Online retail v traditional retail – the consumer wins?

The Australian Competition and Consumer Commission (ACCC) has recently announced that it is investigating some online retail arrangements and determining whether they substantially lessen competition, show evidence of parties controlling pricing or have an anti-competitive effect.

It has been reported that a number of local fashion importers have made agreements with overseas manufacturers to ensure that overseas manufacturers do not supply orders to online purchasers in Australia or that they continue to sell to Australian consumers via online channels but with limited supply and/or increased website prices. The supposed aim of these agreements is to force Australian consumers to buy from local retailers rather than online. However, the result may be that Australian consumers pay substantially more for certain fashion brands.

Some distributors see the agreements as necessary to address the cheaper prices available to Australian consumers buying online from overseas websites. They lay the blame at the government’s $1,000 GST-free threshold for imported goods and claim something needs to be done to avoid more retailers closing down.

There are some concerns as to whether these agreements contravene the provisions of the Competition and Consumer Act 2010 (the Act). Though clearly those concerns were not shared by the individuals that were willing to speak openly to the media about their arrangements!

If it is found that these arrangements breach the Act, the parties involved may be liable for significant penalties.

Arrangements which are likely to be of particular concern to the ACCC may involve the following:

  • minimum resale price maintenance – agreements for the supply of goods or services which limit the retailer’s ability to sell products below a specified price are prohibited other than in limited circumstances;
  • price fixing – arrangements which contain provisions which fix, control or maintain the price for a particular product may breach the Act; and
  • exclusive dealing – arrangements which have the purpose or effect of substantially lessening competition are prohibited. Such arrangements may occur where a distributor supplies goods but restricts the retailer’s right to re-supply the goods (such as preventing supply to online websites) if the restriction is found to have an anti-competitive purpose or effect.

The provisions of the Act extend to conduct outside Australia in relation to the supply of good or services to persons (such as retailers) within Australia.

As the online retail space continues to force traditional retailers to adapt and change, the news of the ACCC’s investigation is a timely reminder that businesses should remain vigilant to ensure that their practices don’t lead them into further troubles.

If you have any queries in relation to certain business arrangements, competition laws or the interfacing of online and traditional business models, please contact Certus Legal Group to discuss the matter further.