A supplier who enters into an agreement with a distributor should ensure that the agreement does not specify a minimum resale price of the relevant goods and/or services. Including such a provision may mean that the agreements are in breach of the resale price maintenance (“RPM”) provisions contained in the Trade Practices Act 1974 (Cth) (“TPA”).
International Beauty Supplier (“IBS”), a wholesaler of beauty products, recently offered undertakings to the Australian Competition and Consumer Commission (“ACCC”), in response to the ACCC’s concerns that IBS contravened the RPM provisions in the TPA.
Section 48 and Part VIII of the TPA prohibit a supplier of goods and/or services from, among other things, entering into an agreement with a distributor which restricts the distributor from on-selling those goods and/or services at a price below that which the supplier mandates. Recommended retail prices are perfectly legitimate, as long as they are ’recommended’ and not prescribed.
In February 2008, IBS entered into written agreements with 28 distributors throughout Australia. The agreements contained a clause that compelled the distributors to sell the products at a price published by IBS. IBS would then provide the distributors with price lists, which the distributors understood to be the minimum prices at which they could on-sell the products.
IBS has admitted that its conduct was likely to contravene the TPA. Accordingly, IBS offered a court-enforceable undertaking to the ACCC and confirmed that it will write to distributors informing them that they can on-sell the goods supplied by IBS at a price nominated by the distributors.
