ISSUE NO.61 March 2000
From the Chair: an invitation and
IN THIS ISSUE
I welcome opportunities to discuss with the Commission must make in
business and consumer interests how administering these statutes. This is very
the Commerce Commission will be much in line with world-wide trends—
Commission publications .............. 2
prioritising our work for the future. We antitrust statutes tend to evolve on the
value our relationships with you— basis of court precedents and adjudication
Product recalls register ................. 2
relationships I want to continue to decisions made by regulators.
From the courts ............................. 3
Increasingly, decisions are based on
Contact between the Commission, economic as well as legal principles. This,
Commission settlements ............... 6
business and consumers is an important coupled with the fact that the business
part of compliance with the three Acts acquisition clearances and authorisations
Commission warnings ................. 10
that we enforce. Business and that come to the Commission tend to be
consumers need to be aware of our more complex, impresses on new
Business acquisitions ................. 11
roles and procedures. We need to be Commissioners the need to take into
aware of how our economy is changing account not only what is written in the
Electrcity Industry Reform Act ... 14
so that we can develop our procedures statutes, but also court and Commission
to keep pace. precedents, the often considerable
Problems in Gisborne .................. 15
economic or consumer welfare dimensions,
For my first months in the Commission, and the need at all times to ensure that
Commission website ................... 15
towards the latter part of 1999, I had to decisions will stand up to court appeal or
rely very much on other Commissioners similar review.
and staff. Indeed, their ongoing advice
and counsel continue to be very much Related to this, certainly, is a strong
part of our day to day relationships. appreciation of the way in which the
The commitment of staff and the active Commission goes out of its way to see
involvement of Commissioners is a that the processes governing its work
great strength of the Commission. ensure that all interested parties to an
issue are able to be heard. Published by:
Overall, it is the complexity of the Commerce Commission, PO Box 2351,
Wellington, New Zealand
Commission’s quasi-judicial and When it comes to enforcement activities, Telephone (04) 471 0180
enforcement roles that has been to the the same underlying principles are evident. Facsimile (04) 471 0771
forefront in my initial responses to the Commission enforcement action must be ISSN 0114 8354
organisation. The very nature of the based on a rigorous legal and economic
The Commission welcomes reprinting of
Commerce and Fair Trading Acts, in analysis that will stand up in court to the material in this newsletter. However, it should
that neither is prescriptive, brings into rules of evidence. This principle applies to not be relied on as legal advice.
sharp focus the types of judgments that
(continued on page 2)
March 2000 1 FAIR'S FAIR
all enforcement decisions, regardless of It is not possible, obviously, to predict behaviours of firms or individuals and
the magnitude of the issue involved. the outcome of the Government’s can also influence the degree to which
enquiries into electricity and firms remain dominant in markets.
Coming out of all this is my firm belief telecommunications, but they are likely Likewise, under the Fair Trading Act, no
that administering the Commerce, Fair to have implications for regulatory sooner has the Commission succeeded
Trading Act and Electricity Industry policy, with possible flow-on in changing one set of behaviours, than
Reform Acts efficiently and effectively, implications for the Commission. another set of circumstances, which can
requires a considerable level of work against the interests of
informed judgment both on the part of At the same time, the new Government consumers, arises.
Commissioners and Commission staff. understandably is looking to ensure
that it is getting value for money from Perhaps only one thing about the future
The immediate future will pose exciting all Crown agencies. The Commission remains certain, that is the Commission
challenges for the Commission. The continuously re-evaluates its Commerce cannot be expected to be resourced to
new Government has made it clear that Act and Fair Trading Act priorities to address all the issues that come in front
it is looking to amend the Commerce target our resources on areas where of it. The Commission will continue to
Act, particularly in the areas of there are significant economic impacts re-evaluate priorities to make sure its
definitions of dominance, penalties and and where consumers benefit most from resources are targeted to those areas
the application of section 36. By the our enforcement initiatives. that need maximum input for consumer
same token, amendments are also likely welfare and to promote economic
to be proposed to the Fair Trading Act. The pace of technological change on its benefits throughout the economy.
own can make marked differences to
From the Chair: recent speeches
March 13, Wellington Rotary Club, The March 20, Public Sector Accountants March 22, New Zealand Petroleum
Commission - its Role Within the Special Inteerst Group, Wellington, Conference, Christchurch, Impact of the
Comerce Act, the Fair Trading Act and Purpose and Role of the Commerce Commerce Act on the Petroleum
the Electricity Industry Reform Act. Commission. Exploration and Downstream Energy
publications Consumers’ Institue product
Draft leniency policy, March 2000
The Commerce Commission is seeking
recalls register on the web
public comment on its draft policy for
when it should take a lower level of Product recalls can be posted on the Internet, thanks to a service provided on the
enforcement action, or none at all, in Consumers' Institute website. Consumer Online (www.consumer.org.nz) includes
exchange for assistance with an Product Recalls, a service funded by the Emily Carpenter Charitable Trust. This is
investigation. the country's only national product recall register. To take advantage of this free
service, contact Consumers' Institue (04) 384 7963, fax (04) 385 8752 or email to
Product recalls, February 2000 firstname.lastname@example.org
The Commission has published
guidelines to help businesses carry out
effective product recalls
Queries? Questions? Comments and speech notes
If you have any questions or comments about Fair’s Fair, or would like copies of speech notes, then please contact the
Commission’s Senior Advisor Communications, Vincent Cholewa, phone work (04) 498 0920, home (04) 479 1432, fax (04) 471 0771,
e-mail email@example.com, PO Box 2351, Wellington.
