Business owners often ask us whether there’s anything they can do to stop people reselling their products.
The simple answer is no.
If an individual has legitimately purchased your product, there is little you can do to stop them reselling it.
Under Australian Consumer Law, business owners are prohibited from substantially lessening competition within the market.
We understand that it can be frustrating having little control over your products once they have been purchased. If resellers are causing headaches for your business, here’s what you need to know.
How Do Reselling Businesses Operate?
Buying and reselling legitimately bought products is legal in Australia.
Reselling businesses are on the rise. For resellers, the investment and financial risk is low. And, thanks to online marketplaces such as Gumtree and Facebook Marketplace, reselling has never been easier.
The basic structure of a reselling business looks like this:
- Jim legitimately purchases a product from Jeff’s business.
- Jim is now the owner of the product.
- Jim resells the product to Kerry.
This process is legal. There is little control Jeff has over Jim and his resale of the product to Kerry.
Even though Jeff doesn’t have a formal Reseller Agreement in place with Jim, Jim is still entitled to resell the product.
Stopping People Reselling Your Products May Be Considered Anti-Competitive Behaviour
So, in the above example, why can Jim legally resell the product to Kerry?
The main reason is that the Australian Consumer Law (ACL) prohibits anti-competitive behaviour.
Put simply, anti-competitive behaviour is any practice or act that reduces competition within the market.
Contracts, agreements, understandings or concerted practices that have the purpose of lessening competition within the market are strictly prohibited by the ACL.
As a business owner, what does this mean for you?
Because of the ACL’s rules on anti-competitive behaviour, there’s not much you can do to stop resellers. If you tried to stop people reselling your products after they’d been legitimately purchased, you’d likely be lessening the competition within the market.
Can People Resell Items That Contain Copyrighted Material?
Generally, reselling items that contain copyrighted material is not an infringement of copyright, sl long as the material has been lawfully created and legitimately acquired.
This is because Australian copyright law does not grant copyright owners the exclusive right to control the sale or resale of their copyright material.
However, copyright owners and distributors can potentially control the sale of this material through commercial Distribution Agreements.
If you need a Distribution Agreement, we recommend you seek proper legal advice to make sure the Agreement conforms with Australian Consumer Law.
Do You Have To Honour Warranties If Someone Resells Your Product?
If your business has a Supply Agreement with the manufacturer of your products, it’s likely that particular warranties are associated with selling these products.
These warranties are often provided by a business in addition to the automatic consumer guarantees that come with products.
Legal issues may arise for the reseller if they resell a product with a warranty.
Let’s consider the following example:
- Jim has legitimately purchased a product from Jeff’s business.
- Jeff’s business offers a 12 month warranty on the product that Jim has purchased.
- Jim then resells this product to Kerry.
So, is Kerry entitled to the 12 month warranty?
Without an authorised Reseller Agreement with Jeff’s business, Jim cannot grant Kerry the 12 month warranty offered by Jeff.
Unless otherwise stated, warranties your business offers on products are afforded to the original purchaser only. As a result, purchasers of resold items can’t rely on your business to extend warranties to them.
Ultimately, as a business owner, you have little control over your product once it’s been legitimately purchased. While this means you can’t do much about people reselling your product, it also means your responsibilities decrease once the product is resold.
So, Is There Anything Your Business Can Do To Control Resellers?
Although you have little control over the resale of your products once they’ve been purchased, there are some legal arrangements you can put in place to protect your business.
Let’s go through the two key agreements you should have if you’re concerned about resellers.
- Supply Agreements
Having a Supply Agreement will ensure your revenue streams are secure and legitimate, and that your liability is limited for defects in resold products.
- Reseller Agreements
Where possible, it’s beneficial to have a Reseller Agreement between your business and other parties you know will be reselling your products.
Although this won’t prevent anyone else from reselling your products, a Reseller Agreement can:
- Help secure revenue streams
- Limit your liability for defects in resold products
- Set out the rights and responsibilities of the parties, ensuring the reselling arrangement goes smoothly
As a business owner, there’s little you can do to stop people reselling products they’ve legitimately purchased from your business. We know this can be frustrating!
If you need help navigating your situation, our team is here to help. We’ll be able to guide you through your legal rights, and can put together a Supply Agreement or Reseller Agreement to make the resale process smoother for your business.
For a free, no-obligations chat, reach out to us at email@example.com or on 1800 730 617.
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