Many companies involved in the direct selling industry in Australia conduct their business
by way of a buy/resell model. (This is similar to other forms of distributorships.) In some
countries, direct selling companies are able to specify a minimum price below which their
independent distributors cannot resell or advertise the goods or services. However, this
practice, which is known in Australia as “resale price maintenance”, is strictly prohibited in
Australia under the Competition and Consumer Act 2010 (the Act)
1
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What is “Resale Price Maintenance”?
Suppliers of goods and services in Australia are unable to specify a minimum price below
which goods or services are unable to be resold. Independent contractors or distributors
have the right to advertise and sell goods at any price they like.
Examples of supplier conduct which may amount to resale price maintenance include:
a statement to the effect in Policies and Procedures that products must not be sold by
distributors for amounts less than those amounts set by the supplier;
setting minimum prices below which independent contractors or distributors must not
resell the products;
offering inducements to independent contractors or distributors to not resell products at
discounted prices; and
taking action against independent contractors or distributors, for example, threatening
to cut off supply because they have discounted or advertised prices which are below
those set by the supplier.
Recent ACCC Action
In January 2012, the Australian Competition and Consumer Commission (the ACCC) (the
Australian regulator for consumer law matters) commenced legal proceedings against
Eternal Beauty Products Pty Ltd (Eternal) and its director, Ms Penny Rider in respect of
conduct allegedly in breach of this prohibition.
Eternal supplies beauty products and is the sole Australian distributor of an eye cream and
face cream (the Products). Representatives of Eternal were said to have induced
representatives of various retailers during telephone conversations and by email to not sell
the Products at prices less than the price specified by Eternal.
The proceedings were concluded recently when the parties agreed by consent to Federal
Court orders that:
Eternal and Ms Rider had engaged in resale price maintenance in breach of section 48
of the Competition and Consumer Act;
Eternal pay a penalty of $80,000 to the Commonwealth in respect of the contraventions
while Ms Rider pay a penalty of $10,000.
Eternal establishes a Compliance and Education/Training Program, to be maintained
and administered for three years.
Ms Rider attend the training which must be provided annually for three years and which
she must verify has taken place each year (by providing an affidavit to the ACCC).
Eternal and Ms Rider pay the ACCC the sum of $10,000 as a contribution towards the
ACCC’s costs.
Take Home Points
Companies involved in the direct selling industry should ensure that they do not stipulate to
their independent contractors that goods or services must not be sold or provided below
particular prices. Recommended or suggested prices should be just that and the
independent distributor should have the right to determine the price at which they re-sell
goods or services. Direct selling companies should also be mindful that their Policies and
Procedures do not contain clauses which contravene, expressly or implicitly, this
prohibition. Further, the selling of goods below a recommended or suggested price should
not be grounds for the termination or suspension of an independent contractor’s agreement
with the company.
Footnotes
1
Section 48 of the Competition and Consumer Act 2010 (Cth).
The content of this article is intended to provide a general guide
to the subject matter. Specialist advice should be sought about your
specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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