Resale price maintenance is one of the more commonly misunderstood competition prohibitions, partly because the practice it prohibits feels like ordinary commercial control to the supplier doing it.
The prohibition
Under the Commerce Act, a supplier must not require or pressure a reseller to sell at or above a specified price. That includes:
- Making supply conditional on not discounting below a set price.
- Withholding or threatening to withhold supply because a reseller discounted.
- Applying pressure — commercial or otherwise — to stop a reseller discounting.
- Inducing or attempting to induce a reseller not to discount.
The prohibition applies regardless of market share. A small supplier can breach it as easily as a large one.
What is permitted
You can recommend a price, provided it is genuinely a recommendation. The safe formulation is a recommended retail price clearly identified as such, which the reseller is free to ignore without consequence.
You can set your own wholesale price. You can decline to supply for genuine commercial reasons unrelated to a reseller’s pricing. You can operate an agency arrangement where you retain ownership and set the price yourself — though whether an arrangement is genuinely agency depends on substance, not labelling.
Where businesses cross the line without meaning to
The pattern is rarely a written policy. It is usually a conversation:
- A phone call to a retailer who has advertised below RRP, expressing disappointment.
- A hint that supply might be reviewed if discounting continues.
- Responding to a complaint from another retailer by contacting the discounter.
- A rebate or support programme that is quietly withdrawn from discounters.
- Minimum advertised price policies enforced through commercial pressure.
That last one is worth attention. Minimum advertised price arrangements sit in a more nuanced position than outright price fixing, and enforcing them through withholding supply or support brings them into the prohibited territory.
The evidence in these cases is usually email. A supplier employee writing to a retailer about their pricing creates the record.
Why it is enforced
The competition rationale is that resellers should be free to compete on price, and that consumers benefit when they do. Suppliers frequently see it differently — brand positioning, protecting resellers who provide service, avoiding a race to the bottom.
Those may be legitimate commercial concerns and they are not a defence. The Commerce Commission has taken action in the grocery sector including proceedings alleging a restriction on independently owned stores discounting selected products, which indicates the level of attention.
The related enforcement priority
Unconscionable conduct is a current Commerce Commission enforcement priority. It covers conduct in trade that is unconscionable, assessed against factors including relative bargaining power, whether terms were reasonably necessary to protect legitimate interests, whether the affected party could understand the documents, and use of undue influence or unfair tactics.
Dealings between much larger and much smaller businesses are where this arises. A supplier applying heavy commercial pressure to a small reseller may face exposure on both fronts.
Practical steps for suppliers
- Train the people who talk to resellers. Sales staff create the evidence, usually without knowing the rule exists.
- Use “recommended retail price” and mean it. Never suggest consequences for departing from it.
- Do not act on competitor complaints about a discounter. Passing that pressure on is the classic fact pattern.
- Keep supply decisions documented and commercially grounded, so a decline can be explained by something other than pricing.
- Review rebate and support programmes for anything that operates as a discounting penalty.
For retailers
If a supplier pressures you not to discount, that is prohibited conduct and you can complain to the Commerce Commission. Keep the correspondence.
Note separately that your own pricing must comply with the Fair Trading Act — was-now claims where the was price was never genuinely charged for a reasonable period are a different and equally enforced problem.
The Commerce Commission publishes plain-language guidance on resale price maintenance, unconscionable conduct and its enforcement priorities free at comcom.govt.nz.
General information only, not legal advice.
