse supply.
When is a refusal to deal legal?
There may be sound commercial reasons why you choose to refuse to supply another business goods or services such as:
you may find it too costly or inconvenient to sell to businesses with whom you have no existing relationship
you may already have enough retail outlets in the area
you may believe the buyer has the wrong type of retail business for the product
you may believe the buyer is a bad credit risk or
you may simply not wish to deal with the other business.
If the refusal to supply is legitimate, the business will have to negotiate with the supplier or find an alternative source.
When is refusal to deal illegal?
There are only a few circumstances that make a refusal to deal illegal under the Competition and Consumer Act, which relate to anticompetitive conduct. Sometimes, an illegal refusal to deal is prohibited outright, other times it is subject to a competition test.
Below are some examples of refusal-to-deal conduct that may be illegal.
Agreements involving competitors
If such agreements restrict the supply of goods they are prohibited if they have the purpose or effect of substantially lessening competition in a market in which the businesses operate.
Primary boycotts
These are agreements between two or more competitors to refuse to deal, or limit dealings with another supplier or particular customer, or a class of competitor or customer. They are illegal.
Secondary boycotts
These generally occur when two persons together engage in conduct that hinders or prevents a third person from supplying to, or acquiring goods or services from, a fourth person. They are prohibited if their purpose is to cause substantial loss or damage to a business, or a substantial lessening of competition in a market.
Misuse of market power
This is when a firm with a substantial degree of power in a particular market (by market share or otherwise) takes advantage of that power for the purpose of damaging other businesses by refusing to deal or by offering to do business on such unrealistic terms that it borders on refusal to deal. However, this does not mean that the supplier has to supply everyone. The onus is on the customer to show that the supplier’s action was taken with the purpose of deterring or preventing the business or class of business from entering or competing in that market.
Exclusive dealing
When this occurs it is generally one person trading with another and imposing restrictions on the other’s freedom to choose with whom, or in what, it deals.
For more information on refusal to deal
For further information on your rights and obligations under the Act related to refusal to deal, please see the ACCC's Refusal to Deal guide or call the ACCC's Small business helpline on 1300 302 021.
