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Giltrap City Toyota pay $150,000 for price fixing

Issued 7 February 2002/009

Giltrap City Toyota to pay $150,000 for price fixing

The Auckland High Court has ordered Giltrap City Limited, trading as Giltrap City Toyota,to pay a pecuniary penalty of $150,000 for price fixing in breach of the Commerce Act.

The penalty comes almost eight years after Giltrap City Toyota entered into a price fixing agreement with other Auckland Toyota dealers in June 1993. In December 1996, seven Auckland Toyota dealers admitted breaching the Act following a Commerce Commission investigation. They were each ordered to pay penalties of $50,000. Giltrap City Toyota did not admit any breach and elected to defend the Commission’s prosecution.

Commission Chair John Belgrave said the Commission is very pleased with the penalty imposed, which follows September’s High Court judgement by Justice Susan Glazebrook that Giltrap City Toyota and its former managing director, Mr Andrew MacKenzie, had breached the Commerce Act by entering into price fixing arrangements with other Toyota dealers.

“The judgement emphasises that price fixing agreements are one of the most serious type of anti-competitive conduct prohibited by the Commerce Act,” said Mr Belgrave.

He added: “Price fixing lessens competition in the most fundamental way – it prevents consumer choice by influencing prices. 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 treats price fixing as a serious issue and will continue to prosecute this behaviour.”

“The $350,000 penalty against the seven dealers in 1996 plus today’s amount sees this arrangement incurring penalties totalling half a million dollars,” said Mr Belgrave.

In setting the penalty, Justice Glazebrook said: “In a Commerce Act context credit given for cooperation and settlement would generally be substantial, given the public interest in promoting settlements in this context. This is especially so as such cases are often hard to prosecute and involve what would often be complex litigation.

“I have accepted that a substantial penalty credit would have been appropriate for other dealers because of the settlement. Giltrap City Toyota is not entitled to any such credit. I have also accepted the Commission’s submission that the size, standing and financial resources of Giltrap City Toyota justify a larger penalty than for the other defendants.

Her honour added: “A price fixing arrangement is deemed to lessen competition substantially as, by its very nature, it weakens the natural competitiveness that one would otherwise have expected to find between parties to it. It is open to the Commission to seek a deterrent penalty whether or not prices were affected by the price fixing arrangement.

“Deterrence is an important object when fixing penalty under the Act. Deterrence is not just a question of deterrence of the party that has contravened, but more importantly deterrence of the commercial community in general. If deterrence is to be achieved, it must be generally appreciated in the commercial community that the penalty will be more than petty cash to the traders concerned.

“Penalties must not be able to be seen as a type of licence fee and actions that breach the Act must be made commercially undesirable. In this regard a penalty which might be a deterrent for a small company may be of little significance to a large one. In addition to size and resources, questions of commercial standing are also material.”

Justice Glazebrook said that while Mr MacKenzie’s position was different from the other individuals in that he proceeded to a trial, she accepted that this may not have been entirely his own choice and he may have been obliged to defend the case because Giltrap City Toyota decided to do so.

In view of these factors, she did not consider it appropriate to impose a penalty on Mr MacKenzie.

Giltrap City Toyota has appealed the High Court ruling to the Court of Appeal.

Background information
The Commission has issued several media releases on this case:
1996/100 $350,000 penalties for Toyota dealers (4 Dec 1996)
1997/124 Toyota dealer to face trial for price fixing (16 December 1997)
1998/79 Commission wins in Privy Council: Giltrap City Toyota to pay costs and face trial for price fixing (30 October 1998)

Copies of those releases can be viewed on the Commission its web site

Please contact Jackie Maitland for an electronic copy of Justice Glazebrook’s judgement.

Communications Manager Jackie Maitland
Phone work (04) 498 0920

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