Friday, 17 August 2007 – LAWFUEL – The Legal Newswire –
The Commerce Commission has reached a settlement with Espresso Engineers Limited and Valente Coffee Machinery Limited after they breached the Commerce Act by preventing a reseller from advertising their coffee machines for sale below a specified minimum price.
Under the settlement, both Espresso Engineers Limited and Valente Coffee Machinery Limited admitted to breaching the Act by making it known, in an e-mail to the person reselling their goods, that they would not supply them to him unless he agreed not to advertise them for sale at a price less than the recommended retail price.
The Commission’s investigation found that this behaviour was likely to be in breach of section 37(1) of the Commerce Act, which prohibits resale price maintenance. Under the settlement each company has agreed to supply its goods and services to the reseller without specifying a minimum price, and not to further breach the Act.
Commission Chair Paula Rebstock said wholesalers and distributors need to understand that resale price maintenance is a serious offence. “This behaviour contravenes the Commerce Act as it prevents price competition in the market. “By refusing to supply the reseller unless he advertised their goods for sale above a fixed price, Espresso Engineers and Valente Coffee Machinery tried to inhibit competition. By setting retail prices that resellers must follow, suppliers remove consumers’ ability to shop around for the best price.”
Section 37 of the Commerce Act 1986 prohibits resale price maintenance by suppliers.
Resale price maintenance occurs when a supplier of goods specifies the minimum price that a reseller can charge for those goods. Suppliers are allowed to issue recommended retail prices for goods, but they cannot enforce any minimum price.
Penalties the Courts may impose for breaches of the Commerce Act include:
• Pecuniary penalties of up to $10 million or three times the value of any commercial gain, expected or actual, resulting from the breach;
• Pecuniary penalties of up to $500,000 on an individual; or
• Order an individual to be excluded from managing a business.
In March 2006 the Commission successfully prosecuted computer parts and systems wholesaler Morning Star Computer Limited for breaching the Commerce Act by preventing computer parts resellers from advertising its products below certain fixed prices. The company was fined $50,000 plus $3,624 costs.