Resale price maintenance occurs when a supplier of goods enforces, or tries to enforce, a minimum price at which the reseller must on-sell those goods.
A reseller may be a distributor or a retailer. Resale price maintenance prevents resellers from setting their prices independently and can lead to increased prices for consumers. It is a form of anti-competitive conduct and is unlawful.
What is unlawful?
It is a breach of the law if a supplier of goods:
specifies a price
takes certain actions to enforce that specified price.
What is a specified price?
A specified price is where a supplier stipulates a price below which the goods may not be sold. In other words, it is a minimum price, as specified by the supplier.
The specified price does not need to be an exact figure. A supplier can specify a price by referring to a formula, a range of prices, a document containing prices, or a price list.
What is a recommended retail price?
A recommended retail price (RRP) is where a supplier recommends a price at which their goods should be sold.
It is fine for a supplier to recommend a price to its resellers but it cannot do anything to try to enforce that recommended price.
Morning Star Computer Limited was a wholesaler of computer parts and systems. It told its resellers not to advertise six products for sale below the recommended retail price. It threatened to increase wholesale prices to the resellers if they advertised the products below the recommended retail prices.
The Commerce Commission issued proceedings in the High Court and Morning Star pleaded guilty and was convicted and fined $50,000, plus ordered to pay the Commission’s legal costs.
A supplier can:
recommend a retail price for goods
set a maximum price for the on-sale of goods.
A supplier cannot:
enforce a recommended price for goods
set a minimum price for the on-sale of goods
pressure a purchaser to stop discounting goods
refuse to supply or punish a purchaser who sells goods below the recommended price
offer a purchaser an incentive or special deal if the purchaser agrees to set a minimum price for goods
offer a purchaser an incentive or special deal if the purchaser agrees to stop offering discounts for goods
withhold supply unless the goods are sold at a minimum price
withhold supply because the goods have been sold at less than a minimum price.
Authorisation of resale price maintenance
The Commission can authorise resale price maintenance if it is satisfied that the resale price maintenance will result, or be likely to result, in benefits to the public that will outweigh the harm.
If you wish to engage in conduct that you think may risk breaching the resale price maintenance provisions of the Commerce Act, you can apply to the Commission for an authorisation.