March 2000 2 FAIR'S FAIR
Commerce Commission enforcement action
Pages 6 to 10 list enforcement action The Commission has developed its Settlements
recently taken by the Commerce Investigation and Enforcement Criteria
Commission. The Commission has to help it make consistent, objective A settlement is used when it is the
jurisdiction under the Commerce, Fair decisions as to when to investigate and best way to achieve compliance
Trading and Electricity Industry what level of action to take after an having regard to the circumstances of
Reform Acts. investigation. the case, the enforcement criteria and
the Commission's resources. The level
After an investigation the Commerce Warnings or settlements will not always of evidence required is the same as
Commission has four options as to precede court action. If a matter that for court action. If a satisfactory
what, if any, action it can take. warrants it, then the Commission will go settlement cannot be achieved, then
straight to court action after its the Commission can take court action.
These are to: investigation.
· take no further action; Warnings
· issue a warning; Court action
· enter into a settlement in which it These are expressions of the
receives signed undertakings Court action is taken when there has Commission's opinions that behaviour
detailing how behaviour will been a significant, widespread or risks breaching the Commerce, EIRA
change; and repeated breach, or when the law needs or Fair Trading Acts. The evidence
· take court action. to be developed through legal required is that of sufficient cause to
precedents. believe that behaviour is at risk.
FROM THE COURTS
Caltex, Mobil and Shell were price fixing:
High Court imposes $1.175 million penalties
The Auckland High Court on 15 withdraw a discount from the price of rejected both challenges.
February 2000 ordered Caltex New petrol at more than 50 Auckland petrol The trial was held in August and
Zealand Limited, Mobil Oil New Zealand stations. The discount was in the form September last year, and Justice Salmon
Limited and Shell New Zealand Limited of a free car wash offered to customers gave his decision in October.
to pay penalties totalling $1.175 million who spent $20 or more on fuel. The sentencing hearing was held on 2
for breaching the Commerce Act by February 2000, and Justice Salmon
price fixing. In his Judgment, Justice Salmon stated issued his decision on penalties on
that the discount “… did operate as an February 15. He has ordered Caltex to
The Commerce Commission integral part of petrol pricing or was a pay $450,000, Mobil to pay $350,000 and
understands that this is the first time discount in relation to petrol.” Shell to pay $375,000.
anywhere in the world that it has been
proved that a group of major oil He also stated “… that representatives The Court’s decision sends strong
companies acted anti-competitively from each of the oil companies made warnings to all businesses.
over the price of petrol. There have relevant untruthful statements to the
been successful cases against Commission.” First, price fixing is a major breach of the
individual oil companies, but not Commerce Act. It is fundamentally anti-
against a group of major companies. The Commission filed its statement of competitive and anti-consumer. It
In October last year the Court found claim in September 1997. limits—or even eliminates—consumers’
that the Commission had proved its ability to shop around for the best
case. Caltex and Mobil took unsuccessful prices. The oil companies profited,
strike out actions against the consumers paid more.
The Commission had alleged that the Commission’s case to the High Court
three companies colluded to jointly and the Court of Appeal. The Courts (Continued on page 4)
March 2000 3 FAIR'S FAIR
FROM THE COURTS
“Secondly, businesses must realise that • Nine North Island meat companies, • Seven Auckland Toyota dealers,
price fixing covers all parts of a price, total penalties $5.51 million, total penalties $350,000; action is
not just the final retail price. Formal and including $1.5 million against each continuing against an eighth
informal agreements among competitors of Affco New Zealand Limited, dealer
about discounts, commissions, mark- Richmond Limited and Lowe • Country Fare Bakeries Limited and
ups and all other parts of prices are Walker NZ Limited Quality Bakers New Zealand
strictly prohibited. • Eli Lilly & Co (NZ) Limited’s animal Limited, total penalty $300,000
health remedies division, Elanco, • Toyota New Zealand Limited,
The Commission will continue to take and Chemstock Animal Health $250,000 penalty DB Breweries
action against price fixing. Limited, total penalties of $700,000 Limited, $110,000 penalty
• Christchurch Transport Limited and • Acer Computer New Zealand
Other Commission court action against its Chief Executive, total penalties Limited, $83,000 penalty
anti-competitive pricing includes: $400,000
Spotlight fined $7,500 for misleading sale promotion
The Auckland District Court on 9 A Commission investigation showed Zealand.
February 2000 fined Spotlight Stores that during the promotions in question, Where sales are advertised, the savings
New Zealand Limited $7,500 for Spotlight had advertised one of its being offered to customers must be
misleading customers about savings biggest selling items, DMC Stranded genuine. Where traders try to get
available during promotions in its Cotton, used for embroidery, as being customers into their stores by offering
Christchurch store in October, reduced in price by 35% - from $1.30 per fake bargains, the courts will deal firmly
November and December 1998. skein down to 80 cents per skein. The with them.
average customer buys 10 to 15 skeins
The Commerce Commission had at a time. In fact, 80 cents was the Misleading sales claims are not just
prosecuted Spotlight for breaching the regular selling price of this item. unfair on consumers, they are also
Fair Trading Act. Spotlight pleaded Spotlight Stores New Zealand Limited unfair on other retailers who are honest
guilty to the offences. operates six stores throughout New in their advertising.
Importer fined $6,000 after not honouring
settlement, and importing 3,600 unsafe babies’
The Otahuhu District Court on 3 honouring a Commission settlement. This is a safety standard not a labelling
December 1999 fined importer Geeta The settlement related to animal toys standard. It applies to toys for young
Trading Company Limited $6,000 plus that the Commission had alleged did not children, irrespective of how the toys
$390 costs for importing 3,600 babies meet the standard. are labelled.
rattles that broke easily and were a
choking and inhalation hazard. The Commission follows-up all The Commission had the rattles
settlements. If one is not honoured, checked by a child psychologist and an
The Commerce Commission prosecuted then it will consider court action. accredited testing laboratory. They
Geeta for breaching the Fair Trading In this case, Geeta imported multi- concluded that the rattles were intended
Act, which makes the product safety coloured babies’ rattles shaped like for children under three, and that they
standard for toys mandatory. Geeta bells, lemon trees and birds, and broke easily, releasing pieces too small
pleaded guilty. labelled them as unsuitable for children to meet the standard.
