Elanco and Chemstock pay $700,000 penalties for price fixing
30 April 1999
The Auckland High Court today imposed the second highest Commerce Act penalties to date, a total of $700,000, after two animal health remedies companies admitted they had breached the Commerce Act by fixing prices for some of their products in 1996.
Commerce Commission Acting Chairman Mark Berry said that the Commission filed court action against Elanco, which is the trading name of Eli Lilly & Company (NZ) Limited's animal health remedies business, and Chemstock Animal Health Limited in July last year.
The Court ordered Elanco to pay a $500,000 penalty and Chemstock to pay $200,000. The penalty imposed on Elanco was also the second highest single penalty imposed under the Act to date.
Elanco and Chemstock admitted that they had breached section 27 via section 30(1) of the Act. These sections work together and prohibit competitors colluding over prices.
Elanco is a manufacturer and wholesaler of animal health remedies while Chemstock is a wholesaler. They compete in a nation-wide wholesale market, primarily supplying veterinarians.
Mr Berry said that Elanco and Chemstock agreed they would not compete for customers, with Elanco keeping the larger veterinary practices and Chemstock the smaller. This agreement included both companies knowing the minimum prices Elanco would offer to smaller veterinary practices.
In addition, Elanco attempted to include two other wholsalers in similar arrangements. The other wholsealers refused to be involved.
"Price fixing is fundamentally anti-competitive," Mr Berry said. "It strikes at the very heart of competition - it prevents customers shopping around for better prices.
"There is a strong warning here from the Commission and the Court.
"Where we find evidence of price fixing, we will investigate and, if we believe the law was broken, we will take enforcement action.
"The Court has shown how seriously it views price fixing. In this case the companies admitted that they broke the law. Even allowing for that admission, the Court still imposed $700,000 in penalties."
The products involved in this case were cattle growth promotants, Compudose 200 and Compudose 400, and Rumesin anti-bloat treatments for cattle.
Other Commission court action against anti-competitive price arrangements includes:
- Nine North Island meat companies, total penalties all companies $5.51 million (section 27), including $1.5 million against each of Affco New Zealand Limited, Richmond Limited and Lowe Walker NZ Limited;
- Christchurch Transport Limited and its CEO, total penalties and costs $400,000 for attempting to rig bids for contracts (section 30);
- Toyota New Zealand Limited, $250,000 penalty plus $10,000 costs (section 37);
- Country Fare Bakeries Limited and Quality Bakers New Zealand Limited, $150,000 penalty each (section 30);
- DB Breweries Limited, $110,000 penalty plus $5,000 costs (section 37);
- Seven Auckland Toyota dealers, $50,000 penalty each; action is continuing against an eighth dealer (section 30);
- Roadmarkers Waikato (1981) Limited, $15,000 penalty plus $5,000 costs (section 30);
- Caltex (NZ) Limited, Mobil Oil New Zealand Limited, and Shell New Zealand Limited, still before the courts (section 30).
Media contact: Commerce Act Manager Geoff Thorn
Phone work (04) 498 0958, cellphone 021 630 466
Communications Officer Vincent Cholewa
Phone work (04) 498 0920