Chemical Formulators Pty Ltd (Chemform), a manufacturer and supplier of commercial cleaning products, has acknowledged that it engaged in resale price maintenance in court-enforceable undertakings provided to the Australian Competition and Consumer Commission.
Chemform supplies commercial cleaning products to companies which supply hospitals, hotels, food processors, mining companies and aged care facilities in Australia.
“Businesses must be free to set their own prices, including below suppliers' recommended prices if they so choose,” ACCC Chairman Rod Sims said.
Resale price maintenance, which is prohibited by section 48 of the Competition and Consumer Act 2010, occurs when suppliers prevent, or attempt to prevent, independent retailers or distributors from advertising or selling products below a specified price.
“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.”
In response to an ACCC investigation, Chemform admitted that it was likely to have engaged in Resale Price Maintenance by:
- Entering into agreements with distributors of Chemform products, a term of which prevented distributors from discounting the price of Chemform products below the price specified by Chemform;
- Providing 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;
- Inducing or attempting to induce a distributor not to sell Chemform products below the price specified by Chemform; and
- Withholding supply from a distributor who was likely to sell Chemform products at a price less than the price specified by Chemform.
Chemform has provided the ACCC with a court-enforceable undertaking agreeing that it will:
- Not engage in Resale Price Maintenance conduct in the future;
- Revise its distributor agreement to ensure that it does not contain a clause preventing distributors from discounting the price of Chemform products below the price specified by Chemform;
- Send a copy of the revised distributor agreement to distributors and advise them that they are free to set the minimum price at which they wish to sell Chemform products; and
- Implement a Competition and Consumer Law Compliance Program.
“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,” Mr Sims said.