What is a Minimum Resale Price?

Do You Need an ABN to Sell Online? (2022 Update)

Before a product can get into the hands of a consumer, there are many background steps that first take place. A supplier or manufacturer will design and produce goods which are then distributed (often by a third party known as a distributor) amongst resellers. Finally, retailers sell goods to consumers for a price that they set. It may be the case that a supplier wants to set a minimum resale price, whether that be to preserve the brand integrity and exclusiveness or perhaps reduce competitiveness between retailers, creating a balanced playing field. In this article we examine whether it is legal to set a minimum resale price.

Retail price maintenance

The Competition and Consumer Act 2010 (Cth) prohibits the practice of resale price maintenance (RPM). At section 96, the legislation identifies what conduct will constitute RPM. It details that a supplier cannot sanction a reseller if it does not want to set prices in accordance with what the supplier requests. Examples of sanctions include a threat to stop supplying products to the reseller or a cancellation of all business with the reseller.

Examples of retail price maintenance

The legislation is deliberately broad, and therefore a ‘specified price’ as set by the supplier can mean a fixed price, a request not to sell below a minimum price, a request not to discount goods, or a requirement that the reseller comply with the recommended retail price (RRP). If a supplier asks a reseller to engage in any of this conduct, the reseller does not need to comply, and cannot suffer from sanctions.

If a supplier were to set a minimum resale price, this would be an example of RPM. The legislation and the Australian Competition and Consumer Commission (ACCC) operate to encourage competition between retailers.

Loss leader selling

A supplier can sanction resellers that use loss leader selling tactics. Loss leader selling involves selling heavily discounted goods or deliberately selling below cost price to attract customers or promote business. However, where a supplier has previously agreed to supply goods for the explicit purpose of loss leader selling, then sanctions will not apply.

Get on demand legal advice for one low monthly fee.

Sign up to our Legal Advice Plan and access professional legal advice whenever you need it.

Get started

Recommended resale price

We have all heard the term ‘recommended resale price’ (RRP), but how does the legality of an RRP fair against competition and consumer legislation? A supplier has every right to recommend a retail price that resellers may like to use. This assists a business in determining the profit margin they can earn balanced against the cost price. An RRP can also assist in ascertaining competitor pricing. A supplier must not enforce an RRP because that will constitute retail price maintenance. It will usually be permissible for a supplier to also set a maximum retail price.

Wrapping it up

Minimum resale prices and retail price maintenance are prohibited under federal competition and consumer legislation. Therefore, a supplier cannot set prices amongst resellers. The Australian Competition and Consumer Commission has the power to investigate any breaches of this legislation. Suppliers found to be engaging in retail price maintenance may face penalties. If ever in doubt, you can always speak to a commercial lawyer.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

Most Popular Articles
You may also like
Recent Articles

Get the latest news

By clicking on 'Sign up to our newsletter' you are agreeing to the Lawpath Terms & Conditions

Share:

Register for our free live webinar today!

Navigating the Role of Company Directors

12:00pm AEST
Thursday 19th September 2024

By clicking on 'Register for webinar' you are agreeing to the Lawpath Terms & Conditions

You may also like

Need to transfer your company shares soon? Read this first.
Learn about the details of a joint venture, what you should be considering and the steps not to take.
What Is A Modern Slavery Policy? This article explores everything related to a Modern Slavery Policy; from key components to mistakes to avoid.

Thank you!

Your registration is confirmed. Keep an eye on your inbox for an email with details on how to watch the webinar.