One price isn’t right: ACCC proposes to deny authorisation of minimum pricing for electrical goods
What do Bing Lee, David Jones, JB Hi-Fi, Radio Rentals and Winning Appliances all have in common? They’re all members of the National Associated Retail Traders of Australia (“NARTA”), a large independent electrical buying group.
In September 2012, NARTA applied for a 10 year authorisation for a provision of its Code of Conduct under which members would agree to abide by any minimum “advertising price” set by NARTA. In other words, for certain brands of electrical goods like dishwashers, fridges and washing machines, the price in your local DJ’s, JB Hi-Fi and Bing Lee catalogues wouldn’t be below the specified price.
NARTA’s justification for setting a minimum advertising price included that:
- that the advertised price of electrical goods was commonly “significantly divorced” from actual sale prices because a number of retailers offer customers the opportunity to negotiate a “better deal”;
- only a small proportion of items were covered and NARTA members did not have to stock those items; and
- NARTA members are currently disadvantaged compared to single-banner and corporate retail groups like Harvey Norman and the Good Guys, who can offer wholesale suppliers greater retail pricing consistency (as well as consistency in respect of marketing generally) making them more likely to be able to secure exclusive wholesale supply arrangements.
NARTA argued that the pricing arrangement would bring benefits for consumers, including that there would be wider brand choice (NARTA holds exclusive supply arrangements with BEKO, which you may have seen around if you’ve been out fridge shopping lately), and that this would stimulate greater retail competition.
The ACCC is not convinced. On 17 January 2013, the ACCC issued a draft determination to deny authorisation. Contrary to NARTA’s application, the ACCC thinks imposing a minimum advertising price is likely to reduce members’ incentives to compete strongly with one another and that the potential for public detriment is significant. The ACCC is not convinced that a minimum advertising price would improve the competitive position of NARTA against other buying groups.
One interesting observation made by the ACCC in its draft determination is the impact of online selling. Although it may be fairly commonplace for retailers to negotiate a better price in store, the ACCC does not consider this to be relevant to online retailing, where, because consumers can quickly compare advertising prices, retailers have an added incentive to offer their lowest price as their advertising price. As well as being a bargain for savvy online shoppers, the ACCC also observed that lower online prices can give consumers greater leverage when negotiating in store.
We will update you when the ACCC releases its final determination.