Retailers Who Intimidate Online Suppliers Set To Be Investigated By ACCC

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The ACCC has been asked to investigate mass retailers who have been accused of “intimidating” vendors and retailers to not support online retailers.In an explosive submission to the Productivity Commission, giant online web site eBay, which attracts an average of 5.6M unique visitors a month, has accused mass retailers of engaging in anti-competitive behaviour to limit the availability of products at online sites.

Also last week Productivity Commissioner Philip Weickhardt described retailers’ calls to impose a GST and import duty on purchases from foreign internet retailers as “protectionist” and based on faulty logic.

The comments are a blow to Gerry Harvey the CEO of Harvey Norman who along with the National Retail Association has been calling on the Federal Government to impose a 10% GST on goods under $1,000 purchased from overseas web sites.

Weickhardt said that the introduction of a tax would do little to make Australian retailers more competitive with cheaper offshore competitors.

The biggest blow for IT and consumer electronics was struck when eBay called on the Australian Competition & Consumer Commission to investigate how retailers “leaned” on suppliers to prevent the sale of goods to online retailers. 

The Productivity Commission has referred the matter to the ACCC for investigation.

eBay managing director (Australia and New Zealand) Deborah Sharkey said that “eBay is pleased that the Commission has referred concerns relating to restrictive distribution practices to the ACCC and considers that there is merit in more in-depth study by the ACCC into the effect on consumer choice and online retailing of restrictive distribution practices by some traditional retailers, manufacturers and suppliers”.

Several consumer electronics distributors and vendors are set to be questioned.

Investigations by SmartHouse and ChannelNews have revealed that several distributors have been told if they supply goods to online sites they will be dropped by mass retailers.

Some distributors have deliberately priced goods sold to online retailers up to 25% above the price they sell the same goods to a mass retailer in an effort to “appease” the demands of high street retailers.

One Sydney based distributor who sells high end head phones has in the past forced online retailers to pay cash up front for goods and place minimum quantity orders. 

A Melbourne based distributor of Hi Fi gear who approached an online web site to sell his iPod attach sound gear because his overseas vendor was selling online, suddenly pulled the products from sale online in Australia claiming that he was under pressure from retailers to stop the online operation from having access to his stock.

Responding to draft recommendations released recently by the Productivity Commission, eBay managing director Deborah Sharkey told the Commission that certain unnamed Australian retailers had engaged in anti-competitive behaviour to limit the availability of products on online sites.

 

“EBay is also aware of situations where local distributors and sellers have had pressure applied by prominent Australian retailers to cease selling products on online sites such as eBay.com.au, in competition to the retailer’s own channels,” Sharkey said in her submission.

“The highly concentrated Australian retail environment means such behaviour can create considerable pressure on distributors and sellers, who have limited other retail distribution channels locally.” 

ChannelNews has been told that at least 3 major digital camera brands are set to start selling goods online following a decision by Canon to sell direct.

We have also been told that the move by vendors to establish their own online stores is being done on the strict provision set down by mass market retailers that they do not allow goods to be sold online below the recommended retail price.
 Instead brands like Canon are offering consumers additional memory and bags to shift stock.

 In an effort to protect retailers from what Gerry Harvey–the CEO of Harvey Norman–calls a “major tax disadvantage to mass retailers,” Gary Black, executive director of the National Retail Association, told the Productivity Commission that the price differential caused by the GST exemption was between 11 per cent and 23 per cent and, unless it was scrapped up to 80,000 retail jobs could be lost over the next three years, removing $3 billion in wages from the domestic economy.

The Australian newspaper said that Weickhardt questioned the validity of the association’s figures.

“Multiple people have told us that they would be happy to pay a premium to a local supplier” in return for added benefits such as after-sales service and domestic warranties, he said.

“I find this whole simplistic analysis doesn’t add up,” he said, adding that the NRA’s theoretical model was “so full of holes it wouldn’t be worth the paper it was written on”.

Mr Weickhardt also described former Coles Myer internet retailing boss John Wood, who appeared as a consultant to the NRA, as “naive” and attempting to engage in “central planning 101” by pushing for Australia Post to collect GST and import duty on all parcels shipped into Australia.

Mr Weickhardt told the hearing yesterday that while removing the GST exemption would have the benefit of creating a “level playing field” for local retailers competing with foreign websites; it was far from the most pressing issue confronting the retail sector.

“It is by no means the biggest issue and there was significant evidence from many submissions that it was a smaller issue,” he said.

Do you have evidence of vendors and suppliers being intimidated? If so drop us an email at dwr@4squaremedia.com

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