Market restriction - is it legal?

[character_parties_aus]

I have a general question for legal eagles out there not specifically eBay related.

I have found a line of items I wish to sell. The items are all official etc. Upon speaking with the manufacturer they asked several questions about my business. As soon as they found out I was predominantly online and largely sold party goods they said they could not supply me. I can understand people not wanting to supply to people who largely sell on ebay due to price gouging. The reason they dont want to supply me is that the manufacturer sells goods in another market direct to the party industry and clearly does not want to reduce their current level of supply or margins in that market.  They only want to sell their new line to what they termed 'variety stores' ( dollar shops to you and me) as they are not in this market currently.

to me not only does this seem groslly unfair but is a supplier restricting who they sell to on the grounds of the market place they represent legal?

[digital*ghost]

Not a legal eagle, but was curious so did a quick google - if this is correct (I note it's copyright 1997, so even if correct then, some things may have changed, plus, it looks like a blog kind of post, so will still require a bit of clarifying and confirming):

Examples of situations where it is legal to refuse to supply goods are as follows 1) you are a poor credit risk, 2) you are "loss-leadering", 3) you provide poor after-sales service, 4) your order is too small, 5) you lack particular skills or experience which are necessary to the business. A supplier may even be legally entitled to refuse to supply you because he thinks that your business is too close to an existing retailer who sells the same product. In some cases, a supplier can refuse to supply you if you refuse to agree not to sell outside a defined sales territory. This would only be illegal if it substantially reduced competition in the industry. For instance, if only one retailer had been appointed for each sales territory, then an agreement not to sell outside the territory would severely limit competition and would be illegal. On the other hand, such exclusive dealing agreements are often necessary for the protection of franchises, distributorships, agencies etc.

http://members.iinet.net.au/~patrick6/kiss32.html

I also found this ("Withholding the supply of goods").... but don't have the mind to try and read it right now. 

http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/s98.html

[character_parties_aus]

Thanks!

As well as my eBay store and online business I also own a franchised B&M store(different market sector) so am very familiar with territories and that is perfectly legal and morally correct as well. Witholding supply on the grounds of the market place I operated in unreasonably ( in this case to stop me being more competitive) in my mind is illegal as well is immoral. I will be calling the ACCC next week to obtain further clarification.

[digital*ghost]

Actually, disregard all the above - I clicked on the wrong link on ACCC, this explains it nicely:

As a general rule, suppliers have the right to choose who they wish to deal with and there are many reasons why a supplier may refuse to supply goods or services.

For example, a supplier may choose not to supply a business on the basis of the reliability of that business, the cost of delivery, or the presentation of goods and services. Similarly, a wholesaler or manufacturer may find it too costly or inconvenient to sell to everyone who asks.

If a supplier decides not to supply a business and their reason is not an improper one, the client business will have to renegotiate terms with that supplier or seek alternative suppliers.

https://www.accc.gov.au/business/anti-competitive-behaviour/refusal-to-supply-products-or-services

That link provides all the info regarding when it is illegal to refus to supply.

[cherry*135]

Yes, I am pretty sure suppliers can choose who they supply to. Not a legal eagle, just my view of the situation.

Some brand owners have specific items that they will only supply to a particular store.. e.g. DJ's.

A few of the party plan businesses won't allow their product to be sold on online auctions sites, by distributors.

[digital*ghost]

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@character_parties_aus wrote:

I will be calling the ACCC next week to obtain further clarification.

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Probably the best bet, as from what I could tell, even the if's and but's have some if's and but's. o_O 

[character_parties_aus]

Supplying on the basis of efficiency, price, location etc is one thing. Supplying on the basis of market sector is another matter entirely.

[cherry*135]

That gives them enough reasons not to supply.

For example, a supplier may choose not to supply a business on the basis of the reliability of that business, the cost of delivery, or the presentation of goods and services. Similarly, a wholesaler or manufacturer may find it too costly or inconvenient to sell to everyone who asks.

[cherry*135]

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@character_parties_aus wrote:

Supplying on the basis of efficiency, price, location etc is one thing. Supplying on the basis of market sector is another matter entirely.

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What if you intended to try and force them to supply to you? What would that involve? Court cases? Expenses?

[digital*ghost]

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@character_parties_aus wrote:

Supplying on the basis of efficiency, price, location etc is one thing. Supplying on the basis of market sector is another matter entirely.

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I'm just quoting a broad, but the most relevant, paragraph from the page, so wasn't suggesting it all applied, just sort of giving a spring-board to the info I found...

There's actually a line of items I would really love to stock, but the supplier forbids them to be listed on eBay. I'm not able to find anything similar, but I honestly didn't even question that, as it's kind of the same thing as brands only having authorised sellers in certain outlets, and seemed to be a relatively common restriction, either to uphold licensing agreements, or to protect brand image. (In my case though, it's not actually a refusal to supply, more a condition of sale).