Think I have annoyed the engineers enough in other threads, so maybe time to turn to the legal eagles
Relevant section of Competition Act, 89 of 1998 (part relevant to the “current” victron issue is 5(2))
5. Restrictive vertical practices prohibited
(1) An agreement between parties in a vertical relationship is prohibited if it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement can prove that any technological, efficiency or other pro-competitive, gain resulting from that agreement outweighs that effect.
(2) The practice of minimum resale price maintenance is prohibited.
Interestingly the prohibition of resale price maintenance in South Africa is per se unlawful (i.e. no reason can excuse it).
while some provisions of the Competition Act allow for the weighing up of anti-competitive effects against pro-competitive gains to determine the lawfulness of an agreement or practice, no “rule of reason” analysis is permitted where minimum resale price maintenance is concerned – it is outright unlawful. [ source ]
It is apparently also not necessary to show that the conduct/policy actually lead to an anti-competitive outcome
Section 5(2) is an outright or, in the language of antitrust jurisprudence, a per se prohibition. In other words simply
proving the existence of the specified restrictive practice is sufficient for making a finding under Section 5(2). In contrast with violations alleged in terms of Section 5(1), Section 5(2) does not require that anti-competitive effects be established nor does it permit of an efficiency defense. [ source ]
So, if there is evidence of possible penalties (lowering discounts or refusing to supply in future) then Victron might struggle to not cough up for this (even if this happened in the past and regardless of motivation of the complainant).
It is unlikely that things got to this stage (i.e. Competition Commission referring to the Competition Tribunal) without this kind of evidence. The Competition Commission has powers of search and seizure and to summons.
Unless there are disputes around fact (for instance Victron might claim that the distributors chose to not “allow” discounts beyond a certain price, and “made up” the excuse that “Victron says we are not allowed to…”) I suspect Victron will negotiate for a consent order, with the Competition Commission before this goes to full litigation - like this one involving Toyota (see, I do read the posts…) where they do not admit liability.
Edit: @plonkster also noted the “I do not have inside info” part - my post is not intended to rehash the topic
Your post is excellent, and a lot of what you write, I also found last night as I was doing some “light reading”. The “per se” distinction. There are places, some US states I think?, where it is not per se illegal. You can mount a “actually this helps competition” defense.
Over here, sending a single email to a downstream distributor and telling them not to sell things too cheaply, whatever your motivation may be… is probably sufficient to get you in trouble.
apparently was per se for almost 100 years and was reversed in 2007 (see first source link in my previous post)
think precedent has been set already (barring the unknown facts that could come out if this goes the whole tribunal route) - but I suspect many people/businesses do not know about the competition act or more likely often choose to not pursue it since it might also impact negatively on future business prospects if there is a perceived reputation to “spoil the game for everyone”.
Read this on Business Day - The Competition Commission has referred a Dutch supplier of solar power equipment, Victron Energy, for prosecution at the Competition Tribunal, alleging it forced distributors of its products to sell goods at a set price, which is illegal.
There is an official statement that was sent out to the distributors. I have not seen it yet, but if you are curious, welcome to ask your reseller. What I can say, at no point was the company protecting its own bottomline. The case has indeed been ongoing for a long time, and the outcome came last week. The timing is somewhat unfortunate, but it is what it is. So… don’t expect prices to come down because of this. It was never artificially raised.
You’re talking about the contract between the installer and Victron? To me this is something Victron have a right to insist on. I’ve worked for a company that had a franchise for an international brand name product, and the brand was very picky about the stock of spare parts we had to hold, the accuracy of our multimeters, and even the type of solder that we used. I get that. They are trying to protect their brand.
And this is something the local supplier has to take into account when working out what he can sell the goods for.
But heaven’s sake, let him do that.
But give him a certificate too so that he can prove to prospective customers that he is a properly authorised person in good standing with Victron. Because there will be people who are getting their inverters elsewhere, and in such cases the customer is left with no protection.
When I worked for the company I’m busy not naming, “parallel importers” emerged who were sourcing the same product from cheap markets in the East., The customer goes a shop they supply, says “ooh! That’s cheap here. I’ll have one of those” and thinks he is going to get backup.
Our position was difficult because The Brand had told us that we had to honor the guarantee of any of their equipment bought anywhere in the world. If somebody buys in New York then can’t get it fixed whilst he’s on holiday in South Africa, that’s not a good thing. And this is what the parallel importers were taking advantage of. They could undercut any of our official dealers on price, because they did not have to include the cost of maintaining a service department.
In the end we agreed with The Brand that we would honour the guarantee, but we could charge a handling fee if the item had been bought from a local shop that we did not have any business with.
This resulted in angry customers who didn’t understand that the real villain was the parallel importer. Either way the reputation of The Brand suffered.
So yes, it is more complicated than just allowing anybody to sell the thing at any price they like and then let the invisible hand of the market move.
And that is in my opinion, why Victorn created has such an awesome 2nd hand market, as it matters none from whom I buy the 2nd hand part, the warranty stays in place. Victron will put the new owner in contact with the original dealer who sold the item originally. Any dealer/repairer close by will help.
How that all works behind the scenes, no idea. I have a manufacturer that backs up their products. Finish en klaar. And I pay for that with a smile, Happy Seller, Happy Buyer.
