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Commission Protects Cheaper Wholesale Car Parts

Commission Action Protects Cheaper Wholesale Car Parts

Media Release 1999/74

Commerce Commission action against the New Zealand Collision Repair Association has ensured that savings on car parts will be passed on to an insurance company paying for repairs and, ultimately, to the company's customers.

Commission Acting Chairman Mark Berry said that protecting healthy competition in the wholesale market for car parts has led to new business practices that should benefit consumers.

In a settlement with the Commission, the Association has admitted that it breached the Commerce Act by trying to prevent State Insurance Limited introducing a new buying system to reduce the price of car parts.

Under the new system, which is being trialed in Wellington and Christchurch, State buys car parts directly from suppliers and is charged wholesale prices.

Before the new buying system, all car repairers - many of them members of the Association - bought parts at wholesale prices and charged them to State at retail prices. The margin between wholesale and retail prices is on average between 15 and 30 percent.

In December last year the Association wrote to 42 car part suppliers, threatening that its members may boycott those suppliers who sold parts directly to State Insurance at wholesale prices.

The attempt failed because many suppliers would not co-operate with the Association. "In this case, State introduced a new business practice to reduce costs to itself and, ultimately, to its customers," Mr Berry said. "The Association attempted to stop that practice by threatening a collective boycott.

"Whilst every individual business has the right to say: 'no, I will not do business with you', there must be no collusion in coming to that decision.

"The Act gives the suppliers, the repairers, State and State's customers the right to choose individually who they will do business with.

"The philosophy behind it is that choices made by customers, competitors and suppliers should determine the shape of New Zealand's economy. The Act does not define how businesses should behave but prohibits anti-competitive behaviour."

The Commission and the Association have entered into a Deed of Settlement including signed undertakings that:

? the Association admits it breached the Commerce Act;

? the association will immediately stop trying to restrict State Insurance acquiring car parts;

? the Commission can take court action if the Deed is not honoured; and

? the Commission may publicise the settlement.

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