The Auckland High Court today imposed penalties totalling $350,000 after seven Auckland Toyota dealers admitted that they had breached the Commerce Act by fixing prices by agreeing to limit the discount available to purchasers of new cars.
Commerce Commission General Manger John Feil said the Commission took court action after investigating allegations that eight Auckland Toyota dealers had agreed on the maximum discounts they would offer buyers of new Toyota cars.
In an agreed statement of facts presented to the Court, the dealers admitted that at their regular monthly franchise meetings in May and June 1993, they discussed and eventually agreed on the maximum discounts they would offer to car leasing companies, fleet buyers and private individuals.
The dealers who admitted breaching the Act were: Albany Toyota, North Shore Toyota, North Western Toyota, Greenlane Toyota, Derbyshire Toyota, Manukau City Toyota and Papakura Toyota.
Court action is continuing against the eighth dealer, Giltrap City Toyota, which has not admitted breaching the Act.
The prices from which discounts could be made were the recommended retail prices suggested by the dealers' supplier, Toyota New Zealand.
Acting on information they had received, Commission investigators executed search warrants on the dealers in August 1993, and court action started in March 1994. The dealers co-operated with the Commission throughout the investigation.
Today, the Court imposed penalties of $50,000 against each of the dealers who admitted breaching the Act.
Mr Feil said price fixing is prohibited by the Commerce Act because it lessens competition in the most fundamental way - it prevents customer choice influencing prices.
"This arrangement could have prevented customers being able to negotiate better prices because all the dealers involved knew what each others' minimum prices would be," Mr Feil said. "They had agreed on maximum discounts from the manufacturer's recommended price list.
"Their ultimate purpose was to limit, if not stop, competition between themselves. The effect on customers would have been higher prices. However, because of the immediate intervention of the Commission the arrangement had little if any effect and the Commission could not establish that anyone had been adversely affected by the agreement."
Mr Feil said it is important to note that it is not illegal for a competitor acting individually to follow a rival's prices or to offer customers a deal to match or beat a lower price.
What is illegal, are agreements between competitors about prices. These do not need to be formal contracts. An understanding reached at, for example, an informal meeting, at a sports club or over the phone can still amount to price fixing and can breach the Act.
"The Commission views price fixing seriously," he said, "and will continue to take action against it."
Media contact: Communications Officer Vincent Cholewa