Geeta supplies the 13 “King Kong” under three years.
stores in the North Island. Importers and retailers must understand The standard prohibits toys, and parts
that simply labelling toys as not for of toys that can be removed or break
Commission staff making a follow-up children under three does not make toys
check found that Geeta was not comply with the standard. (continued on page 5)
March 2000 4 FAIR'S FAIR
FROM THE COURTS
off, that fit completely into a measuring The standard applies to toys for reflex when they choke. If they swallow
cylinder about the size of a 35mm film children aged up to three years old or inhale an object that sticks in their
canister. because up to that age children do not throat, they must be helped or they can
have a properly developed coughing choke to death.
Folio Model and Talent Management:
sentencing of partners
Criminal convictions of Dianne responsibility for how their business is Judge Rushton states.
Stephanie Burton and Brian Charles run. Ms Burton interviewed women who
Carson as the partners who ran Folio responded to Folio’s advertisements for
Model and Talent Management have Partners cannot pick a scapegoat or a modelling course. At the interviews
set important precedents for all hide behind the partnership and say Ms Burton outlined the course and said
partnerships—a partner can be ‘nothing to do with me’. Partnerships that Folio would take nine photos of
criminally liable under the Fair Trading bring legitimate business benefits to the each woman and select the best three
Act for the actions of other partners. individual partners, they also bring out of each nine to go on a composite
responsibilities to ensure that their card. The composite cards would be
The Commerce Commission prosecuted business complies with the law. shown to clients wanting models.
Ms Burton and Mr Carson in the
Auckland District Court for breaching Judge Rushton also reinforced other Ms Burton said that the course would
the Fair Trading Act by making court decisions that silence—that is, cost $450. She did not disclose that
misleading claims about the cost of not providing information—can be a there were additional costs of $210 for
modelling training by not disclosing representation and can be misleading. the nine photos and the composite card.
additional costs. On 19 January 2000
Judge Cecilie Rushton imposed fines She stated in her decision that silence is In summary, Judge Rushton found in
and costs totalling $6,000. a representation when there is a duty to this case that:
disclose information or where silence • when Ms Burton was acting in the
“The acts of one partner, provided they makes another representation untrue. ordinary course of Folio’s business,
are performed in the ordinary course of she had not disclosed additional
the firm’s business, are binding on co- “I am satisfied that, given the costs
partners and accordingly are their joint circumstances of this case, Folio had a • Ms Burton’s silence was a
acts,” Judge Cecilie Rushton states in positive duty to disclose the full cost to misrepresentation and breached the
her reserved decision. these women of reaching the stage Fair Trading Act, and
where they could obtain the work they • the partnership was liable for that
Judge Rushton’s decision means that were seeking. This they did not do,” breach.
partners must take personal
Commission speakers available
Commission members and staff are available for speeches and briefings on all aspects of the Commerce, Fair Trading and
Electricity Industry Reform Acts.
A Commission speaker could prove invaluable to your organisation. Knowledge of the legislation can help you avoid
breaches by your business or staff and identify anti-competitive or unfair trade practices by your competitors.
Contact: Communications officer Vincent Cholewa phone (04) 498 0920, fax (04) 471 0771, e-mail
March 2000 5 FAIR'S FAIR
COMMERCE COMMISSION SETTLEMENTS
Extreme Motorsports: businesses CAN be liable for
damages and injuries despite contract clauses
A Commerce Commission settlement The Consumer Guarantees Act gives Commission can take legal action.
with Auckland go-kart operator, consumers mandatory guarantees about
Extreme Motorsports, highlights that the quality of goods and services, and The Commission’s role—through the
businesses can be responsible for mandatory rights to remedies if a Fair Trading Act—is to ensure that
damage to property and injury to guarantee is not met. consumers are not given false or
people, even if a contract, terms of misleading information about their
trade or any other representation Under civil law, businesses can be liable rights and businesses’ obligations.
claims, incorrectly, that they are not. for damages for gross negligence. Courts can impose fines of up to
$100,000 under this Act.
Customers at Extreme Motorsports The Crimes Act makes businesses
were required to sign a document criminally responsible for taking Where a business describes
stating that the company would not be reasonable precautions to avoid injury consumers’ rights and businesses’
responsible for any injury, death, loss or death. obligations accurately, even if later on it
or damage even if caused by the does not met them, the Commission has
company’s action or negligence. The Commission can become involved no jurisdiction under the Fair Trading
through the Fair Trading Act, which Act. Instead, consumers have rights
In the Commission’s opinion, Extreme prohibits false or misleading claims under other laws and may have redress
Motorsports risked breaching the Fair about “any condition, warranty, through other agencies.
Trading Act by making a false or guarantee, right or remedy.”
misleading claim about customers’ In the case of Extreme Motorsports, the
rights and the company’s obligations. Various laws create rights and company has given signed
obligations that must be met. If they are undertakings, including that it will
In general terms, a business can be not, then consumers can take legal delete the paragraph that the
responsible for damage and injury action under those laws and, in some Commission was concerned about and
caused during its normal business. circumstances, can involve the Police or will not, in future, use any indemnity
other appropriate agencies. notice that breaches the Fair Trading
This is an issue where several Act.
different laws can apply, giving If a business attempts to contract out of
customers rights and placing these rights and obligations, then it has The Commission follows up all
obligations on businesses. Any made a false or misleading claim, may settlements and has the right to take
business unsure of its own position have breached the Fair Trading Act and further action if they are not honoured.
