New Zealand’s competition watchdog has released a statement of preliminary issues outlining key competition issues that could potentially arise if HP New Zealand were to be granted approval to engage in resale price management (RPM) in relation to its HP online stores.
HP made a submission [PDF] to the Commerce Commission (ComCom) on March 22 for approval to supply its products to a third-party distributor, who would then sell those products directly to customers and receive payments from those sales through HP’s online stores. As part of this, HP intends to control the product and marketing strategies, as well as determine the price of its products that are sold by third parties through its HP online stores.
Under the Commerce Act 1986, however, RPM is prohibited as ComCom considers it as a form of anti-competitive behaviour because it “prevents resellers from setting their prices independently and can lead to increased prices for consumers”.
Engaging in RPM in New Zealand is only permitted if it is authorised by the watchdog when it is “satisfied that the RPM conduct will in all the circumstances result, or be likely to result, in such a benefit to the public”.
The company claimed in its submission that if it was given the green light, some of the main benefits that would come from the proposed arrangement would include improved customer user experiences of the HP online store, wider payment options, faster delivery times, and a wider range of delivery options.
In releasing the statement [PDF], ComCom said it would identify and assess what detriments and benefits are likely to occur to determine whether or not it grants HP permissions to engage in RPM.
Some specific considerations, according to the statement, will include what is likely to occur in the future without the proposed conduct and what is likely to occur in the future with the proposed conduct; whether the conduct would raise or lower prices; whether it would reduce or improve quality, choice, or other elements of value to consumers; whether the conduct could improve or worsen production processes; and whether the conduct could assist or hinder innovation in products or processes.
“We will consider if the Proposed Conduct could have any effects on competition that would create likely benefits or detriments. For example, we will assess how, if at all, the conduct could affect competition between resellers of HP products. We will also assess if it could affect competition between HP’s products and rival brands,” ComCom said.
Additionally, ComCom said it will consider what HP would do if it disallowed the company to engage in RPM, including whether HP could supply its products to third-party distributors without controlling the retail pricing of its products in HP stores; HP could achieve “reasonably comparable outcomes” to its proposed arrangement through an alternative plan; or whether the company could implement a similar distribution model it had with Acquire.
Up until recently, HP sold its products on an HP-branded online store through one of its resellers, Acquire, and part of that arrangement saw Acquire decide on the products sold and the retail prices, according to the statement.
ComCom is scheduled to make its final decision on September 10, with interested parties currently given until April 22 to submit comments on HP’s proposal.
HP New Zealand was recently sold for $1 by HP South Pacific, HPE’s Australia and New Zealand outpost. The sale ended up being the saviour for HP South Pacific, which recorded net profit of just over AU$13 million for the 2020 financial year, a vast improvement on the restated net loss of AU$2.79 million from the year prior.