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Suppliers can do little to stop etail discounts

Tim O’Callaghan, Partner at law firm Druces incorporating Arnold Fooks Chadwick.

There has been a great deal of anguish among bricks-and-mortar retailers over etailers’ discounting practices.

Traditional boutiques have accused etailers of reckless discounting. A number of my design clients have been at the sharp end of some choice words from shops, demanding they stop supplying certain well-known etailers who seem intent on riding a coach and horses through the industry standard margin.

What, if anything, can suppliers do to level the playing field between their traditional retailers and the etailers?

In a parallel universe calibrated to the desires of suppliers, they would be able to enforce a recommended retail price, and set out provisions (and even perhaps penalties) to prevent discounting.

Unfortunately, EU competition law provides little solace to the supplier wanting to set minimum prices. In fact, it makes any effort to do such a thing unlawful, the practice known as retail price maintenance.

To engage in retail price maintenance will render the entire supply agreement that contains such a clause as void
and unenforceable and, more alarming in recent years, the OFT may impose a fine; which, as the sellers of replica football kits discovered a few years ago, can be as much as £18.6m.

Call it the ‘free market economy’ but there is very little suppliers can do to assist their traditional retailers against merciless etailer discounts.

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