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Caltex, Mobil and Shell Fined For Price Fixing

Caltex, Mobil and Shell were price fixing: High Court imposes $1.175 million penalties

The Auckland High Court today ordered Caltex New Zealand Limited, Mobil Oil New Zealand Limited and Shell New Zealand Limited to pay penalties totalling $1.175 million for breaching the Commerce Act by price fixing.

Commerce Commission Chair John Belgrave said that the Commission is delighted that after a long defended hearing Caltex, Mobil and Shell were found to have breached the price fixing provision of the Act.

"I believe that this is the first time anywhere in the world that it has been proved that a group of major oil companies acted anti-competitively over the price of petrol," Mr Belgrave said. "There have been successful cases against individual oil companies, but not against a group of major companies."

In October last year the Court found that the Commission had proved its case.

The Commission had alleged that the three companies colluded to jointly withdraw a discount from the price of petrol at more than 50 Auckland petrol stations. The discount was in the form of a free car wash offered to customers who spent $20 or more on fuel.

In his Judgment, Justice Salmon stated that the discount "… did operate as an integral part of petrol pricing or was a discount in relation to petrol."

He also stated "… that representatives from each of the oil companies made relevant untruthful statements to the Commission."

The Commission filed its statement of claim in September 1997.

Caltex and Mobil took unsuccessful strike out actions against the Commission’s case to the High Court and the Court of Appeal. The Courts rejected both challenges.

The trial was held in August and September last year, and Justice Salmon gave his decision in October.

The sentencing hearing was held two weeks ago, and Justice Salmon issued his decision on penalties today. He has ordered Caltex to pay $450,000, Mobil to pay $350,000 and Shell to pay $375,000.

Mr Belgrave said that the Court’s decision sends strong warnings to all businesses.

"First, price fixing is a major breach of the Commerce Act. It is fundamentally anti-competitive and anti-consumer. It limits—or even eliminates—consumers’ ability to shop around for the best prices. The oil companies profited, consumers paid more.

"Secondly, businesses must realise that price fixing covers all parts of a price, not just the final retail price. Formal and informal agreements among competitors about discounts, commissions, mark-ups and all other parts of prices are strictly prohibited.

"The Commission will continue to take action against price fixing."

Background
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
 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

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