The Commerce Commission has warned four tourist organisations that their proposed guidelines to standardise "kickbacks"are, in the Commission's view, price fixing and risk breaching the Commerce Act.

The Commission's General Manager, John Feil, said that warning letters have been sent to the Inbound Tour Operators' Council (ITOC), New Zealand Bus and Coach Association (NZBCA), New Zealand Tourist Drivers' Guild (NZTDG) and the New Zealand Tourist Industry Association (NZTIA).

They have been warned that the Act prohibits price fixing, and that, in the Commission's opinion, the guidelines were a form of price fixing. Price fixing is an arrangement among competitors over pricing issues. It is prohibited because it is fundamentally anti-competitive. It prevents or limits customer choice influencing prices.

Kickbacks are a payment made by a business to a tour operator for bringing customers - usually on bus trips - to the business.

The Commission believes kickbacks are an unhealthy practice. They should be condemned not regulated.

However, kickbacks themselves are not prohibited by the Act. The level of any kickback must be determined between the individual business and tour operator involved. They must not be set by trade associations or by collusion among groups of competitors.

The Act allows trade associations to make recommendations on pricing issues, but they must not enforce the recommendations.

Mr Feil said that in this case the guidelines used the word "recommended", but the Commission's investigation showed that ITOC, NZBCA, NZTDG and NZTIA all intended that the guidelines would set standards and be regulated.

He said the Commission was concerned that the guidelines had been falsely promoted as approved by the Commission.

"These guidelines have no kind of approval from the Commission at all," he said. "The Commission never approves or endorses any business schemes, and any claim that a scheme is 'approved' by the Commission should immediately sound alarm bells."

At this stage the Commission does not intend to take the matter further and has ended its investigation. However, if the Commission receives evidence that despite its warning any attempts are made to enforce the guidelines, then it will reopen the investigation with the aim of taking prosecutions.

"There is a message here for all trade organisations," Mr Feil said. "Arrangements among competitors about pricing issues are prohibited because they are anti-competitive. And that applies to more than just the final price.

"In this case kickbacks were the issue agreed on. But the law also applies to discounts, rebates, formulae for working out quotes and other pricing issues."

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 web site www.comcom.govt.nz