Solar power company will pay R14 million to Competition Commission

A solar power company has agreed to pay R14 million to the Competition Commission although it still denies that it contravened the Competition Commission Act provisions regarding minimum resale price maintenance.

The payment of R14 232 581 is the highest any company has ever paid in a case like this. Minimum resale price maintenance is a practice where a manufacturer or supplier requires its distributors to sell its products at or above a price floor. If the distributor fails to, the manufacturer may take action, such as refusing to supply the distributor.

Section 5(2) of the Competition Act prohibits the practice of minimum resale price maintenance and section 5(3) states that despite subsection (2), a supplier or producer may recommend a minimum resale price to the reseller of a good or service, provided that the supplier or producer makes it clear to the reseller that the recommendation is not binding and if the price is indicated on the product, the words ‘recommended price’ must appear next to the stated price.

The practice of resale price maintenance is a per se contravention of the Competition Act which means that companies engaged in the practice cannot justify doing it.

The Competition Commission concluded the settlement agreement with Victron Energy B.V. – a company from the Netherlands – and referred it to the Competition Tribunal for confirmation.

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Someone complained about Victron to the Competition Commission

Someone complained to the Commission on 11 December 2023 that Victron allegedly engaged in the practice of minimum resale price maintenance from March 2020 to at least the end of 2022. Victron develops and sells electric power conversion products for mobile and other off-grid applications which includes products such as sine wave inverters, sine wave inverter/charges, battery chargers, DC/DC converters, transfer switches, battery monitors, batteries, solar panels, solar charge regulators and more. 

The Competition Commission alleged in its complaint referral to the Tribunal that Victron largely relied on its distributors to implement and enforce the practice of minimum resale price maintenance for Victron products sold by online stores to end users in South Africa.

In addition, the Commission alleged that Victron published a recommended retail price list on its website from time to time and provided updated price lists to its distributors on a quarterly basis. Although the list indicated that it is a recommended price, Victron in practice insisted on a maximum discount from its recommended retail price list when online stores sold Victron products to end customers.

The Commission also alleged that Victron instructed its distributors to ensure that its online store customers comply with the maximum discount practice by threatening to either lower the discount Victron provided to the distributor or stopping supply to the distributor.

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Distributor would then allegedly use same threats

The distributor would then in turn use similar threats of either lowering the discount the distributor provided to the online store or stopping supply to its online store customer to ensure compliance.

According to the Competition Commission, Victron asserted during the investigation that the principal objective of the pricing discussions was to address the issue of end customers being sold Victron products without being provided with the appropriate after-sales and technical support and it has denied liability for a contravention of the Competition Act.

However, the Commission maintained that the conduct amounts to a contravention of section 5(2) of the Competition Act, regardless of any justifications that may be proffered by the company involved.

The Commission says in terms of the settlement agreement, Victron does not admit that it contravened the Competition Act but has agreed to pay the amount and to ensure compliance with the Competition Act going forward, as well as implement a competition law compliance programme for all its employees, management, directors and agents who participate in any commercial activities in South Africa.

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Settlement referred to Tribunal for confirmation

The Commission referred the settlement agreement to the Tribunal and once confirmed, will bring to an end the complaint referral proceedings currently before the Tribunal against Victron. According to the Commission, it decided to settle to conclude the matter faster and avoid protracted hearings and thus conserve resources.

In addition, the Commission said it is satisfied that the objectives of the act, together with the public interest, are served by the agreement. Victron also undertook to refrain from engaging in minimum resale price maintenance in future, to prepare a statement regarding the settlement to its employees, to implement a competition law compliance programme and to pay a substantial settlement amount.

The Commission will pay the settlement money into the National Revenue Fund in accordance with the provisions of section 59(4) of the Competition Act. The amount must be paid within 90 days.

In a statement, the Commission said it is satisfied that the settlement amount sends a strong message of deterrence and it is an important milestone in the Commission’s enforcement against minimum resale price maintenance matters.

In the past, other companies paid R3 million, R100 000, R150 000 and R139 400.