The internet and resale price maintenance

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When I was at the ACCC, one recurring offence related to resale price maintenance (RPM). This is illegal under s.48 of the Competition and Consumer Act.

RPM occurs when a wholesaler tries to force a retailer to set a particular retail price when the retailer on-sells the wholesaler’s products. Usually, if the retailer sets a lower price, the wholesaler refuses to continue to supply the retailer.

As I have noted before, the RPM laws are controversial from an economic perspective, but RPM is clearly illegal. However, wholesalers seem to ignore this and try to force on-line retailers to charge a higher price, often to protect the bricks-and-mortar retailers. The latest offender caught by the ACCC is AquaDepot Imports.

The internet is creating a retail revolution. It has effected some sectors (e.g. books and music) before others. But there will be few retail sectors that are not effected over time. Many bricks-and-mortar retailers will have to change their business models to survive – and some will fail and exit. I don’t know what the successful models will look like (e.g. will charging customers who try shoes but don’t buy work for a bricks-and-mortar store?). But this is the progress and it will benefit the customer.

However, as with any change, some businesses will fight the inevitable and try and weaken the competitive impacts of change – even if this means that they break the law. So I suspect that the ACCC will come across a a lot more RPM cases over the next few years.

3 Responses to "The internet and resale price maintenance"
  1. In the Fosters case, Coles and Woolworths should have just refused to blink – no Fosters sales through those outlets would end up hurting Fosters more than it would the retailers.

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