The sister company of a Mitre 10 MEGA operator has been fined $500,000 after a Commerce Commission investigation.

Commerce Commission chair John Small said the penalty handed down at the High Court in Wellington should serve as a lesson to others considering similar moves.

NGB Properties was accused of placing an anti-competitive covenant on a site close to Mitre 10 MEGA Tauranga, allegedly to prevent competitor Bunnings from opening nearby.

The Commission said NGB was the sister company of Juted Holdings Limited, which operated Mitre 10 MEGA in Tauranga.

Small said the Commerce Act banned using land covenants that were intended to substantially lessen competition in a market or were likely to have that effect.

“Land covenants can harm competition by raising barriers to entry or expansion in a particular market, making it harder for competitors to compete effectively and gain scale,” he said.

”In this case, the covenant was intended to stop Bunnings, a competitor to Mitre 10, from building close by which would deprive Kiwis in Tauranga of the benefits that might have come from a more competitive local market for DIY and building supplies.”

And the watchdog said land covenants were a problem in other industries too.

It said in the fuel, groceries and residential building supplies sectors, these covenants could be limiting competition.

Bunnings Warehouse made a bid to set up shop but a land covenant stymied its ambitions.

“This case illustrates that even a single covenant of short duration has the potential to have a substantial impact on competition,” Small said in a statement today.

“That’s why the Commission will continue to pursue companies who seek to benefit from anti-competitive land covenants.”

The regulator said Justice Francis Cooke agreed that restrictive land covenants were serious, and he imposed the $500,000 penalty.

The court said the penalty was significant, and should deter others who might think of engaging in similar activities.

According to Small, this was the first time a penalty had been imposed under section 28 of the Commerce Act.

That section of the act outlawed requiring, giving or enforcing of land covenants intended to substantially lessen competition.