Cordless telephone distributors were price fixing: all distribution agreements must comply with Commerce Act
Published23 Apr 2000
Acknowledgment by cordless phone distributor, Vtech Distributors Limited, and another distributor that they were price fixing is a warning to all business sectors: competitors must not use distribution agreements to set prices.
In a settlement with the Commerce Commission, the companies have acknowledged that their distribution agreement, which included a pricing schedule for "Voyager" brand cordless telephones, was a price fixing arrangement.
The Commission's Commerce Act Manager, Geoff Thorn, said that the Act prohibits competitors colluding over prices. In this case, the two companies agreed on minimum wholesale and retail prices for cordless telephones.
"Such arrangements are fundamentally anti-competitive," Mr Thorn said. "They prevent customers shopping around for a better price. If they are allowed to be effective, their long-term effect is to increase costs to consumers.
"We have ended this investigation with a settlement because it involved only a very small market segment long-range cordless phones and both companies co-operated as soon as the Commission became involved.
"We accept that both companies did not understand the law, rather than deliberately set out to breach it. However, if they do not honour the settlement they signed, then we can consider court action."
Courts can impose penalties of up to $5 million for price fixing and other anti-competitive pricing arrangements. Other Commission court action against anti-competitive pricing arrangements includes:
Nine North Island meat companies, total penalties $5.51 million, including $1.5 million against each of Affco New Zealand Limited, Richmond Limited and Lowe Walker NZ Limited
Caltex New Zealand Limited, Mobil Oil New Zealand Limited and Shell New Zealand Limited, total penalties $1.175 million
Eli Lilly & Co (NZ) Limited's animal health remedies division, Elanco, and Chemstock Animal Health Limited, total penalties of $700,000
Christchurch Transport Limited and its Chief Executive, total penalties $400,000
Seven Auckland Toyota dealers, total penalties $350,000; action is continuing against an eighth dealer
Country Fare Bakeries Limited and Quality Bakers New Zealand Limited, total penalty $300,000
Toyota New Zealand Limited, $250,000 penalty
DB Breweries Limited, $110,000 penalty
Acer Computer New Zealand Limited, $83,000 penalty
Summary of settlement
The two companies have given signed undertakings including:
acknowledgment that their "distribution agreement" and "pricing schedule" constitute price fixing under the Commerce Act
to modify their distribution agreement to ensure that it complies with the Act
to not enter into, enforce or attempt to enforce any contract arrangement or understanding that fixes the price of goods or services, and
that if they do not honour the settlement the Commission will consider further action.
