Mitre 10 agreed a $500,000 penalty with Commerce Commission after buying up nearby property in Tauranga to prevent Bunnings opening in opposition and then registering a restrictive covenant against the title in what proved to be an ineffective attempt to prevent the site ever being used by a competitor. To clinch its purchase, Mitre 10’s opening offer at $850 per square metre was eventually pumped up to $1,046 square metre.
Mitre 10 enjoys a local monopoly for its central Tauranga MEGA store at Gate Pa. Competitor Bunnings’ closest outlet is some ten kilometres away in Mount Maunganui.
The High Court was told Mitre 10 was shaken to learn in 2018 that Bunnings had paid $7.9 million to buy a site five hundred metres down the road in central Tauranga. For Bunnings, this site was big enough for only a home improvement store. Land next door was needed, with the combined sites being large enough for a Bunnings Warehouse. A bidding war ensued between Mitre 10 and Bunnings, with each trying to get control of this adjoining land. Mitre 10 came out on top with its offer of $10.8 million. Looking towards a future onwards sale, Mitre 10 registered a restrictive covenant against title to its purchase, prohibiting any future owner from running a business on the site in direct competition with Mitre 10’s business.
Evidence was given that Mitre 10’s legal advisers were unaware of the Commerce Act rule prohibiting such restrictive covenants. They are anticompetitive; restricting competition, reducing consumer choice. The Act states such covenants cannot be enforced.
Mitre 10 removed its restrictive covenant before putting the property back on the market in 2021, selling to Kainga Ora at the original $10.8 million purchase price.
While Mitre 10’s adventure had limited direct financial cost, there was the economic cost of management time, reputational damage and the opportunity cost on $10.8 million which could have been put to more profitable use in the interim.
A $500,000 penalty for breach of the Commerce Act was approved by the High Court. The maximum penalty is ten million dollars.
Justice Cooke commented that simply purchasing land to stop a competitor getting a local foothold can, by itself, be considered anticompetitive behaviour in breach of the Commerce Act.
Commerce Commission v. NGB Properties Ltd – High Court (28.07.23)
23.122