should get legal advice. consumers, competitors and the
Misleading advertising of rental car rates concerns
The Commerce Commission is The Fair Trading Act prohibits false or Rental car firms should ask themselves,
concerned about what appears to be a misleading claims about prices. In before they publish any advertisement,
nationwide practice, misleading cases involving other industries, courts “Can a customer hire a car for one day
advertising of rates in the yellow pages have ruled that advertising prices that at the advertised price, at any time of
by rental car companies. are not readily available can breach the the year?” If the answer is, “No”, then
Act. In the rental car industry, many of the advertisement may be misleading
In the Commission’s opinion , many the prices advertised have only been without further appropriate explanation.
claims that rental cars are available for available for long term hires—
“from $X per day” are false or customers cannot hire a car for a day at A further problem found with a few
misleading, because these prices are the advertised per day rate—and/or the rental car dealers is that the quoted
only available in exceptional advertised price is an off-peak rate only. (continued on page 7)
March 2000 6 FAIR'S FAIR
COMMERCE COMMISSION SETTLEMENTS
prices have also excluded fees per To date the Commission has concluded telephone directories are reprinted. It
kilometre travelled, or insurance. settlements with seven traders: will also consider prosecution of the
Affordable Rental Cars, Ascot Rental worst offenders , or where traders
A number of the companies spoken to Cars, Cut Rate Rentals, Fair-Go Rent a refuse to settle with the Commission .
by Commission staff have argued that Car, Kiwi Action Rentals, Shoestring
because they have used words, such Rentals and Wellington Car Rental The Commission has also advised
as, “from $X” or “special conditions Centre. In addition, warnings have Telecom Directories of its concerns and
apply”, their advertising is not been issued to a further nine traders, is pleased with the way the company
misleading. However, in the and more are being investigated. has responded. Telecom Directories
Commission’s opinion, statements such sales staff will ask rental car firms to
as this do not save an advertisement The Commission will continue to confirm that cars can genuinely be hired
from being misleading, where the monitor rental car advertising as at the advertised rate.
quoted prices are not readily available.
Car dealers: three prosecutions, seven settlements,
more action likely
Commerce Commission action against A customer could not buy one of those Court. Autoworld admitted that it
car dealers that have made false or vehicles without paying that extra cost. breached the Act when it advertised
misleading claims is continuing, with Where an extra cost is compulsory, as a three-year guarantee with every
two cases currently before the courts, “on road costs” were here, it should be second hand car. Car buyers did not
seven investigations concluded with included in the advertised price or get a guarantee. Instead, they got a
settlements and more enforcement clearly and accurately disclosed. mechanical breakdown insurance
action likely. policy with claim limits and
Moncks Bay Motors staff would exclusions and they had to pay a
Commission Chair John Belgrave said strongly encourage customers to take $100 excess on every claim.
that the Commission had become very out a two-year mechanical warranty for
concerned that car dealers were an extra $350. A customer was told that • Two other dealerships are being
continuing to breach the Fair Trading if they did not buy the warranty, then prosecuted by the Commission. The
Act, and the Commission would focus the sales agreement would state that Commission’s legal advice is to not
its attention on the industry. they had declined the warranty and name them until they have had their
took full responsibility if anything went first appearance in court.
Mr Belgrave said that he is particularly wrong with the car. This was a
disappointed with dealers’ poor misleading statement about the Settlements
compliance because of considerable customer’s rights.
efforts made by the Commission and the • BMW offered three models for
Motor Vehicle Dealers Institute to Consumers have legal rights to payments of $209, $259 and $299 a
educate them. guarantees and remedies, and sellers week. Not disclosed in the
cannot contract out of providing these. promotions were final payments of
Moncks Bay Motors The Fair Trading Act prohibits false or $41,700, $48,150 and $58,750
misleading claims about warranties, respectively. BMW has
In the most recent settlement, Moncks guarantees, rights and remedies. acknowledged that its
Bay Motors has acknowledged that it advertisements were likely to
risked breaching the Act by not Other enforcement action taken by the mislead consumers about the total
disclosing extra costs and by stating Commission in the last few months prices payable for the cars
that it would take no responsibility for includes: advertised. It also acknowledged
the car if the customer did not buy a that it inadequately disclosed the
two-year mechanical warranty. Prosecutions deposits required and that the
pictures in the advertisements may
Extra “on road costs” of $247.50 had to • Autoworld Richmond Limited was not have been of the standard
be paid on some of the advertised cars. fined $8,000 by the Nelson District vehicles available.
(Continued on page 8)
March 2000 7 FAIR'S FAIR
COMMERCE COMMISSION SETTLEMENTS
• Mitsubishi offered a Galant for was too small and was in a place it had reduced the price. The car
payments of $99 a week. It did not where it would not be noticed and was advertised as “Was $19,990,
adequately disclose that, in understood by consumers. reduced to $16,930,” but the car had
addition, there were a final payment • Nissan’s advertised “finance offer” been available from the same
of $10,500 and a deposit of $6,250. did not state any amounts for company for $14,990. Avery Motors
Mitsubishi has acknowledged that deposits and final payments. These acknowledged that the claimed
the small print including these payments varied depending on the reduction was incorrect and
details was too small and not on the model and all were substantial misleading.
screen for long enough to be read percentages. Nissan has
and understood by consumers. acknowledged that the small print • Millenium Motors advertised
including these details was too second hand cars that were not
• Holden’s promotion offering a small and was in a place where it available at the advertised prices,
Barina for $79 a week was would not be noticed and and one that was not available at all.
misleading because it did not understood by consumers. Compulsory “on road costs” were
adequately disclose a $6,656 final not included in the advertised
payment and a $2,750 deposit. • Avery Motors increased the price of prices. Millennium Motors has
Holden has acknowledged that the a Suzuki Vitara for what it called a given signed undertakings setting
small print including these details “clearance sale” but claimed that out how it will change its
Bic, Primary Distributors and two retailers: is that
cigarette lighter child resistant?
