Comcom warns roofer on cartel behaviour

Restrictive clause will not be reinforced. 

The Commerce Commission has formally warned Consolidated Alloys NZ for cartel-like behaviour after the Australian-owned manufacturer used a settlement over a patent dispute to try and restrict roofing products available in New Zealand.

In June 2013 the Auckland-based manufacturer negotiated a settlement with competitor Edging Systems (NZ) resolving a commercial dispute about whether Edging System's EZ-Edge product breached Consolidated Alloys' registered patent over soft-edge flashing products used on homes with metal roofs.

As part of the settlement, Edging Systems, a New Plymouth-based roofing products maker, paid a lump sum and royalties on annual sales of its EZ-Edge product, while also agreeing not to sell any other soft-edge flashing products covered by the patent until June 2030.

In October 2013, Consolidated Alloys approached Edging System over its new product, Vent Edge, which the Australian firm claimed breached the conditions of the settlement but didn't take any further action.

The regulator began investigating in September 2014 after Edging Systems came to the commission seeking immunity for alleged cartel conduct affecting competition.

The commission says while the settlement's clause may have been inserted to protect royalty payments, restricting sales is likely to "substantially" lessen competition. Edging Systems' two products have brought competition and led to some price decreases the regulator says.

Following the commission's investigation, Consolidated Alloys formally advised it will not enforce the restrictive clause and has also not prevented its competitor from selling Vent Edge.

"Without a court ruling we can't determine whether the patent validly applied to any of ESL's flashing products," Commerce Commission chairman Mark Berry says. "However, we believe the clause would have restricted competition after the patent expired, ultimately impacting on customers' choice. Clauses like this protect established products by limiting innovation and the development of more efficient or better-value products that benefit consumers."

The commission says it considers a public warning appropriate and will take no further action.

Consolidated Alloys registered the patent in 1995 and it expired in August this year.