Meredith Dairy proposal to set minimum prices raises competition concerns

“We consider that the proposed conduct would not result in a net public benefit​,” ACCC commissioner Roger Featherston said.

“The proposed minimum retail prices would mean retailers who are currently offering cheeses at lower prices to consumers could no longer do so.​

“It would also reduce the competitive pressure on other retailers to offer lower prices, including major supermarket chains.”​

The ACCC said the evidence provided by Meredith Dairy suggests smaller retailers are advertising special deals to compete with larger retailers and the major supermarket chains.

Meredith Dairy also claimed to the ACCC that discounting by some retailers is leading to demands from other retailers for lower wholesale prices so they can match the discounts.

However, the ACCC said Meredith Dairy has not presented evidence that the ongoing price competition at the retail level will jeopardise ongoing investment in its business.

“Having considered Meredith Dairy’s reasons, we consider that the reduction in retail competition would not be outweighed by any public benefit,”​ Featherston said.

“We believe retailers should be allowed to charge customers prices as they see fit in a competitive market and not be forced to set prices according to Meredith Dairy’s wishes.”​

Meredith Dairy and other parties can now comment on the draft notice before the ACCC makes a final decision.

Background and regulations

It is illegal for a supplier to attempt to set a minimum price for their products or services. This practice is known as resale price maintenance (RPM). However, a supplier may recommend that resellers charge an appropriate price for particular goods or services.

A supplier may also withhold the supply of goods when a retailer has sold the goods at a price below cost for the purpose of attracting customers who are likely to buy other goods (loss-leader selling), even where such conduct is not unlawful. However, Meredith Dairy does not consider that this is a practical option for it because it considers that it would be too difficult for it to establish that loss-leader selling is occurring.

Instead Meredith Dairy proposes to set a minimum price for its products that would apply to all retailers, without it having to establish that loss-leader selling is occurring.

Businesses may obtain legal protection for RPM conduct by lodging a notification with the ACCC.

Once lodged, protection for the notified RPM conduct begins automatically 14 calendar days after the notification was lodged, unless the ACCC issues a draft notice objecting to the notification within those 14 days.

In this case the ACCC has issued a draft notice within 14 days. This means that Meredith Dairy cannot engage in the notified RPM conduct unless, following public consultation about the notification, the ACCC decides not to issue a final revocation notice.   

The ACCC may revoke an RPM notification where it is satisfied that the likely benefit to the public from the conduct will not outweigh the likely detriment to the public from the conduct.

Before issuing a revocation notice, the ACCC must issue a draft notice setting out its reasons for proposing to revoke the notification.