High Court warning to trade and professional associations
Published23 Aug 1996
The Rotorua High Court today sent a warning to all trade and professional associations that the Commerce Act applies to them and they cannot act anti-competitively.
Justice Robertson had particularly strong words for Rotorua moteliers when he found that the Rotorua Branch of the Motel Association of New Zealand had breached the Act.
Commerce Commission Chairman Dr Alan Bollard said the Commission took court action against the Rotorua Branch of the Association because it had expelled two members, Kiwi Lodge and Bel Aire Motel, for using kerb-side billboards to advertise reduced rates.
The Branch had previously passed a resolution which in effect meant that if Kiwi Lodge and Bel Aire Motel did not remove their billboards, then they would be expelled from the Association.
After negotiations about the court action, the Branch agreed to the Court entering judgment against it for breaching the Act. The Act prohibits competitors working together to exclude a rival.
However, before the Court could enter its judgment, the Branch was dissolved.
Justice Robertson was extremely concerned that before he could conclude the matter the Branch had been dissolved and he could not impose a penalty against it.
He warned that if any motel operators breached the Act in future, then they could expect penalties considerably higher than the $15,000 that had been suggested when the Branch agreed to judgment.
Dr Bollard said the Commission pays close attention to trade and professional associations because they are a venue at which competitors meet and discuss their businesses.
Associations and their members must be aware that if their rules or discussions affect competition, then they are covered by the Commerce Act.
"Collusion to exclude competitors is one of the most common problems with associations," Dr Bollard said.
"It is prohibited by the Commerce Act because it is a practice that prevents healthy competition developing, and customers lose out. In this case, the Branch acted against motels that advertised cheaper rates.
"The Court has clearly warned that it is prepared to impose severe penalties and the Commission is warning that it will take court action against significant or repeated breaches."
Media contact: Communications Officer Vincent Cholewa
