Mitsubishi Electric Australia in court for resale price maintenance

The competition watchdog has launched proceedings against Mitsubishi Electric Australia for allegedly engaging in resale price maintenance.

The Australian Competition and Consumer Commission alleges on three occasions between 2009 and 2011 Mitsubishi Electric’s senior managers attempted to induce Mannix Electrical not to sell its Mitsubishi air conditioning products below a set price.

Resale price maintenance occurs when a supplier attempts to get another business not to resell or advertise its goods or services below a minimum price.

When Mannix decided not to follow Mitsubishi Electric’s request, the ACCC alleges it terminated Mannix’s ‘dealer’ status and reclassified it as a ‘contractor’.

Mannix stores operate in South Australia, Queensland and Victoria as Mannix Airconditioning and Airconditioning Warehouse Sales.

In a statement about the proceedings, Mitsubishi Electric said it had received notice of the legal action and has so far co-operated fully with the ACCC in its investigation.

“As the matter is now before the Federal Court, it is not appropriate for Mitsubishi Electric Australia to comment any further,” it said.

“Mitsubishi Electric Australia is committed to ethics as one of our company’s guiding principles and we take matters of compliance very seriously. We have reviewed our compliance program at length and are implementing additional measures to prevent this type of issue arising again.”

The ACCC alleges Mitsubishi Electric’s conduct was partly motivated by complaints from its dealers who were Mannix’s competitors.

“Resale price maintenance can inhibit traders from competing for customers because they are unable to discount the price of products they sell,” ACCC chairman Rod Sims said in a statement.

“Such conduct is a concern to the ACCC, particularly where traders put pressure on their supplier to stop their competitors from discounting.”

Hall and Wilcox partner Sally Scott told SmartCompany the maximum penalty for resale price maintenance can be more than $10 million if 10% of the benefit obtained is more than $10 million, or if 10% of the company’s annual turnover for the relevant period is greater than $10 million.

“This allows the ACCC and the Court to ensure that the penalty sufficiently hurts the company that has done the wrong thing and sufficiently deters others from doing the same thing,” she says.

“Otherwise, there would be a risk that businesses would treat the potential for a penalty as just a cost of business.”

Scott says businesses can ‘recommend’ a minimum resale price, but nothing more.

“Businesses can’t threaten to stop supply if a reseller sells below a minimum price,” she says.

“Generally, businesses can set a maximum price, as this would usually be in the interests of consumers.”

Scott says this is a common issue and it can be damaging for a business’s reputation.

“Many businesses come to me wanting to set minimum prices and stop their resellers or dealers from selling below that minimum price,” she says.

“Often the issue arises when one dealer is regularly discounting below a recommended minimum price and other dealers lose business as a result. The other dealers will go to the supplier, complain and ask the supplier to ensure dealers don’t sell below the recommended minimum price. There is an inclination for suppliers to accede to this. Often businesses won’t know that it is unlawful.”

Resale price maintenance has in the past been an area of focus for the competition watchdog, with a number of these cases occurring in 2012.

In October last year, Penny Rider, the sole director of Eternal Beauty Products, was fined a total of $100,000 for pressuring online retailers into selling her cosmetics products at higher prices, and then suggesting they could lose business if they didn’t.

Queensland-based homebrew supplier Edwards Essences also accepted a court-enforceable undertaking after it admitted it engaged in resale price maintenance.