Warranty Conditioned on Use of Branded Supplies |
Printed in the Business Monday of October 1st, 2012 From time to time the Commission is made aware of certain commercial practices which are potentially anti-competitive and which are likely to result in significant harm to consumer welfare. When this occurs the Commission’s role is to investigate the compliant. However, it is also necessary to remind businesses of the need to be fair in their transactions. Lately, a fairly common complaint to the Commission is that certain suppliers of business and other mechanical equipment are requiring that consumers who purchase their equipment, utilise consumable supplies (maintenance or replaceable parts) only of the supplier’s brand, as a condition of the product’s warranty. This practice usually occurs in a scenario where a consumer purchases a branded piece of office/mechanical equipment from a local agent. That consumer then decides to purchase for that equipment, consumables from a different supplier but which are compatible with his equipment. The first supplier/agent of the branded equipment recognises that the consumer has used consumables that are not specific to the brand and informs the consumer that unless he reverts to the original brand of consumables he risks voiding the supplier’s warranty. The question that arises therefore from this this type of practice is whether or not suppliers can or should require that customers use consumables only from the suppliers themselves or a specifically named supplier as a condition of their warranty. This type of practice being described may be described as “exclusive dealing”. Exclusive dealing in the Fair Competition Act is described as:
The Act further states that:
In regard to the above scenarios therefore an interpretation of the law is that yes a supplier or brand agent can condition his written or implied warranty on the consumer using a specific article or service that conforms to prescribed specifications. Such specifications may include articles of an identified brand, trade, or corporate name, and may be so specified if the use of the alternative poses any threat to the performance of the equipment. In such instances the dealer’s actions are justified. If however the inclusion of conditions is intended to restrict or impede a competing brand, this action would be deemed a restriction of competition and may be prohibited. Usually where it can be demonstrated that consumables from another brand have been used frequently without any harm to the equipment, it may be difficult to show that the use of such consumables represent a real threat to the proper functioning of the equipment. A supplier who is found to be in breach of the Act is subject to the following penalties:
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