Retailers concerned over pressure from suppliers as ACCC slams supplier for threatening eCommerce business

Australian online retailers have regularly complained of pressure from suppliers which insist that products must be sold at a certain price, although stores complain this is sending money overseas. Auction giant eBay released data last year which found many Australian stores are experiencing problems.

The ACCC said in a statement yesterday that AquaDepot Imports will now need to tell retailers they are free to set their own prices, following an investigation. The company's two operators Graeme Faulkner and Philip Wu have admitted to engaging in resale price maintenance.

"Resale price maintenance is an attempt by a supplier to set a minimum price below which its retailers cannot sell, advertise, display or offer goods for sale."

This type of practice is accepted in the United States but is not allowed in Australia. However, the ACCC found the company had sent emails stating that if prices were offered 5-10% below RRP they would no longer be supplied.

ACCC chairman Rod Sims said in a statement that the regulator will continue to crack down on practices that restrict retailers from setting their own prices.

"The law against resale price maintenance applies to online stores the same as it does to bricks and mortar shops. It is illegal for a company to try to prevent any retailer from providing a better price to consumers."

This issue isn't just occurring in Australia. Earlier this week online retailers in New Zealand claimed foul play against Adidas, accusing it of setting the price of new All Blacks' jerseys too high in New Zealand and trying to block international websites that were selling the jersey cheaper from shipping to New Zealand.

In response retailers lowered prices to well below RRP, with some actually taking losses to prove the point.

Prime Minister John Key even made comments about the situation, saying he hoped New Zealand consumers weren't being taken advantage of.

The recent controversies highlight a problem that has been plaguing the online retailing industry for some time. Businesses complain that suppliers don't understand online retail and put too much pressure on them to raise prices.

A survey from earlier this year conducted by eBay found that 35% of 3,000 respondents had trouble with suppliers preventing them from selling goods online, and one quarter were required to sell goods at a particular price.

Hal Pritchard, chief executive of kitchenware retailer Everten Online, says he has experienced this same problem and says it is "the biggest issue facing our industry".

"There are certainly suppliers that don't supply to me because they won't be able to control what I'm providing. I would say about 20-30% of wholesalers are scared of online retail and they don't know what to do with it or how it fits into the marketplace."

"The other 70% are doing it, but they're scared about what happens. So we just have to build relationships with them and reassure them we're not here to butcher their prices."

While Pritchard says no suppliers have approached him and forced the company to lower prices, he does say "if they were allowed to do it, they certainly would".

"In the long-term I think it's people who develop good relationships with these suppliers that will be able to create sustainable models. But everyone is just so nervous, because there is no real answer to what's happening."

• ACCC reveals it has examined more than 100 businesses on claims of carbon tax hikes
• Court slaps pyramid scheme participants with $200,000 in penalties
• ACCC to investigate clothing importers stitching up online deals
• ACCC warns of carbon tax price gouging: Midday roundup
• Fashion importers shut down cheap online sales but run price fixing risk

...
written by James Omond, August 10, 2011

Regarding the ACCC comment - "The law against resale price maintenance applies to online stores the same as it does to bricks and mortar shops. It is illegal for a company to try to prevent any retailer from providing a better price to consumers."

It never ceases to amaze me how many businesses are either unaware of the "anti-competitive" provisions generally, or somehow think they don't apply to the online environment.

I am sure many more online retailers will be able to force suppliers to back down by callin on this part of the law.

...
written by Michael Terceiro, August 11, 2011

Just one point of clarification about the law on RPM in the US. RPM is not "accepted" or legal in the US. Rather in 2007, the US Supreme Court in the Leegin case overruled the previous law on RPM which had decided that RPM was per se illegal - ie assumed to be anti-competitive and therefore illegal. Now, as a result of Leegin, when courts in the US are faced with a RPM case they apply the rule of reason test - ie balance up the pro-competitive benefits of the RPM against its anticompetitive effects. I think most Australian lawyers who specialize in the competition law area would also agree that RPM in Australia should be subject to a similar rule of reason test - ie only make RPM illegal if it is likely to result in a substantial lessening of competition in a market.

...
written by photoman001, August 15, 2011

As a wholesaler we were supplying 'shops' long before ONLINE ONLY stores popped up. Now I have outlined in other blogs that Online Only businesses have very few overheads so of course they can undercut shop retailers. So why would I jeapardise 10yrs work building a business supplying to over 400 shops to have a couple Online stores operate country wide and under sell all of them? Wait until the USA trend of 'drop shipping' takes off here where the online retailer doesn't need ANY storage and see what happens to the market. I can certainly understand why suppliers want a minimum price and if the ACCC had any brains they would see it too otherwise ALL retail shops will be wiped out. I might not be able to set a price but I CAN choose who I sell too here.
What does the public think will happen for their short term greed? When thousands of shops shut, people unemployed, going after YOUR job and willing to work cheaper to get it. Double the number of people out of work, taxes going up to support them etc etc. Do you know that the Govt. pays out around $400 million EVERYDAY in benefits and the trend is only going one way? A lot of those taxes come from the small businesses that this 'free enterprise' is closing down and the people that work for them. Why do people think the Govt. purse is a never ending supply of money. Look what is happening overseas in countries where this has been going on for years. The USA, Greece, Spain, Italy, Ireland. Are these REALLY economies that we want to copy? Wake up before it's too late.