INSIDE STORY: How Mitsubishi Electric Tried To Take Down A Dealer Simply Because They Offered Discounted Air Conditioning

Written by David Richards     26/12/2013 | 15:19 | Category: AIR CONDITIONING & HEATING

Senior executives of Mitsubishi Electric who openly engaged in trying to fix the price of Mitsubishi air conditioning products so that their dealer network could not buy or offer for sale discounted products, are still working for the Japanese Company despite the Company being fined $2M by the Federal Court for engaging in resale price maintenance and questionable behaviour.

INSIDE STORY: How Mitsubishi Electric Tried To Take Down A Dealer Simply Because They Offered Discounted Air Conditioning
The content of emails seen by ChannelNews revealed that the most senior management of the Japanese Company that had revenues of $248 million in Australia in the financial year ended March 2013 systematically engaged in trying to prevent their dealer network from offering discounts.

Not content with seeing discounts of $200 offered the Japanese Company then moved to try and nobble the business of one dealer who did not meet their demands. 

Mannix who operates outlets under trading names including Mannix Air conditioning and Air conditioning Warehouse Sales was threatened on several occasions by senior Mitsubishi Electric staff according to emails tendered as evidence in a the case which was bought by the Australian Competition & Consumer Commission. 

The Australia Federal Court who fined Mitsubishi for their actions was told that at the time of the offences Mr Tony Hirst was the Executive Director of MEA and the General Manager of Mitsubishi's air conditioning division and that several damming emails were ccd to him directly. ChannelNews has been told that Hirst was well aware of the attempt to stop discounting and that he held several meeting with Mitsubishi staff in an effort to hold up the price of Mitsubishi Air Conditioning products. 

 Hirst is still working at the Company and is now trying to break the Company into the top end of the appliance market with a new range of Mitsubishi appliances.  

The Court heard that Hirst was the direct supervisor of Mitsubishi Regional Managers, Michael Johnson and Kevin James. Throughout the period October 2009 to May 2010 when the offences occurred, Johnson was the Regional Manager for Victoria, South Australia and Western Australia and reported directly to Hirst.

In between May 2011 to September 2011 when further offences occurred Kevin James was the Regional Manager for Victoria, South Australia and Western Australia and reported directly to Hirst.

Another person singled out by the courts was Scott Petrie the Sales Manager for South Australia, Petrie, reported directly to both Johnson and later James.

Also mention in the Court case was Graham O'Meara the Victorian and Tasmanian Sales Manager at Mitsubishi Electric.

Back in 2009, Scott Petrie was instructed to talk to Mannix management including Mr Sax and Mr Larke, regarding the prices at which Mannix stores were selling MEA HVAC products in Victoria and Queensland after the Company got complaints from other dealers. 

 During those conversations, Mr Petrie informed Mannix that its prices for MEA HVAC products were $200 too low, it was revealed that Petrie was acting on the instructions of Michael Johnson and Tony Hirst who were furious that Mannix was selling the 7.1kW MEA HVAC product significantly cheaper than their competitors.

One internal email said "Don't worry it is not exclusive to MEA, they (Mannix) have also gone aggressive on Fujitsu. I understand the importance of the account to us, however, they have instantly devalued our product in the market by around 10-15%".

Petrie then sent an email to Mannix management that said " Can you please let me know why Mitsubishi Electric are being sold into the market as the bottom end brand in the market when we clearly hold ourselves up as one of the top 2 brands available in Australia today. I am getting a lot of Flak from our Senior Management on pricing".

Mitsubishi saw their products as being more alongside Daikin than LG.

MEA also considered that the quality of its products was above LG and Fujitsu and equivalent to Daikin.

Sometime later Mitsubishi management discovered that a Mannix supplied Dandenong store were selling their air conditioning products under the recommended retail price suggested by the Japanese Company. 

Mitsubishi management then contacted Mannix management pointing out that they were not happy with the prices they were given by a sales executive at the Dandenong store. 

In an email MEA wrote "Please do not drop us, Mitsubishi Electric in it, if reprimanding the store person involved".

In evidence to the Court MEA admitted that they engaged in the practice of resale price maintenance.

Later in February 2011, MEA moved to review the Mannix discount rebate structure after Mannix sent an email to the "trade" which MEA claimed was "creating a little havoc".

An internal email sent to Hirst said "Don't worry it is not exclusive to MEA, they have also gone aggressive on Fujitsu. I understand the importance of the account to us, however, they have instantly devalued our product in the market by around 10-15%".

Later in June 2011, MEA offered select dealers an additional ten per cent rebate for M-Series (MSZ-GE) models.

Mannix immediately decreased its prices for certain HVAC products to some customers by 10%.

This really upset MEA management and several MEA dealers. 

Later On 7 September 2011, James and Petrie met with Darren Mannix and Mr Larke of Mannix at Mannix's head office in South Australia.

At that meeting, MEA advised Mannix that it would be terminating Mannix's status as diamond dealer and instead reclassified them as a contractor. 

At this stage MEA had decided that they would do better getting into bed with Metalflex another group who had been warned about discounting over Mannix. 

Later the same day, Mr Petrie sent an email to Mr James copying other MEA employees including Tony Hirst which contained the following text "If we release our products through Metalflex in SA we will look like absolute fools given that we have removed Mannix sales from our business". 

Mitsubishi later admitted that they deliberately refused to sell HVAC products to Mannix after 1 October 2011 on terms equivalent to resellers that had diamond dealer status and that they deliberately offered Mannix less advantageous terms.

Hirst has not denied claims that he and his management team went out of their way to deliberately damage the business of an Australian dealer who simply offered discounts.

What is known is that under the direction of Hirst Mitsubishi deliberately attempted to make it difficult for Mannix to effectively compete on price with resellers that had "diamond dealer" status, and made it unlikely that Mannix would continue to stock, or sell, MEA HVAC products.

Mitsubishi Electric admits that Mannix was viewed by MEA as a "discounter" and that was not acceptable to a Company that were openly prepared to flaunt Federal laws in an effort to bring the dealer into line with the demands of Hirst and his management team. 

Federal Court Judge Justice Mansfield said that he was satisfied that the conduct  of Mitsubishi was a serious case of resale price maintenance and that the actions of management was deliberate. He went on to say that the withholding of supply involved senior officers and as a result of this the penalty should be at a level sufficient to deter repetition by both MEA and by other equally large corporations.

Mitsubishi Electric Australia  are a sponsor of the Western Sydney Wanderers. The CEO of the Australian Company is Takeshi Shihonmatsu.

Hirst and other senior management in the Company have so far refused to return our calls.