Proposal to set minimum prices on welding equipment raises competition concerns

28 February 2020

The ACCC plans to revoke a resale price maintenance (RPM) notification lodged by welding equipment manufacturer Weldclass, which wanted to prevent retailers from selling welding and plasma cutting machines at a discounted price.

Tamworth NSW-based Weldclass lodged the RPM notification with the ACCC on 4 October 2019, after releasing a new range of machines to the Australian market, branded WeldForce and CutForce, in March 2019.

In a draft notice issued today, the ACCC proposes to revoke Weldclass’ RPM notification because any public benefit would not outweigh the detriments that are likely to result from reduced price competition on the welding machines.

“After considering Weldclass’ position, we do not consider that the proposed conduct would result in a net public benefit,” ACCC Commissioner Stephen Ridgeway said.

“Allowing Weldclass to set minimum retail prices would mean that retailers could no longeroffer consumers discounts on the Weldclass products and consumers would therefore pay higher prices. It is also likely to reduce competitive pressure for other welding machines with the result consumers would pay higher prices for these machines also.”

“We are also concerned that retailers will stop selling other brands of machines, further reducing competition between brands,” Mr Ridgeway said.

Weldclass claims that setting minimum prices would enable full-service retailers to receive a higher margin for providing service and advice to consumers. Weldclass is concerned that some consumers may seek advice from full-service retailers about its products, but then buy from discount retailers.

“We are not convinced that consumers necessarily need high levels of service for the Weldclass machines,” Mr Ridgeway said.

“We believe retailers should generally be free to set their own prices. Consumers should not have to pay a higher price for a service if they don’t need it.”

Weldclass and interested parties can comment on the draft notice before the ACCC makes a final decision.

Further information, including Weldclass’ RPM notification and details about how to make a submission are available on the ACCC’s Public Register at Weldclass RPM Notification.

Background
RPM occurs when a supplier of goods or services (for example, a manufacturer or wholesaler) specifies a minimum price below which a reseller must not on-sell, or advertise for sale, those goods or services.

It is illegal for a supplier to attempt to set a minimum price for their products or services. However, businesses may obtain legal protection for RPM conduct by lodging a notification with the ACCC.

Once lodged, protection for the notified RPM conduct begins 14 calendar days after the notification was lodged, unless the ACCC issues a draft  notice objecting to the notification within those 14 days.

In this case, Weldclass agreed to not commence its RPM conduct until after the ACCC had assessed its notification.

The ACCC may revoke an RPM notification where it is satisfied that the likely benefit to the public from the conduct will not outweigh the likely detriment to the public from the conduct.

Before issuing a revocation notice, the ACCC must issue a draft notice setting out its reasons for proposing to revoke the notification.

Release number: 
29/20
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