Chemform, a manufacturer and supplier of commercial cleaning products, has admitted it engaged in resale price maintenance by attempting to prevent retailers and distributors from selling its products below a specified price.
Chemform supplies commercial cleaning products to businesses which supply hospitals, hotels, food processors, mining companies and aged care facilities in Australia and was investigated by the Australian Competition and Consumer Commission.
Chemform admitted it entered into agreements with distributors of Chemform products which included a term that prevented them from discounting the price of Chemform products below the price specified by Chemform.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
The manufacturer also provided distributors with price lists containing ‘reseller’ prices for Chemform products, which when read in conjunction with a term of the agreements with distributors was a statement of a price that was likely to be understood by distributors as the price below which Chemform products were not to be sold.
Chemform admitted to inducing or attempting to induce a distributor not to sell Chemform products below the price specified by Chemform. It also admitted it withheld supply from a distributor who was likely to sell Chemform products at a price less than the price specified.
“Businesses must be free to set their own prices, including below suppliers’ recommended prices if they so choose,” ACCC chairman Rod Sims said in a statement following the investigation.
“Resale Price Maintenance prevents traders from competing for consumers unfettered by minimum price restraints imposed upon them by suppliers of goods.
“Businesses that are free to compete on price deliver lower prices for consumers.”
Chemform was not fined by the ACCC for its behaviour but instead has provided the consumer watchdog with a court-enforceable undertaking agreeing that it will not engage in resale price maintenance in the future.
The manufacturer has also agreed to revise its distributor agreement to ensure that it does not contain a clause preventing distributors from discounting the price of Chemform products and to send a copy of the revised distributor agreement to its distributors and advise them that they are free to set the minimum price at which they wish to sell Chemform products.
“This is a reminder that companies must ensure that they are aware of their obligations under the Competition and Consumer Act and serves as a warning that the ACCC pursues allegations of resale price maintenance in any industry to ensure that there is a level playing field in the market,” Sims said.
SmartCompany contacted Chemform for comment but did not receive a response before publication.