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Reader question: Are agency agreements actually price-fixing?

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Reader question: Are agency agreements actually price-fixing?

ACCC

A My Business reader has asked whether the use of agency agreements to mandate prices, such as those employed by Apple, amounts to price-fixing under Australian competition laws. Here is the official response.

Commenting on an article outlining the ACCC’s compliance priorities for 2019, a My Business reader posed the question:

“What about agency agreements? Eg: Apple iPhones. All retailers will have the same price and are unable to discount. OK by the ACCC as Apple apparently has an agency agreement in place which allows this. Under this arrangement, the price is fixed and does not allow any competition. Is this not price-fixing?”

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Agency agreements ‘generally exempt’: ACCC

Responding to the question, a spokesperson for the ACCC told My Business that while it could not comment on a specific business, “in general, a supplier must not stop a retailer from selling its products below a certain price or they may contravene laws preventing resale price maintenance (RPM), which is prohibited by the Competition and Consumer Act”.

“However, there is nothing wrong with a supplier providing retailers a recommended resale price (RRP) list, so long as it is only recommended and no pressure is put on the retailer to comply with the RRP,” the spokesperson said.

Agency agreements are generally exempt from prohibitions on “resale price maintenance” (RPM), the spokesperson confirmed.

“The RPM prohibition does not necessarily apply to agency agreements. In general, where a supplier appoints an agent to sell its products to retail customers, the agent sells on behalf of the supplier, and does not take legal title in the products for resale. In that case, legally, the supplier is making the sale, so RPM cannot apply.”

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The spokesperson concluded: “Whether a particular sales arrangement is legally characterised as an agency agreement or not will depend on the nature of that agreement and the circumstances of the case.

“In some circumstances, a business can obtain legal protection to engage in RPM if the ACCC is satisfied that the likely public benefits outweigh the likely public detriments. More information on when and how a business could receive such a protection can be found on the ACCC’s guidelines.

More information on the rules around resale price maintenance can also be found on the ACCC’s website.

Apple did not respond to a request for comment.

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Reader question: Are agency agreements actually price-fixing?
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