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Final settlement reached in livestock price fixing case

24 October 2017

A settlement has been reached with Elders Rural Holdings Limited (Elders) in a price fixing case arising from the livestock industry’s response to the introduction of the National Animal Identification and Tracing Act 2012 (NAIT Act).

The Commerce Commission launched an investigation in 2012 after receiving a complaint from a Northland farmer.

As Elders is no longer trading, the Commission and Elders agreed to seek a declaration from the Court that Elders breached the price fixing provisions of the Commerce Act. At a hearing at the High Court at Auckland earlier this month, Elders admitted it was involved in three anti-competitive agreements with PGG Wrightson Limited, Rural Livestock Limited, and other members of the New Zealand Stock and Station Agents’ Association.

The agreements were that:

  • saleyards would charge a minimum fee of $25 to tag cattle, and $10 for any calves, presented to a saleyard without the ear tag required by the NAIT Act. Agents would pass the fee on to farmers
  • agents would charge farmers a radio frequency identification device (RFID) administration fee of $1.50 per head of cattle (split equally between the vendor and purchaser), to register saleyard based cattle movements
  • saleyards would increase existing yard fees by $1.50 per head of cattle (split equally between the vendor and purchaser).

Elders ceased trading in July 2014 when it sold its livestock business to an unrelated third party. However, its Australian parent company, Elders Limited has agreed to pay $200,000 towards the Commission’s investigation costs. The settlement reflects the fact Elders is no longer trading.

In her declaration judgment released today, Justice Patricia Courtney noted that none of the individuals involved, including those in senior management positions, seemed to realise the potential implications of their conduct. “Despite the element of deliberateness in the agreements, there was no intention to contravene the Act and no secrecy about the agreements reached. If the senior members of the industry could fall into this error then it must be a risk for other members of the industry and other industry bodies.”

Commerce Commission Chair Dr Mark Berry welcomed the conclusion of the long-running case. “The livestock companies should have decided independently how to respond to the new law, instead of colluding on fees to the detriment of farmers. Without these anti-competitive agreements, fees may well have been set lower than they were.”

“Several of our recent cartel cases have involved collusive agreements arising from industry meetings. While it is not illegal for industry members to get together to share knowledge and engage on industry-wide issues, industry groups need to take care to ensure their members aren’t engaging in anti-competitive behaviour when taking part in association activities," Dr Berry said.

Background

In December 2015, PGG Wrightson and Rural Livestock were fined $2.7 million and $475,000 respectively after admitting their conduct in this case. PGG Wrightson also agreed to pay $50,000 towards the Commission’s investigation costs.

In December 2016, four current or former employees of PGG Wrightson and one former employee of Elders Rural Holdings Limited were ordered to pay penalties totalling $105,000 for their roles in the price fixing agreements. Four of the men, Nigel Thorpe, Donald Baines, Douglas Cartridge, and Andrew Clark, were members of PGG Wrightson’s NAIT Project Team. The fifth individual, Stuart Chapman, was Elders’ managing director at the time. In addition to their respective penalties, they each paid $5000 towards the Commission’s investigation costs.

Warning letters were also issued to the following parties who the Commission considered were likely to have breached the Commerce Act: 

  • Allied Farmers Limited
  • Peter Walsh & Associates Limited
  • CRT Livestock Limited
  • L.I Redshaw Limited
  • Central Livestock Limited
  • Hazlett Rural Livestock Limited
  • Southstock Limited
  • the New Zealand Stock and Station Agents’ Association.