Commerce Commission enforcement of it is considerably more difficult to trace in its newsletter advising shop owners
the product safety standard for any problems that might arise with the about the introduction of the safety
cigarette lighters has continued with lighters back to their source. standard, not to sell non-complying
settlements with two distributors and lighters after 15 May 1999 and to return
two retailers. The Commission’s concerns were with them for a refund.
the certificates, not with the lighters
The Minister of Consumer Affairs themselves. The dairy’s proprietor said that she had
introduced the mandatory product not noticed any of Foodstuff’s
safety standard in 1998 after a spate of Both companies have changed their warnings.
house fires caused by young children certificates to ensure that they
playing with cigarette lighters. The accurately provide all the required T&F Kent owns a business that trades
standard requires that cigarette lighters information. as Kent Bags, which sells a wide range
be child resistant. of cigarette lighters.
The Beachcomber Dairy was selling
The distributors who have who have Tokai disposable cigarette lighters that T&F Kent failed to produce certificates
entered into settlements with the were not child resistant and did not of compliance for any of the lighters it
Commission are Bic (NZ) Limited and have certificates of compliance as was selling. The safety standard
Primary Distributors Limited. The two required by the safety standard. requires businesses to show
retailers are Auckland company T&F Commission and New Zealand Customs
Kent (NZ) Limited and Christchurch The business has given signed staff certificates, which the businesses
shop Beachcomber Dairy. undertakings to ensure that all cigarette would get from their suppliers.
lighters it sells in future are child Businesses have 10 days within which
The Commission’s concern with Bic resistant and have correct certificates. to provide the certificates.
and Primary Distributors was that they
were providing incorrect certificates Beachcomber Dairy had bought the T&F Kent has given signed
with their lighters. The certificates did Tokai lighters from Foodstuffs (South undertakings that in future it will not sell
not state the address of the Island) Limited before the safety any cigarette lighters covered by the
manufacturer nor the date of standard was introduced. Foodstuffs safety standard unless it can provide
manufacture. Without this information, had signs in its warehouse and notices the correct certificates of compliance.
March 2000 8 FAIR'S FAIR
COMMERCE COMMISSION SETTLEMENTS
Commission supports Auckland City Downtown
Accord, gives warning to help those involved comply
with the Commerce Act
On 18 January 2000, the Auckland City not allowed to compete on price or to compliance with liquor laws—and
Downtown Accord was amended after a offer cheaper drinks or “happy hours”. wanted to make sure that any
Commerce Commission warning that the misunderstandings about the Commerce
original proposal could have put the The Commerce Act strictly prohibits Act did not stop it going ahead.
hotels, cafes, and restaurants that had agreements between competitors that
joined the Accord at risk of breaching will fix, control or maintain the prices for The Commission finds it unfortunate
the Commerce Act. goods or services. Businesses must that a community effort to encourage
make their own decisions about their compliance with one law put those
The Auckland City Council, the Police, own prices. Any agreement that involved at risk of breaking another.
and others involved in the hospitality interferes with that process is likely to The warning will help ensure that the
industry developed the Accord. The breach the Act. Courts can impose Accord goes ahead in a way that, in the
purpose of the Accord was for penalties of up to $5 million on Commission’s opinion, does not put
businesses to jointly “adopt companies, and up to $500,000 on businesses at risk under the Commerce
responsible and quality business individuals for breaches. Act.”
practices, particularly where the sale
and consumption of liquor is involved, The Commission has contacted all of It is important to note that the
in order to create a pleasant and safe the Accord members to ensure they are Commission’s warning letter is not an
community for residents, city workers, aware of their obligations under the authorisation. It does not prevent
customers and visitors alike.” Act. competitors, consumers or others who
might believe that businesses are
In its original form the Accord included The Commission believed that the breaching the Commerce Act from
terminology that could have been Accord had an excellent objective—a taking their own legal action.
interpreted to mean that members were safer community through better
Computer investigations: misleading claims about
components, warranties and prices
Commerce Commission investigations its advertising of computer systems. In the Commission’s opinion, The PC
of three computer retailers, Macrocom, Its advertisements for $2,999 computer Company made misleading claims on its
The PC Company and Advantage systems stated that the systems website about customers legal rights to
Computers, have ended with contained Intel chipsets, when they did mandatory warranties. The Act does
settlements, in which the companies not. Other advertisements featured a not give customers rights to warranties,
have changed their promotions. photograph of the system, including a but prohibits false claims made about
sub-woofer. The sub-woofer was not the rights created by other laws.
In the Commission’s opinion, all three part of the advertised package.
companies were at risk of breaching the In this case, The PC Company tried to
Fair Trading Act. The Act prohibits Macrom had not physically checked the limit its liability to pay freight costs if a
misleading conduct in relation to goods, computers to ensure that they computer had to be repaired. However,
false or misleading claims about contained Intel chipsets. Sub-woofers the Consumer Guarantees Act does not
warranties and guarantees, and false or were available as an optional upgrade of require the customer to pay any freight
misleading claims about prices. the system but not at the advertised costs when goods are of unacceptable
Macrocom has acknowledged that price. quality.
consumers could have been misled by
(continued on page 10)
March 2000 9 FAIR'S FAIR
COMMERCE COMMISSION SETTLEMENTS
Advantage Computers advertised on its In the Commission’s view, it is that future promotions are not
website Microsoft Office 2000 misleading to advertise a price without misleading or deceptive.
