Monday, February 23, 2009

The ACCC responds !

To my mock-complaint made last week, about electronics retailers who offer "best price guarantees" and who sell goods "below cost price" to consumers.

Of course, I am personally satisfied, not outraged, that businesses make every effort to sell goods and services to customers. They should have every right to offer and set whatever prices they please.

But the sad reality is that Trade Practices Act, and all of its devilish detail exists, and the ACCC has been known to successfully prosecute businesses for charging prices too high, too low, changing prices quickly or simply for being a dominant market player.

The ACCC representative suggested that my accusation that these large electronic retailers were engaged in some kind of predatory pricing under Section 45 of the TPA would fail on two counts:

1/ You need to prove the seller is in an "extremely dominant market position". Harvey Norman and Clive Peeters, although both are large, are considered to operate in a highly competitive market where lots of people sell competing electronics.

2/ You need to prove that the seller is "keeping their prices below cost for a prolonged period of time with a specific intention of targeting their competition".

I explained how the legislation is quite vague and ambiguous, that is why I thought that it could be applied to just about any succesful business in Australia. The ACCC representative replied that the legislation in Australia is quite short, and the rule of thumb is to interpret case law to look at similar situations.

I questioned how the ACCC establishes the "intention of targeting a business" part - was it by guessing ? They responded that there are cases where there is evidence - giving the example of a large supermarket that continually and repeatedly undercutting a small grocery store in the same shopping centre, whilst making inquiries about its suppliers and costs.

( This is what I call normal competition - and the consumer benefits from this )

What isn't mentioned is that if, by the same token, the small grocery store monitors the supermarket prices, and responds by undercutting every price and outdoing them on every special, the legislation cannot or would not likely be used against the small player.

The way I see it, basically is that a judge, on his whim, *can* choose to punish a business under the TPA for engaging in regular trade. And the business is in extreme trouble of it is the most succesful player in its industry.