ComCom puts electronics sector on notice over resale price maintenance

The Commerce Commission has concluded an investigation into allegations that manufacturers of consumer televisions were engaging in resale price maintenance (RPM), which is illegal.

RPM occurs when a supplier of goods enforces, or tries to enforce, a minimum price at which the reseller must on-sell those goods.

Following the investigation, the Commission has issued Panasonic with a warning. The Commission believes Panasonic likely engaged in RPM by withholding supply of TVs to two retailers, because they offered TVs at a price less than a price specified by Panasonic, and supplying TVs to a retailer on terms less favourable than other retailers because that retailer offered TVs at prices lower than the price specified by Panasonic.

"Resale price maintenance can be harmful to competition and consumers as it may result in consumers paying higher prices for goods than they would if prices were not influenced in this way," says Commerce Commission chair, Anna Rawlings.

"It is important that all businesses operating in the manufacturing and retail sectors understand what they need to do to comply with the law which prohibits suppliers from enforcing a minimum price for the resale of their goods," she says.

The Commission has also issued an open letter to businesses operating in consumer electronics wholesale and retail markets, reiterating that RPM is illegal because it prevents retailers from setting their prices independently, so that they can effectively compete to attract more customers.

The open letter refers to the Commission's recently updated fact sheet on RPM, which provides guidance for manufacturers, suppliers and resellers of all goods.

This guidance includes reminders that:

• Suppliers should not dictate the price at which their products are resold 
• Suppliers should not prevent retailers from offering lower selling prices than the supplier recommends or setting their selling prices independently 
• Suppliers and retailers should not agree to fixed or minimum selling prices 
• Suppliers should not prevent or limit retailers ability to advertise lower prices in some sales channels than in others, such as online Retailers should not ask their suppliers to influence competing retailers selling prices, including by altering the wholesale prices that they offer to the competing retailers. 

Four manufacturers (LG, Sony, Panasonic and Samsung) account for approximately 90% of TV sales in New Zealand, and two large retailers (Harvey Norman, Noel Leeming) account for over approximately 60% of retail sales.

Platform services such as PriceSpy and PriceMe and retailers own extensive websites enable manufacturers, retailers and consumers to monitor the pricing offered on a daily basis.

A warning letter explains the Commissions opinion that the conduct at issue is likely to have breached the law. It is not a finding of non-compliance only the Courts can decide whether a breach of the law has occurred.

The purpose of a warning letter is to inform the recipients of the Commission's view that there has likely been a breach of the law, to suggest a change in the recipients behaviour and to encourage future compliance with the law.