A supplier of aquarium products has been slammed by the Australian Competition and Consumer Commission for pressuring an online retailer to drop prices, in the latest example of what eCommerce operators are saying is one of the biggest issues facing their industry.
Australian online retailers have regularly complained of pressure from suppliers which insist that products must be sold at a certain price, although stores complain this is sending money overseas. Auction giant eBay released data last year which found many Australian stores are experiencing problems.
The ACCC said in a statement yesterday that AquaDepot Imports will now need to tell retailers they are free to set their own prices, following an investigation. The company’s two operators Graeme Faulkner and Philip Wu have admitted to engaging in resale price maintenance.
“Resale price maintenance is an attempt by a supplier to set a minimum price below which its retailers cannot sell, advertise, display or offer goods for sale.”
This type of practice is accepted in the United States but is not allowed in Australia. However, the ACCC found the company had sent emails stating that if prices were offered 5-10% below RRP they would no longer be supplied.
ACCC chairman Rod Sims said in a statement that the regulator will continue to crack down on practices that restrict retailers from setting their own prices.
“The law against resale price maintenance applies to online stores the same as it does to bricks and mortar shops. It is illegal for a company to try to prevent any retailer from providing a better price to consumers.”
This issue isn’t just occurring in Australia. Earlier this week online retailers in New Zealand claimed foul play against Adidas, accusing it of setting the price of new All Blacks’ jerseys too high in New Zealand and trying to block international websites that were selling the jersey cheaper from shipping to New Zealand.
In response retailers lowered prices to well below RRP, with some actually taking losses to prove the point.
Prime Minister John Key even made comments about the situation, saying he hoped New Zealand consumers weren’t being taken advantage of.
The recent controversies highlight a problem that has been plaguing the online retailing industry for some time. Businesses complain that suppliers don’t understand online retail and put too much pressure on them to raise prices.
A survey from earlier this year conducted by eBay found that 35% of 3,000 respondents had trouble with suppliers preventing them from selling goods online, and one quarter were required to sell goods at a particular price.
Hal Pritchard, chief executive of kitchenware retailer Everten Online, says he has experienced this same problem and says it is “the biggest issue facing our industry”.
“There are certainly suppliers that don’t supply to me because they won’t be able to control what I’m providing. I would say about 20-30% of wholesalers are scared of online retail and they don’t know what to do with it or how it fits into the marketplace.”
“The other 70% are doing it, but they’re scared about what happens. So we just have to build relationships with them and reassure them we’re not here to butcher their prices.”
While Pritchard says no suppliers have approached him and forced the company to lower prices, he does say “if they were allowed to do it, they certainly would”.
“In the long-term I think it’s people who develop good relationships with these suppliers that will be able to create sustainable models. But everyone is just so nervous, because there is no real answer to what’s happening.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
