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Set Top Box Distributor Fined For Price Fixing

By David Richards | Thursday | 14/12/2006

Digital Products Group the national distributor of Topfield branded digital set top boxes has been fined a massive $238,000 for price fixing in contravention of section 48* of the Trade Practices Act 1974. Sole Director Jai Kemp has also been fined $42,000.

The penalty was imposed by Justice Tracey of the Federal Court following proceedings instituted by the Australian Competition and Consumer Commission. Digital Products Group had earlier admitted to the court that in its dealings with a Melbourne based retailer it had breached section 48 of the Act by on two occasions attempting to induce and on 17 occasions inducing the retailer not to advertise certain Topfield digital set top boxes supplied by Digital Products Group at prices less than prices specified by the company, and using a statement of price that was likely to have been understood by the retailer as the price below which the retailer was not to advertise a certain Topfield digital set top box for sale. The contraventions took place between October 2003 and June 2005.

Digital Products Group's sole director, Mr Jai Kemp, admitted being knowingly concerned in 11 of the contraventions and was penalised $42 000.  Digital Product Group's national sales manager, Mr Mark Dopson, admitted being knowingly concerned in nine of the contraventions and was penalised $17 500.

As well as imposing these penalties, Justice Tracey ordered injunctions against Digital Products Group, Mr Kemp and Mr Dopson preventing them from engaging in similar conduct in future.  He also ordered that Digital Products Group implement a trade practices compliance program.

The orders were made with the consent of the parties.

"It is important that wholesalers understand that they cannot try to prevent retailers from advertising or selling their products below particular prices", ACCC Chairman, Mr Graeme Samuel, said today. "This case demonstrates that wholesalers and their individual representatives that do so face the risk of substantial monetary penalties being imposed against them.

"The ability of a business to advertise products at a discounted price can assist consumers in getting the best deal and encourages other businesses to compete on price".

"This was a genuine oversight by us and whilst that's not an excuse it's an expensive reminder that as a young company there are rules we need to follow," says CEO and General Manager Jai Kemp.
Since learning of the breaches, which occurred from 2003 to mid 2005, Digital Products Group has fully cooperated with the ACCC and as such was awarded a 30 per cent discount on the original proposed fines.  In a joint submission to the court, the ACCC acknowledged that: "The Respondents have cooperated significantly with the Commission and acknowledged their liability at the earliest stage in the proceeding… This has shortened the investigation, the proceeding and the trial, consequentially saved costs and enabled the Commission to focus on other investigations and proceedings.

"The Commission [submitted] that these mitigating features should result in a substantial discount from the penalties that would have been appropriate to impose without that cooperation and acknowledgment of liability.
"The 30% discount for cooperation and acknowledgment of liability proposed by the parties in this proceeding is… the most generous compared to all other recent [retail price maintenance] penalty cases."
Jai Kemp says that Digital Products Group will comply with all orders from the Federal Court sought by the ACCC: including the implementation of a TPA compliance program.

 "As soon as we were made aware of the ACCC investigations in February this year we sought expert advice and immediately began a program of TPA awareness for all of our staff," says Mr Kemp.
"Like many other small Australian businesses, I was simply unaware that we had breached the Trade Practices Act."  
"When I started our wholesale and distribution side of the business in mid 2003 I was more worried about getting letter heads printed and making sure I paid the electricity bill on time.  Not having a degree in business or a legal background I had no idea what retail price maintenance was - the information was not readily available in a form that was easily understood," adds Mr Kemp.
Since it began to distribute the Topfield brand in 2003 Digital Products Group aimed to be the market leader in personal video recorders and has now grown to a workforce of twenty. The size of the penalties along with the payment terms are such that Digital Products Group will continue to grow.
Jai Kemp warned other businesses about the risks associated with breaching the Trade Practices Act. 
"It's really important to make sure you understand the Act. We thought we were doing the right thing. It turns out that we weren't - and for that we apologise.  "Even though it has only been a short time since we received the court's ruling, we would like to move on and put this behind us. Digital Products Group would like to thank all of our supporting customers for a successful 2006. We look forward to another exciting year of growth in 2007, kicking off next week with the release of our long awaited Topfield High Definition Personal Video Recorder," concluded Mr Kemp.

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