1999: a busy successful year of focusing on major issues for Commerce Commission
29 December 1999
"1999 has been a busy and successful year for the Commerce Commission," said its Chairman, John Belgrave.
"We have achieved good results in enforcement and adjudication roles and met new demands in the electricity sector. It has been very much a year of focusing on major issues to reinforce the work and precedents that we had established and developing our views under the Electricity Industry Reform Act (EIR Act).
"Courts imposed high Commerce Act penalties, record penalties were imposed under the Fair Trading Act, settlements bringing significant benefits to competition and consumers were achieved, and we had more than 50 adjudication decisions to investigate."
Major Commerce Act Litigation
"For what appears to be the first time in the world, the Commission proved that a group of major oil companies colluded to fix petrol prices," Mr Belgrave said. "There have been successful cases against individual oil companies but as far as we are aware, this was the first success against a group of major oil companies."
The Auckland High Court found that Caltex (NZ) Limited, Mobil Oil New Zealand Limited and Shell New Zealand Limited had acted anti-competitively and had fixed the price of petrol by jointly removing a discount at more than 50 Auckland petrol stations. Sentencing will be next year.
The Commission started its case in 1997 and Caltex and Mobil fought legal changes through the High Court and the Court of Appeal before the case finally went to trial in August this year.
The highest penalty imposed during the year was a total of $700,000 on Elanco, which is one of the trading names of Eli Lilly & Company (NZ) Limited, and Chemstock Animal Health Limited for price fixing. These companies provide wholesale supplies to veterinarians, and they colluded over the prices of cattle growth promotants and medicines.
Acer Computer New Zealand Limited, which is a subsidiary of Acer Inc, the third largest personal computer manufacturer in the world, paid a penalty of $83,000 after it admitted attempting to have two wholesalers agree to minimum mark-ups. Distributors can recommend resale prices, but any attempt to enforce them is illegal.
A case alleging that Carter Holt Harvey Building Products Group Limited acted anti-competitively against a Nelson company trying to compete in insulation markets was also tried this year in the Auckland High Court. The Court will release its decision next year.
Major Fair Trading Act litigation
The Napier District Court imposed the highest fine it could under the Fair Trading Act, $30,000 against an individual, and imposed the highest compensation order a District Court can make, $200,000, when it sentenced Lisa Sharon Morton for running the Joker 88 and Liberty Group Bond pyramid schemes.
Action against other alleged pyramid schemes included interim court orders against Maximus Intermediaries Limited and an associated company. Under the interim orders Maximus' bank accounts (containing more than $250,000) have been frozen. This case is still before the courts.
In other cases:
- FAI Home Security Holdings New Zealand Limited was fined $10,000 for making false claims that security guards would respond to home alarms in rural Taranaki when they would not.
- Autoworld Richmond Limited was fined $8,000 for misleading claims in advertising that every second hand car purchased came with a three year guarantee. The cars did not have a guarantee, but a mechanical breakdown insurance policy with claim limits, exclusions and a $100 excess on every claim.
- Gullivers Pacific Group Limited, which trades as Budget Travel, was fined $8,000 for not disclosing extra costs that increased the cost of travel and accommodation packages by more than 50 percent for some customers.
Settlements involving companies giving signed undertakings of how they would change their behaviour to ensure that they would comply with the Commerce and Fair Trading Acts proved highly successful.
The Commission follows-up all settlements and in two cases this year took prosecutions when settlements were not honoured. Importer Geeta Trading Limited was fined $6,000 for importing unsafe babies' rattles. Greenbark Enterprises Limited, which trades as Mothercare New Zealand, was fined $4,000 for children's night clothes that did not meet the fire safety standard and other clothing that did not meet the care labelling standard.
Major settlements included those with:
- the New Zealand Collision Repair Association to prevent it acting anti-competitively against an insurance company that had introduced a new buying system to reduce the price of car parts
- Ansett Express Couriers and the airline Ansett New Zealand (despite their similar names, the companies are not related) to renegotiate a contract that, in the Commission's view, substantially lessened competition in the same day airfreight market
- Dairy Board subsidiary, Livestock Improvement Corporation, to ensure that it does not limit competition in markets for the provision of dairy cattle artificial insemination services and for the provision of farm advisory services to dairy farmers
- Telecom New Zealand Limited in which it admitted that a number of its cellphone advertisements breached the Fair Trading Act by not adequately disclosing additional costs and other conditions, and
- Holden, Mitsubishi and Nissan, in which all three companies acknowledged that their advertisements were liable to mislead consumers about prices of new cars.
During the year the Commission granted two authorisations, and two more applications were withdrawn after the Commission gave preliminary views that it would not grant authorisation. The telephone number administration deed and the security system for the national electricity grid were authorised. Kiwi Co-operative Dairies Limited withdrew its application to acquire South Island Dairy Co-operative Limited and the companies involved withdrew their application for a "mega-merger" of up to nine dairy companies and the Dairy Board.
The Commission made 26 business acquisition clearance decisions. Twenty clearances were given and six declined. One further application was withdrawn by the applicant.
The Commission made 20 decisions on applications for exemption from the EIR Act. Ten exemptions were granted, seven temporary exemptions of up to a year were granted, three were declined and three were withdrawn by the applicants.
Statistics, 1999 calendar year
Court actions started 22
Settlements accepted 35
Warnings issued 234
Adjudication decisions made 48
Media contact: Chairman John Belgrave, 021 650 045
Communications Officer Vincent Cholewa
Phone work (04) 498 0920