Professional software (Academic clearly and accurately stating all
version) for $357.30. It did not state significant conditions. The Commission follows up all
that the advertised price was available settlements and can take court action if
only to customers who could prove that All three companies have given signed they are not honoured.
they were students or an employee of undertakings, including that they will
an educational facility. correct these promotions and ensure
COMMERCE COMMISSION WARNINGS
9 furniture retailers warned: “solid rimu” was
custom wood, pine and Melteca
Commerce Commission surveillance of made from customwood and pine. give any kind of legal protection for
claims made by furniture retailers has The “Rhodes” slat bed was described these businesses. Other parties—be
continued with warnings to nine as “beautiful solid rimu”. It was made they customers or competitors—can
retailers that had described furniture of pine with rimu stain. take their own action if they wish.
made from customwood, pine and
Melteca. The “Melody” television and video The retailers warned were:
cabinet was described as “solid rimu”. • Forhomes Furnishers and Flooring,
The Fair Trading Act prohibits It was made of Melteca. Auckland
misleading conduct in relation to goods, • Focus on Furniture, Warkworth
and false claims about the composition The Commission’s warning letter states • Dixon Home Furnishers, Te Puke
of goods. that the Commission does not intend to • Lorenville Discount Centre, trading
take further action against the nine as “Big Scotty’s”, Invercaragill
The claims were made in a furniture retailers at this stage. However, any • Idea & Beds R’Us, Manurewa
catalogue distributed in various cities future breaches of the Act will be • Furniture Court, Wanganui
and towns. viewed seriously. • The Furniture Company, Dunedin
The “Georgia” five-piece bedroom suite • Taihape Furnishings, Taihape
was described as “solid rimu”. It was The Commission’s decision does not • Maurice Clegg Furnishers, New
Subscribe to the Public Register
If you want to know which businesses are applying to the Commission for clearance or authorisation of their acquisitions, or for
authorisation of restrictive trade practices, then subscribe to the Public Register.
The register is published weekly and shows:
• the names of the parties involved;
• for what clearance or authorisation is sought;
• deadlines for Commission decisions.
Applications which have been granted confidentiality are not detailed on the register.
The subscription cost is $90 per year.
March 2000 10 FAIR'S FAIR
BUSINESS ACQUISITIONS - CLEARANCES AND AUTHORISATIONS
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any markets.
Parties can apply to the Commerce Commission for clearance which will be granted if the Commission is satisfied that
dominance is not acquired or strengthened. The Act allows an otherwise prohibited acquisition to be authorised if the
Commission is satisfied that, although the acquisition may result in dominance, its public benefits outweigh its detriments to
competition. If granted, clearance and authorisation give legal protection against anyone taking court action against the
acquisition under the Act.
TeamTalk/Telecom: Decision 377 and draft determination
On 3 December 1999, the Commission The Commission was not satisfied that, TeamTalk applied for an authorisation.
declined to clear TeamTalk Limited’s should the acquisition go ahead,
proposed acquisition of the assets TeamTalk would not acquire a dominant The Commission will grant
which comprise the paging services, position in the national trunked mobile authorisation, despite dominance being
private mobile radio, trunked mobile radio network services market. acquired, if it is satisfied that benefits
radio and related equipment leasing arising from the proposal outweigh
businesses of Telecom New Zealand Some trunked mobile radio users are detriments to competition.
Limited. captive customers of this technology
for functional and economic reasons. The Commission published its draft
The Commission concluded that the They would not be able to switch to determination on March 24, having
appropriate market for analysing the other forms of mobile communications, reached the preliminary view that, based
proposed acquisition was the national such as cellular. on the information then available, public
market for trunked mobile radio network benefits outweighed detriments by
services. TeamTalk and Telecom, which In addition, the Commission concluded between $3.6 million and $10.7 million
operates in the market under the brand that the effective entry of new over five years.
name “Fleetlink”, are the only two competitors into the national trunked
nationwide suppliers currently mobile radio network services market is Interested parties are invited to
providing trunked mobile radio network unlikely to occur. comment, and submissions are due by
services. April 14. The Commission expects to
Subsequent to the Commission publish its final decision on May 17.
declining to grant the clearance,
Fletcher Challenge Steel/Steel and Tube Holdings
On 4 November 1999, in Decision 376, On 23 November 1999, Fletcher extensive inquiries.
the Commission declined to clear Challenge Steel Products Limited
Fletcher Challenge Steel Products lodged a second application seeking The Commission adopted the same
Limited to acquire up to 100 percent of clearance to acquire Steel & Tube market definitions as for Decision 376.
the shares in Steel and Tube Holdings Limited. This application was On 10 December 1999, the majority of
Limited. The companies are the two supported by additional information on the Division of the Commission found
largest distributors of steel in New market shares, by a market research that the new information had removed
Zealand. The Commission was not report on the awareness of steel its concerns on dominance, and the
satisfied that, should the acquisition go purchasers of other steel distributors proposed acquisition was cleared. One
ahead, Fletcher Steel would not become and by two reports from economic member of the Division had a dissenting
dominant in any New Zealand steel consultants. In addition, the opinion.
market. Commission conducted its own further
March 2000 11 FAIR'S FAIR
BUSINESS ACQUISITIONS - CLEARANCES AND AUTHORISATIONS
L’AirLiquide S.A. and Air Products/BOC
On 23 December 1999, the Commission in the production and supply of concluded, BOC would be replaced as a
cleared L’Air Liquide S.A. and Air industrial gases in New Zealand, while gas producer and supplier by Air
Products and Chemicals Inc to acquire Air Products was not currently Products, with no market aggregation
The BOC Group plc. involved. BOC also supplies welding resulting.
equipment, safety products and
The proposal was part of an wholesale refrigerants. The operation of Air Liquide and BOC,
international acquisition by which Air for the period from acquisition until
Liquide and Air Products were to form a At the conclusion of the international actual divestment, was subject to
joint venture company to acquire the acquisition, the joint venture company confidential undertakings given to the
shares in BOC. Air Liquide is based in in New Zealand would divest the assets Commission. The purpose of the
France, Air Products in the United of BOC to Air Products. undertakings was to ensure that the two
States and BOC in Britain. companies will continue to trade
The effect in New Zealand would be independently of each other.
