Resale price maintenance
Resale price maintenance (RPM) occurs if a supplier pressures a business not to sell products below a certain price.
RPM can manifest in several ways, including if the supplier makes it a condition of supply that the business must (or threatens to withdraw supply if the business does not):
- sell at a certain price
- not sell below a certain price
- only discount to an extent that is ‘agreed’ or not discount at all
- comply with a recommended retail price (RRP) or not price a certain percentage below it.
Ultimately, RPM can lead to higher prices paid by consumers.
Businesses must not engage in RPM and it is prohibited outright by law. RPM may be authorised in some circumstances.
It is important that suppliers do not attempt to use RPM to constrain businesses, particularly with the growth of online retailing.
Example: An online retailer enters the bicycle market and prices its bicycles cheaper than its bricks and mortar competitors. The online retailer and the bricks and mortar retailers have the same supplier. Several bricks and mortar retailers complain to the supplier that the online retailer’s bicycles are too cheap and threaten to stop placing orders for those products. The supplier asks the online retailer not to price below the RRP and threatens to cut supply unless the online retailer agrees. This is RPM and is prohibited under the Act.
Businesses should know their rights and be assertive if they feel a supplier is attempting to maintain certain prices for goods or services. If businesses feel they have been subjected to RPM they should contact the ACCC.