The ACCC has decided to revoke the resale price maintenance notification lodged by Graco Australia Pty Ltd on 21 March 2023. This means that the legal protection from the notification will cease.
Resale price maintenance is prohibited under Australian competition law. It occurs when a manufacturer or wholesaler specifies a minimum price below which a reseller must not on-sell, or advertise for sale, goods or services. However, businesses can seek protection for these arrangements by lodging a notification with the ACCC.
The ACCC can only revoke the legal protection from a resale price maintenance notification if it is satisfied that the likely benefit to the public from the notified conduct would not outweigh the public detriment from the conduct.
Graco Australia wanted to set the minimum advertised price for its entire range of airless and air assisted paint sprayers sold by its distributers. It claimed that heavily discounted prices for its paint sprayers online meant that some distributors were ‘free riding’ off high-service distributors. It argued that more guaranteed retail margins for its distributors would help improve services offered to consumers, such as better product demonstrations and post-sale repair and maintenance services.
Resale price maintenance is typically detrimental to consumers because it increases prices above competitive levels.
It can, in limited circumstances, provide public benefits. The ACCC does not consider this to be the case here.
Graco Australia’s minimum advertised price proposal related only to advertised prices, so painting contractors and ‘DIY’ consumers could technically still negotiate lower prices directly with retailers. But preventing retailers from advertising discounts would limit consumers’ ability to identify retailers with the best deal.
In a concentrated market, with Graco Australia’s share of the professional trade segment in Australia being at least 50%, stipulating a minimum advertised price on paint spraying equipment is likely to result in significant public detriment by consumers paying higher prices.
The ACCC concluded that the proposal was unlikely to result in any significant public benefit. Information gathered by the ACCC, including from Graco distributors, suggested that Graco paint sprayers are not more complex than other paint sprayers, that would require significant additional explanation or demonstration. It also appeared that much of the discounting is attributable to high-service distributors.
The ACCC issued a draft notice on 31 August 2023 proposing to revoke the notification. Only one submission was received responding to the draft notice, from Graco Australia.
Further information about the notification, including a copy of the ACCC’s Notice, is available on the resale price maintenance notifications public register.