BOC and Air Liquide are both involved that, when the transactions are
UnitedNetworks/Orion: Decision 380
On 24 December 1999, the Commerce Valley/Bay of Plenty area, including wholesale market would be to replace
Commission cleared UnitedNetworks Tauranga, Rotorua and Taupo. Orion as a gas supplier with United,
Limited (United) to acquire the gas with no market aggregation resulting.
assets of Orion New Zealand Limited. The Commission was satisfied that, The Commission did not find any
should the acquisition go ahead, dominance concerns in the network
The proposal involved United acquiring United’s dominant position in the contracting services market.
Orion’s gas distribution networks, electricity distribution markets would
industrial gas trading business, the not be strengthened. The Commission noted that the
North Island activities of Orion’s purchase of a 5 percent interest in the
contracting business, and a 5 percent The Commission was also satisfied that Southdown co-generation power
interest in the Southdown co- the acquisition would not result in station joint venture was not sufficient
generation power station joint venture. Orion’s current dominant position in the for United to be considered “involved”
United, formerly Power New Zealand gas distribution markets being in an electricity supply business under
Ltd, is principally an energy networks strengthened as a result of United the Electricity Industry Reform Act
business, with electricity networks in acquiring the gas networks. 1998.
Auckland, Wellington and the Thames The effect of the acquisition in the gas
Medical Waste/San-I-Pak: Decisions 381 and 386
On 24 January 2000, the Commission collection and treatment of medical and waste material, they are currently either
declined to clear Medical Waste Group quarantine waste. incinerated or sterilised in an autoclave.
Limited to acquire the business of San- After processing, solid waste residues
I-Pak (NZ) Limited. Both companies are involved in the are disposed of in landfills and liquid
collection and treatment of two sorts of residues are disposed of into waste
The Commission was not satisfied that waste: medical wastes from hospitals water systems.
the proposal would not result in and other medical facilities, and
Medical Waste Group acquiring or quarantine wastes arriving by ship or In the South Island, the two companies
strengthening a dominant position in aircraft from other countries. As these have a very high combined market
the South Island market for the wastes are classified as hazardous share, and the Commission was not
March 2000 12 FAIR'S FAIR
BUSINESS ACQUISITIONS - CLEARANCES AND AUTHORISATIONS
satisfied that the merged entity would The Commission was satisfied that the clearance to acquire San-I-Pak.
face constraint from existing or potential merged entity would not acquire or
competitors, or from most buyers of its strengthen a dominant position in the In considering the second application,
services, within a reasonable timeframe. North Island market for the collection the Commission revisited its earlier
and treatment of medical and quarantine investigation, and analysed new
For these reasons, the Commission was waste. information provided by Medical Waste
not satisfied that this proposal would Group. However, the Commission's
not result in a strengthening of a On 8 February 2000, Medical Waste reasons for declining the application did
dominant position in a market. Group made a second application for not change.
On 29 February 2000, the Commission R&WH Symington is based in increase prices or reduce services,
cleared Pacific Dunlop Holdings (NZ) Palmerston North and produces thermal customers could switch to other
Limited to acquire certain assets and underwear. suppliers and imports.
businesses of LWR Hosiery and
Underwear Limited (LWR) and R&WH The Commission was satisfied that, The other markets in which the
Symington Limited. should the acquisition go ahead, Pacific combined entity would operate, but
Dunlop would not acquire or strengthen would be inside the safe harbours, or in
Pacific Dunlop is a large international a dominant position in any of the seven which there would be no aggregation of
manufacturing and marketing enterprise relevant apparel markets. market power, were the national markets
which is based in Australia. Pacific for the manufacture and supply of:
Dunlop supplies a number of brands of In three of these markets, the national • women’s underwear,
underwear and socks in New Zealand. markets for the manufacture and supply • children’s socks,
These include ‘Holeproof’, of men’s underwear, thermal underwear • bras, and
‘Underdaks’, ‘Bonds’ and ‘Rio’. and adult’s socks, the combined entity • pantyhose.
LWR Hosiery, a subsidiary of LWR would have market shares outside the
Industries Limited, a private company, Commission’s “safe harbours”, but The Commission’s safe harbours are:
manufactures apparel in its would be constrained by the ability of • 40 percent market share if there is
Christchurch factory. Of relevance to existing competitors to expand, the no significant competitor, and
this proposal is its production of availability of imported products, and • 60 percent market share if at least
hosiery, socks and thermal underwear the buying power of customers, one competitor has 15 percent or
under brands which include ‘Jockey’, particularly nation-wide retail chains. If more of the market.
‘Gold Top’, ‘Silks’ and ‘Thermotech’. the combined entity attempted to
Public copies of Commission decisions
Public copies of recent Commerce loaded from the Commission's website, (04) 471 0771; PO Box 2351,
Commission Commerce Act clearance www.comcom.govt.nz. Wellington. If requesting hard copies,
and authorisation decisions and you may be charged for photocopying
Electricity Industry Reform Act Hard copies can be obtained from the and time as set out in the Official
exemption decisions can be down- Support Officer phone (04) 498 0953; fax Information Act.
March 2000 13 FAIR'S FAIR
ELECTRICITY INDUSTRY REFORM ACT
The Electricity Industry Reform (EIR) Act requires companies involved in electricity markets to put in place corporate separation of
their electricity generation and trading businesses from their lines businesses or to have obtained an exemption from the
In considering an exemption, the Commission must answer three questions:
1. Would the exemption result in inhibiting competition in the electricity industry?
2. Would the exemption allow cross-subsidisation of electricity generation from electricity lines businesses?
3. Would the exemption permit a relationship between electricity lines and supply businesses which is not at arms length?
If the answer to any of these questions is “yes” the Commission will not grant an exemption.
AmTrust Pacific Limited
The Commission granted an exemption exemptions given under the EIR Act to deals from other electricity suppliers.
under section 81 of the Electricity property companies.
