Mitsubishi Electric found guilty of RPM

Published On 07/01/2014 | By Pam Cue | Uncategorized

The Federal Court has ordered Mitsubishi Electric Australia Pty Ltd pay penalties of $2.2 million for engaging in resale price maintenance.

As previously reported, the ACCC instituted proceedings against Mitsubishi Electric in November. The ACCC alleged that, on three occasions between 2009 and 2011, Mitsubishi induced one of its dealers, Mannix Electrical Pty Ltd, not to sell Mitsubishi Electric air conditioners below a specified minimum price, ultimately terminating Mannix’s status as a ‘dealer’ when it failed to comply.

According to the ACCC, Mitsubishi Electric’s conduct was motivated by complaints from a number of its dealers, who are Mannix’s competitors, regarding Mannix’s pricing.

Mitsubishi had co-operated with the ACCC’s investigation and the orders were made by consent. In determining whether to accept the parties’ agreed orders, the court had regard to whether they were appropriate and desirable in all the circumstances.

The Court determined that penalties of: $500,000 for each instance in 2009 and 2010 of Mitsubishi inducing or attempting to induce Mannix not to sell at a price less than a specified price; and $1.2 million for withholding the supply of heating, ventilation and air conditioning products to Mannix in 2011 for the reason that Mannix had sold or was likely to sell those products at less than a specified price, was appropriate and desirable in the circumstances.  The court also had regard to principles of deterrence, both specific and general. The court noted that the proposed penalties were higher than those imposed in previous cases of resale price maintenance. However, stated that:

It is nevertheless appropriate as…[Mitsubishi Electric] is a corporation of significant size and turnover; the conduct was serious and concerned three episodes of conduct occurring over three consecutive years; and the conduct in the third year involved a withholding of supply. [Further] MEA’s annual revenues during the conduct were significantly larger than those of the respondents in previous resale price maintenance cases involving similar conduct.”

The Court also made orders for declarations and injunctions, and that Mitsubishi Electric contribute $50,000 towards the ACCC’s costs.

Notably, this is one of the first penalties (albeit by consent) awarded against a corporation by reference to their large annual turnover under the ‘new’ maximum penalty regime.  Under that regime, the maximum penalty for a contravention by a corporation of the restrictive trade practices provisions of the Competition and Consumer Act 2010 (Cth) is the greater of $10 million, three times the relevant benefit gained from the contravening conduct or, in the event that the relevant benefit cannot be determined, 10% of the turnover of the corporation during the preceding twelve month period.  The Court in this case determined that the maximum penalty for each contravention by Mitsubishi Electric would be in the range of approximately $25 million to $30 million based on the corporation’s turnover in the relevant periods because this sum was greater than the figure of $10 million and it was not reasonably possible to determine the total value of the benefits (if any) that may have been obtained by the relevant acts.

Photo credit: Flickr / funkbrothers / CC BY 2.0 (Photo has been altered to black and white)

About The Author

is a solicitor in the Competition Law and Regulatory Group at King & Wood Mallesons Sydney.

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