Australian businesses can set their own prices based on their business needs. However, they must consider some of the restrictions that are placed on price setting. Pricing regulations ensure fair trading in the market. Businesses must comply with many standards to ensure that their price setting process is just. A supplier will recommend a price called a Recommended Retail Price (RRP) for you to incorporate. However, you are not obligated to comply with this price because it is just a recommendation.
What to know about a Recommended Retail Price (RRP)
A RRP is just a recommendation. It is illegal for a supplier to try and enforce a certain or minimum price. This means it is illegal for suppliers to cut off their supplies to you if demands are not met.
Regulations:
However, there are regulations that a you must comply with when price setting.
Comparative Pricing:
Comparative pricing is used when you are comparing the before and after prices of a product. For example, you may see advertisements that say:
“Recommended Retail Price: $450, Our Price: $300”
This technique is allowed as long as it is truthful. Falsely advertising prices may lead to misleading and deceptive conduct. This is a breach of the Competition and Consumer Act 2010. Therefore, it is vital that you avoid any pricing errors when you are advertising.
Predatory Pricing:
Predatory pricing encourages companies with larger market shares to lower their prices. It is not illegal to sell products at prices below the Recommended Retail Price. However, it is illegal if the goal is to eliminate or damage the sales of smaller businesses. Predatory pricing aims to do this and it is illegal because it promotes unfair trading. Moreover, it takes away competitive options from consumers to choose from.
Price Fixing:
Price fixing occurs when two or more competitors agree on setting prices. This is illegal in Australia because it is an anti-competitive behaviour. It does not have to be an oral agreement, even a verbal agreement can breach this regulation. This should not be confused with parallel pricing which is allowed in Australia. This is a legitimate process of setting prices according to the prices of your competitors, without any prior discussions.
Multiple Pricing:
Multiple pricing occurs if you have accidentally set two prices for one product. In this case, you must sell the product at a lower price. Otherwise, you must remove the product for sale until the price can be corrected.
Unit Pricing Codes:
Unit pricing codes is when the price per unit of a product is provided. If you own a grocery store, you must provide the total price and the price per unit of a product. This allows consumers to compare the prices of different products and encourages competitive options.
Different Pricing for Different Products:
Sometimes the price of a product will be different when cash is paid. and different when using other payment methods. In this case, you must clearly outline these terms to the customer.
Final Thoughts on A Recommended Retail Price
A Recommended Retail Price is just a recommendation. Businesses can set their own prices. However, there are several regulations which they must comply with. Contact a competition lawyer to find out more about these regulations.
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