So it was somewhat of a surprise that Australia's Competition and Consumer Commission (ACCC) allowed Tooltechnic, an importer of high end power tools, to specify a minimum resale price to prevent "free riding" by discount dealers on its high end Festool brand. Consumers had been shopping at the high end retailers, and then buying the Festool products are lower-priced retailers who did not provide as much retail service.
Festool products are complex, with a high level of features and functions, and are aimed predominantly at professional users. Tooltechnic believed that provision of retail services such as pre-sales technical advice, product demonstrations, and “try-before-you-buy” arrangements, as well as post-sales services such as customer training and provision of consumables and accessories, would help to expand demand for the brand even if retail prices included a margin sufficient to fund those services.
However, retailers who provided these services were increasingly losing out to competitors who chose a simpler no-frills model, and the problem of free-riding was exacerbated by the increased accessibility of on-line sales. Tooltechnic chose RPM as a solution after judging that other approaches, such as imposing detailed contractual obligations on retailers, granting exclusive retailer territories, or restricting on-line sales permissions, would be unworkable or less effective as a means of boosting sales.
Congrats to the the ACCC for reaching a reasonable decision, and to the Economists at RBB for their role in educating a skeptical government agency.