The ACCC has recently taken enforcement action against several Australian suppliers for attempting to control the prices charged by independent retailers.

The message for suppliers, wholesalers, distributors and franchisors is clear: a recommended retail price must remain exactly that…a recommendation.

What is Resale Price Maintenance?

Resale price maintenance occurs when a supplier prevents, or attempts to prevent, a retailer or reseller from advertising or selling goods or services below a specified price.

This may occur where a supplier:

• Requires retailers to sell or advertise products at the recommended retail price.
• Includes minimum advertised price requirements in a supply agreement or online policy.
• Threatens to suspend or terminate supply if a retailer discounts.
• Removes rebates, discounts or other benefits from retailers that sell below a nominated price.
• Pressures a retailer to increase its prices.

Resale price maintenance is prohibited by section 48 of the Competition and Consumer Act 2010.

Importantly, the ACCC does not need to find a clause expressly stating, “You must not sell below this price.” The surrounding communications, policies, incentives and consequences can be sufficient to establish the conduct.

Recent ACCC Enforcement Action

Late last year, the ACCC accepted court-enforceable undertakings from several suppliers.

Connected Audio Visual admitted that it asked retailers to agree to advertise certain dash cam and car audio products at the recommended retail price. Retailers that did not respond had their accounts placed on hold and, in one case, closed.

Golf Imports admitted that its Online Policy and Supply Agreement contained clauses preventing retailers from advertising products below specified prices. The policy also contemplated suspending or terminating a retailer’s ability to advertise or sell products for non-compliance.

EE Group Australia admitted that it directed certain drone resellers not to advertise or sell products below nominated prices and informed some resellers that supply could be withheld if they did not comply.

These matters demonstrate that the ACCC is concerned not only with the price ultimately charged at the register. Restrictions on the price a retailer may advertise can also constitute unlawful resale price maintenance.

They also demonstrate that a problematic policy may create exposure even where it has not been consistently enforced.

What can Suppliers Lawfully do?

A supplier may generally:

• Provide a genuinely non-binding recommended retail price.
• Set a maximum resale price.
• Run its own promotions or provide retailers with information about suggested promotional pricing.

However, retailers must remain free to determine their own prices.

An RRP may cease to be a genuine recommendation where it is accompanied by pressure, threats, financial consequences, account restrictions or a refusal to supply.

Calling a policy an “RRP policy,” “brand protection policy” or “minimum advertised price policy” will not avoid the competition law risk if its practical effect is to prevent discounting.

Particular Considerations for Franchisors

Franchisors often seek consistent pricing across their networks to support national promotions, brand positioning and customer expectations.

However, where franchisees operate as independent businesses and resell goods or services, a franchisor must be careful not to convert recommended pricing into a mandatory minimum price.

Potential warning signs include:

• Requiring franchisees to obtain approval before discounting.
• Treating discounting as a breach of the franchise agreement or operations manual.
• Threatening default action, reduced supply or loss of benefits.
• Requiring participation in promotions that establish a minimum selling price.
• Pressuring a franchisee after another franchisee complains about discounting.

Brand consistency is not, by itself, a defense to resale price maintenance.

Franchisors should ensure that their franchise agreements, operations manuals, promotional programs and communications clearly distinguish between recommended pricing and mandatory obligations.

Practical Steps for Businesses

Businesses that supply products or services through retailers, dealers, distributors or franchisees should review:

1. Supply, distribution and franchise agreements.
2. Online sales and advertising policies.
3. RRP and promotional pricing communications.
4. Rebate, discount and incentive arrangements.
5. Account suspension and termination procedures.
6. Communications sent by sales and account management staff.

Staff should also receive competition law training. A legally compliant agreement can be undermined by an email, telephone call or account management practice that pressures a retailer not to discount.

Recent ACCC action shows that resale price maintenance remains an active enforcement area. Businesses should obtain advice before implementing any arrangement that restricts the prices at which independent retailers or franchisees may advertise or sell goods or services.