A group of tourist industry companies has settled with the Commerce Commission, signing an undertaking to stop price fixing by setting standard commission rates.
Commission Chairman Dr Alan Bollard said the shareholders of PA Tours Services Limited - R.Lewis and Associates, Jade Travel, General Travel, Pan Pacific Travel, South Pacific Vacations, Ritchies Coachlines and Pacific Tourways - have all settled with the Commission.
The Commerce Act prohibits competitors working together to fix any part of a price. This includes setting standard commission rates. PA Tours was not trying to fix total prices for excursions.
PA Tours was formed in November last year by the companies which signed the settlement. One of its purposes was to collect the commissions excursion operators (e.g. boat rides and bungy jumping) pay to tour operators who bring tourists to their excursions. It would make the GST and other tax payments required and then distribute the money to the shareholders.
It is important to note that the commissions themselves are not a breach of the Act. Individual companies are able to negotiate commissions with individual excursion operators and the payments could still be processed by PA Tours. What is prohibited is competitors working together to set standard rates.
Queenstown and the Southern Lakes area was chosen as the first place in which to start the system and only excursion operators were approached initially. It was proposed to eventually expand the system throughout New Zealand and to include shops, accommodation and eateries.
The Commission became involved after the shareholders arranged for Richard Lewis to set standard commission rates. Joint ventures are exempt from this section of the Act. However, the Commission has determined that PA Tours was not a joint venture, although the company takes issue with that finding.
PA Tours has stopped setting standard commission rates, and individual shareholders are now negotiating their own commission rates with excursion operators.
It does not appear that PA Tours was an arrangement between competitors aiming to exclude rivals.
The stated intention was to invite other companies to become shareholders once the scheme was established. In addition, there was nothing to prevent the tour operators and bus operators involved working with other tourist companies or with excursion operators who had not agreed to pay commission through PA Tours.
