Refusal to supply can be the bane of many SMEs. Unfortunately, for the most part, suppliers are free to choose who they will supply. Often sitting down and talking with the supplier can help to address any concerns or reasons they might have for not supplying you. Keep in mind though, that they don’t have to give you any reason if they choose not to.
If starting with another brand and building up your business so that you meet the criteria for stocking that leading brand is not the answer for you, we need to consider if the refusal to supply is illegal. There are four situations where refusal to supply may be illegal:
1. Where the supplier has an arrangement with a competitor not to supply you or businesses like yours or in your area. These are anti-competitive agreements. If they are likely to substantially lessen competition or result in a primary boycott, the supplier and its competitors are likely to be exposed to penalties if pursued by the ACCC.
2. Where a supplier refuses to supply unless you agree to not discount or sell below a certain price. This is known as Resale Price Maintenance and it is illegal. There is one exception – a supplier may insist that you don’t use their products as a loss leader.
3. Refusing to supply unless you enter into a supply contract with a named third party. This is known as “third line forcing” and is also illegal. This is different to a supplier insisting that if you want Product A supplied you must also take their Products B and C (ie. product bundling).
4. And the big one – a firm that has a substantial degree of power in a market cannot take advantage of that power for the purpose of damaging another business or preventing or deterring your business from entering or competing in the market.
If you find yourself on the receiving end of any of this behaviour, the ACCC might be able to help. It is very important to seek trade practices legal advice first lest there be unintended adverse consequences for you.
Piquet Kruzas is a lawyer and experienced management trainer.
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