NZ competition regulator's warning puts consumer electronics sector on notice over resale price maintenance

New Zealand’s competition regulator The Commerce Commission has issued a warning to manufacturer of consumer televisions Panasonic that it believes the company "likely engaged" in resale price maintenance (RPM), which is illegal.

The Commerce Commission said in a statement that it had concluded an investigation into allegations that manufacturers of consumer televisions were engaging in RPM, and that it 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.

Commerce Commission Chair, Anna Rawlings says 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.

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“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,” says Rawlings said.

The Commission said it 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.

More information on resale price maintenance can be found on the Commission’s website and a copy of the warning letter to Panasonic can be found on the Commission’s case register.

The Commission notes that 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 - while 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.

On the warning letter the Commission says it was its opinion that the conduct at issue is likely to have breached the law, and 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 recipient’s behaviour and to encourage future compliance with the law,’ the Commission said.