The Australian Competition and Consumer Commission (ACCC) has approved Tooltechnic Systems (Aust) Pty Ltd – the distributor of Festool in Australia – to set minimum retail prices on Festool power tools, stating improved services will outweigh “some customers facing a higher retail price for Festool products”.
The minimum pricing came into effect 01 April 2015 and runs until 31 December 2018. Known as “resale price maintenance”, it is the first authorisation of its kind under the 2010 Competition and Consumer Act.
The arrangement has seen Festool dealers required to agree to the minimum pricing, meaning retailers cannot sell Festool products below a certain price that is set by Tooltechnic Systems.
In a media release discussing the decision, the chairman of the ACCC, Rod Sims said some Festool retailers are “free riding” on the services of others.
“This creates a risk that retailers who do offer pre- and post-sales services will not achieve a sufficient return on the sales of their products to continue to provide these retail services,” Sims said.
“Given the highly differentiated nature of Festool products, the ACCC considers that resale price maintenance is likely to limit free riding by encouraging Festool retailers to offer better services to attract customers. This will allow some customers to make more informed decisions in purchasing trade quality power tools and to continue to have the choice of a premium trade quality power tool accompanied by a high level of post-sales services,” he added.
“On balance the likely public benefit resulting from the expected increase in retail services will outweigh the clear, but limited, detriment resulting from some customers facing a higher retail price.”
Tooltechnic is required to provide the ACCC with retail prices of Festool products before and after the authorisation so they can monitor the impact of the arrangement and consider these impacts in any future application for re-authorisation.
The approval of resale price maintenance by the ACCC is highly unusual and provides protection from anti-competitive behaviour laws that may otherwise apply.
The ACCC has stated it cannot foresee to what extend the arrangement will encourage improved service delivery from Festool dealers, however states the key issues are the apparent incentives for service delivery.
“With only a very small share of the market, Tooltechnic needs to judge whether higher service levels will outweigh lower prices in attracting sales.”
Tooltechnic Australia were contacted for comment however responded that they were unable to comment at this time due to “being in the early stages implementation”. Two dealers contacted for comment did not respond.
The ACCC release can be found here.
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