A Commerce Commission settlement has ended a potentially illegal pricing arrangement used by the Trans-Tasman Shipping Alliance.

Commission Chairman Peter Allport said that the Commission's view was that the arrangement between Tasman Express Line Limited, P&O Nedlloyd (New Zealand) Limited and South Pacific Shipping Limited (now in liquidation) was a form of price fixing.

Price fixing is prohibited by the Commerce Act. It occurs when competitors discuss or agree on prices or parts of prices.

In this case the Trans-Tasman Shipping Alliance arrangement related to how the companies would recover the costs of Ministry of Agriculture and Forestry checks and other Government charges related to unloading ships in New Zealand. The arrangement was to pass on the full cost of the charges to customers.

Mr Allport said the Commission has no concern with an organisation passing on to customers part or all of costs imposed by third parties. However, the decision must not be made in collusion with competitors. Organisations can set their own prices but they must do so unilaterally.

This case highlights important issues for the shipping industry and business in general.

The shipping industry has legal exemptions from some sections of the Commerce Act. These exemptions apply to land-based charges for export cargo and to the carriage of goods by sea. They do not apply to arrangements relating to land-based charges for import cargo.

The companies involved in the Trans-Tasman Shipping Alliance have told the Commission that they mistakenly believed that their arrangement was covered by the exemption and they had not intended to breach the Act.

Importantly for all industries is that intent or purpose is not required for this section of the Act to be breached. It prohibits a contract, arrangement or understanding "that has the purpose, or has or is likely to have the effect, of substantially lessening competition".

"If businesses are unsure about any contract or arrangement they may have entered into, or are considering, then they should get legal advice from a lawyer with expertise in competition law," Mr Allport said.

"The Commission can tell them what the law says and explain how the Commission operates, but we cannot give legal advice."

Media contact: General Manager John Feil

Phone work (04) 498 0963

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its website www.comcom.govt.nz