Mitsubishi Electric to pay $2.2 million fine for illegal price maintenance activity

In 2009, Mitsubishi Electric contacted one of its dealers, Mannix Electrical in South Australia, telling the reseller it was discounting too much – $200 – on a 7.1-kilowatt air conditioner. This model generally retailed for around $1,500, so this was a 13.3 per cent reduction from the norm.

Mitsubishi Electric then made attempts – referred to as ‘inducements’ – to get Mannix to lift this and other prices it deemed too low. When this proved unsuccessful, Mitsubishi Electric “terminated” Mannix and refused to supply it with air conditioners.

There is evidence to suggest Mitsubishi Electric approached Mannix with these inducements after being egged on by Mannix’s retail competitors.

For these practices, which Mitusbishi Electric has admitted to, the Japanese company has today been fined $2.2 million by the Federal Court of Australia. This penalty resulted from legal action launched by the ACCC for what it called “engaging in resale price maintenance”.

This penalty is broken down into three parts: $500,000 each for two instances of price maintenance and a $1.2 million fine for terminating Mannix as a reseller.

Operating out of South Australia, Mannix Electrical trades in the retail space as ‘Mannix Air Conditioning’ and ‘Airconditioning (sic) Warehouse Sales’. There are 10 stores in South Australia and one each in Victoria and Queensland.

This considerable punishment was levied by Justice Mansfield, who said the penalty must act as a deterrent and was influenced by the size of Mitsubishi Electric as a company.

“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,” Justice Mansfield said.

“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.”

ACCC chairman Rod Sims welcomed the decision.

“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,” he 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.

Mitsubishi Electric will also pay the ACCC’s legal costs, believed to be around $50,000.

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