The Federal Court of Australia has ordered by consent that Mitsubishi Electric Australia Pty Ltd (Mitsubishi Electric) pay $2.2 million in penalties for engaging in resale price maintenance.
Resale price maintenance, which is prohibited under section 48 of the Competition and Consumer Act 2010 (Cth), occurs when suppliers seek to prevent independent retailers or distributors from advertising or selling products below a specified price.
The Court found that on three occasions between 2009 and 2011, Mitsubishi Electric through the conduct of its senior managers:
- induced and attempted to induce one of its dealers, Mannix Electrical Pty Ltd (Mannix) not to sell Mitsubishi Electric branded air conditioning products at prices below a minimum specified price; and
- reduced the discounts Mannix had received from Mitsubishi Electric by terminating its ‘dealer’ status, for reasons including Mannix’s failure to increase its prices of Mitsubishi Electric branded air conditioning products to the minimum specified price.
For example in 2009, Mitsubishi Electric told Mannix that its price for a 7.1kW air conditioning product was $200 lower than it should be, and attempted to induce Mannix to increase its price for that product. At the time, such products were generally selling for $1500 so $200 represents a significant element of the price for consumers.
Mannix operates retail stores in South Australia, Queensland and Victoria as Mannix Airconditioning and Airconditioning Warehouse Sales.
The Court ordered Mitsubishi Electric to pay a penalty of $500,000 for each act of resale price maintenance in 2009 and 2010, and $1.2 million for its termination of Mannix’s ‘dealer’ status in 2011.
Justice Mansfield accepted that deterrence was of paramount importance in this case, stating further that “there is a need for a significant level of penalty in respect of resale price maintenance to deter large corporate groups from engaging in such conduct in the future”.
In relation to the termination of Mannix’s ‘dealer’ status, His Honour said that “this type of conduct is considered to be at the serious end of the scale of resale price maintenance conduct because it involved [Mitsubishi Electric] taking action, partly driven by complaints from Mannix’s competitors, to prevent Mannix from acting as an effective competitor in the market”.
“Mitsubishi Electric is a company of significant size and resources and this penalty reflects the seriousness of its conduct. The outcome should act as a deterrent to other companies from engaging in anti-competitive conduct in the future,” ACCC Chairman Rod Sims said.
“Such conduct attempts to restrict competitors from competing with each other on price, which prevent our market economy from working as it should and which ultimately increases the prices that consumers pay for those products,” Mr Sims said.
The Court also made orders for declarations, injunctions, and a contribution by Mitsubishi Electric to the ACCC’s costs in the amount of $50,000.
Proceedings were filed on 18 November 2013 on the basis of the parties’ joint submissions, and the orders made yesterday reflect the consent orders filed jointly by the parties.