So Victron “pushed some buttons” to ensure aftersale services stay intact, and on par, ensuring their brand has a very good name year after year for decades on end.
Cause I don’t think for one moment that Victron did anything knowingly and on purpose to circumvent any laws.
Let’s see what comes of this fiasco. I’m sure stuff happens behind closed doors that would be very entertaining IF we could have been a “fly on the wall” in those meetings.
But no one cares … people only care when it affects their pocket. “Too expensive!” … “Why don’t I get support!” … the only two times.
One of the most interesting threads on this forum.
Just another idea to add to this discussion:
Huawei PowerMate comes with a swap-out warranty and I believe some others do the same. In this business model it is as if the manufacturer is directly taking responsibility for the support. They protect themselves by not allowing any tinkering. A customer can look at it and that is it. If you want to take it out of bypass mode, for example, you have to go to the DB board.
There is an app for the Customer, he can make any changes he likes to. The direct swap out is normally done by the distributors and they will give you a new unit, then send back the faulty one. The majority of new inverters in SA will do that, but its part of the R&D. These units are so new that they did not have the opportunity to build a solid reputation and they don’t want to struggle with support in the field, so they would rather pull it back into the repair centre to try and find / rectify the issue. We have access PowerM’s to worth of appr R29m, standing in a warehouse in midrand. I love the unit but they are selling slow, its like the south african market dont like them. We sold and installed a few, and I like them, especially for flats and Duplex/Simplex setups. Build in Fire suppression, True IP65 and can even be installed outside. Just a pity its not a bidirectional inverter.
I’ll just revive this one as I just found the settlement when looking for something:
The Competition Commission (Commission) concluded a settlement agreement worth R14 232 581 with Victron Energy B.V. (“Victron”) to the Competition Tribunal (“Tribunal”) on 06 June 2024. The settlement agreement is in respect of the Commission’s complaint referral against Victron for alleged minimum resale price maintenance.
During the investigation Victron asserted 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. 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 firm involved.
In terms of the settlement agreement, Victron does not admit that it contravened the Competition Act, but has agreed to pay R14 232 581 and, to ensure compliance with the Competition Act going forward, implement a competition law compliance program in respect of all its employees, management, directors and agents who participate in any commercial activities in South Africa.
The settlement agreement has been referred to the Tribunal and once confirmed, will bring to an end the complaint referral proceedings currently before the Tribunal against Victron.
Things worth noting after I discussed this with someone that knows a lot more about law than I do:
They weren’t found guilty.
They did not admit guilt.
It did not go to trial at the competition tribunal.
They most likely decided the reputational risk of a trial (and potential guilty verdict) is worth more than the R14m settlement they agreed upon.
I’m coming across as a Victron fanboy which I most likely am, but the discussion that led to the above points did start with a “Victron was guilty” and then the document was read by the legal mind who said “Nope.”
Yup, that’s essentially what happened. Not uncommon. But also important to mention: The company undertook to put measures in place to ensure this does not happen again. So this was a little more than just “paying for it to go away”.
Another important reason not to fight it, is that South Africa is very black and white about this. In some markets, you can argue that a minimum (or recommended) price is there to keep your resellers profitable. There is room to prove that your practices are not harming the market. In South Africa there is no such provision. If you tell a man a recommended price, and in any way try to push him into sticking to it (even for his own good), and that man can prove it (by printing out an email), you are in trouble.
My personal view: Victron tried to ensure good product support.
Then “someone” decided to make it into something.
Now the question is:
Will Victron still be one of the prominent manufacturer in SA in 10-20 years?
Will the “someone’s” product still be around and/or similarly priced to Victron?
This is a “game” played by big manufacturers far above our “levels”.
It is costing Victron Euro 717 908.61 … at todays web rate.
“Pocket change”, if you ask me (and no-one did), compared to a trial and guilty verdict.
There is a definite whiff of horse manure around this assertion.
If you want to ensure good technical support, then either:
a) make a minimum end-user SLA contractually binding on resellers, or
b) price it in to wholesale price and establish a manufacturer support service.
Trying to mandate that a reseller take a certain minimum margin on the product, on the assumption that the reseller will use that margin to provide support, is a futile exercise (with a few notable exceptions).
I don’t really agree (of course not ).The reseller has always been a large part of the overall solution, which is also why training is so important part, and why Victron expects a certain amount of exclusivity.
There is another part to this as well, a fundamental difference in model. Other manufacturers sell an all-in-one product. Victron sells you the components to build a custom product. It is a strength in some areas (Marine, and RV markets), and another reason why the reseller is a much larger part of the picture.
I agree with all of that. But price fixing is not required to achieve any of that.
Have the retailer sign a reseller agreement, which places all the training and support requirements on the reseller. After that, the reseller must set their selling price to cover their costs.
Had dealers in the past. It was driven by a dealer/supplier contract.
How the dealers do their business, as long as it is within the contract, I really did not care as long as: First and foremost: The clients will be happy i.e. they don’t phone me. (simple rule for me) Secondly, a natural result: The money comes in.
Really like the KISS principal.
I think that common sense has “left the building” ito:
customer is not the king and
the service provider/manufacturer are not always right.
Find that what works between the parties … not everyone will be satisfied. Tough tekkies.
