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More Commission action against oil companies

More Commission action against oil companies: Mobil and Caltex misleading advertising of petrol prices
Media Release 2000/50

The Commerce Commission has warned Mobil Oil New Zealand Limited and Caltex New Zealand Limited to take urgent steps to ensure that they do not make misleading claims about petrol prices, or they will face prosecution under the Fair Trading Act.


Commission Fair Trading Manager, Rachel Leamy, said that both companies were charging more for petrol at pumps—Mobil at Omarama and Caltex at Culverden—than they advertised on roadside signs.


These are the Commission’s third and fourth actions against oil companies this year.


Last month the Wellington District Court fined Shell New Zealand Limited $10,000 after it did not act on a Commission warning and continued to charge more for petrol at Franz Josef than it advertised on the roadside sign.


In February this year the Auckland High Court ordered Caltex, Mobil and Shell to pay penalties totalling $1.175 million for breaching the Commerce Act by colluding over prices in Auckland.


"Petrol is a vital part of a modern economy," Ms Leamy said. "The Commission actively monitors the oil industry for possible breaches of the Fair Trading and Commerce Acts, and we will continue to do so.


"The problems we have found so far with higher prices at some pumps than on the roadside signs appear to be caused by weak business practices rather than deliberate attempts to mislead customers.


"Whatever the reason, this practice has the potential to mislead customers about the price of a vital commodity and must stop."


Ms Leamy said that these cases also highlight a wider issue about prices relevant to all industries: "Price is a fundamental element of healthy competition and is an important part of most consumers’ buying decisions.


"If competition is to be effective, then consumers need to be able to rely on the information provided so that they can make informed choices about what they will, or won’t, buy.


"Misleading advertising hurts consumers and can distort competition and hurt competitors by taking away their customers unfairly. For these reasons the Act prohibits false or misleading claims about prices.


"We see warnings as a way of helping businesses understand the law. We follow up warnings, and if they are not heeded we consider further action."


Background


Fair Trading Act cases


The Fair Trading Act prohibits false or misleading claims about prices.


Mobil was charging 7 cents a litre more for 91 octane petrol at its Omarama Truck Stop than was advertised on the billboard outside the petrol station. The advertised price was 103.9 cents. The price charged was 110.9 cents.


Caltex was charging 5.1 cents a litre more for both 91 and 96 octane petrol at its Culverden truck stop than was advertised on the billboard outside the petrol station. The advertised prices were 105.9 and 110.9 cents. However the prices charged were 111 cents for 91 octane and 116 cents for 96 octane.


Ms Leamy said that the Commission had previously warned Shell New Zealand Limited about the same problem at Shell’s Franz Josef petrol station.


The Commission followed up its warning to Shell and found that the problem had not been fixed. The Commission then prosecuted Shell, which last month pleaded guilty to breaching the Fair Trading Act and was fined $10,000 by the Wellington District Court.


Commerce Act case


The Commerce Act prohibits collusion among competitors over any parts of a price.


In September 1997 the Commission alleged that Caltex, Mobil and Shell 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.


After various legal challenges from Caltex and Mobil, the case went to trial in August and September last year, with Justice Salmon giving his decision in October.


In February this year Justice Salmon imposed total penalties of $1.175 million on the three companies.


Media contact: Fair Trading Manager Rachel Leamy

Phone work (04) 498 0908, cellphone 025 208 0841


Senior Advisor Communications Vincent Cholewa

Phone work (04) 498 0920


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