Industry Reform Act (the EIR Act) to The EIR Act was passed in 1998 and
AmTrust Pacific Limited (AmTrust) and The Commission’s decision follows came into effect on April 1 last year.
certain other subsidiaries of AmTrust exemptions given to Trans Tasman
which are involved with property Properties Limited, Collwall Property One of the EIR Act’s requirements is
investment activities in New Zealand. Investment Limited, AMP Limited and that organisations must separate their
Colonial First State Property (NZ) electricity lines businesses from their
The exemption is from the application of Limited, which also involved the electricity supply businesses where
certain sections of the EIR Act for application of the EIR Act to property more than 2.5 GWh of electricity per
specified property investment and investment and management activities. annum is supplied.
management activities which relate to
AmTrust. The decision enhances tenants’ ability The Commission considers that the
to choose electricity suppliers. It also definitions in the EIR Act include
The Commission granted the exemption allows tenants of properties which are embedded electrical wiring in buildings
subject to a number of terms and the subject of the exemption to choose as an electricity lines business and
conditions, consistent with previous to buy electricity from either their selling electricity to tenants as an
landlord or to shop around for better electricity supply business.
EIR Act applications on hand
Currently the Commission has two EIR 17 of the EIR Act. This arises from her The second application has been
Act applications on hand. One is from directorships of Meridian (an electricity lodged by Tranz Rail Holdings Limited,
Joan Withers – Meridian. Ms Joan supply business) and Auckland which has applied for an exemption from
Withers has applied under section81(1) International Airport (an electricity lines the EIR Act in relation to cross-
for an exemption from sections 7, 11 and business). involvement in an electricity supply
business and an electricity lines
March 2000 14 FAIR'S FAIR
Competitors trading practices hurt business
While visiting Gisborne in early March legislation, to businesses that are not information and discussing issues
the Commerce Commission and the normally in contact with the relating to Fair Trading and Consumer
Ministry of Consumer Affairs found Commission. legislation. The group also talked to
some businesses were disadvantaged business groups in the region, and
because of competitors practices. The practices followed by some conducted an educational seminar to
businesses in Gisborne highlighted the businesses on the final evening.
Issues such as giving quotes and prices importance of these visits; to ensure
exclusive of GST, and having permanent businesses have a level playing field, The seminar was successful with
“sale” prices were found. These and that consumers are informed, and approximately thirty five people
practices mislead customers and give not misled. attending from a wide variety of
the businesses that use them, an unfair business sectors across Gisborne.
advantage. A visit like this to Gisborne last took Many stayed afterwards for finger food
place 4 years ago. and further discussion with Commission
Other issues that arose from the visit and Ministry staff.
were offers of interest free deals where The Commission and the Ministry focus
the administration costs that were their education on fair trading and While in Gisborne, the Commission and
required to be paid were not disclosed, consumer laws on businesses in sectors the Ministry also took the opportunity
and selling cars by tender. Although that have raised compliance concerns to warn against scams and pyramid
tender is a legal selling method, the nationally. The visit focused on the selling, which are common in the region.
Ministry is concerned that some traders following businesses: These schemes cheat people out of
may be calling their sales “tenders”, their money and give little return.
when they are not, to attempt to avoid • motor vehicle dealers Scams seem to be common in the
obligations under the Consumer • real estate agents Gisborne /East Coast region, and maori
Guarantees Act. The Act does not • second hand dealers and pacific island people are often
cover any goods or services sold by • rental car agencies targeted.
“competitive tender”. • furniture and home furnishings
• sellers of products covered by A similar visit to North Shore City is
The visit to Gisborne was part of the product safety standards, such as planned for May 8–10. If you require
Commission’s regional visit programme. toys and children’s night clothes details of this visit please contact
The aim of the programme is to raise • health food shops Janine Manhart at the Commission,
awareness and compliance with the Fair phone (04) 498 0981, fax (04) 471 0771,
Trading Act, the Consumer Guarantees The staff visited over 60 businesses in PO Box 2351, Wellington.
Act and other consumer protection the two-day town visit giving out
Commerce Commission website
On-line: media releases, public register, list of publications (can be ordered on-line), introduction to
the Commerce Act, introduction to the Fair Trading Act and the Commission's roles and
responsibilities under the Electricity Industry Reform Act.
Download: speeches, numbered decisions, Fair's Fair, Compliance, submissions made by the
Commission, clearance and authorisation application forms.
March 2000 15 FAIR'S FAIR
COMMERCE COMMISSION GUIDELINES
Available free of charge from Commissions offices and • The Fair Trading Act - A Guide for Advertisers and
by e-mail from firstname.lastname@example.org: Traders (NB: this is a 40-page A4 book) (October 1997)
• The Fair Trading Act: Guidelines for the Real Estate
Commerce Act guidelines Industry (February 1994)
• Fibre Labelling and the Fair Trading Act (July 1996)
• The Commerce Act 1986 - A General Guide (February 1999)
• Food Labelling, Promotion and Marketing (March 1998)
• The Commerce Act and the Health Sector (January 1998)
• Free Offers - Avoiding Conflict with the Fair Trading Act
• Business Acquisition Guidelines (1999)
• Conference Procedures (September 1998)
• Place of Origin and the Fair Trading Act (March 1999)
• Guidelines to the Analysis of Public Benefits and Detriments
• Pyramid Selling and the Fair Trading Act (June 1997)
• Safety of Children’s Night Clothes (December 1994)
Fair Trading Act guidelines • Safety Standards for Bicycles (August 1995)
• Safety Standards for Cigarette Lighters (May 1999)
• Car Sales and the Fair Trading Act (April 1999) • Safety Standards for Toys (January 1995)
• Care Labelling and the Fair Trading Act (July 1996)
• Comparative Pricing and the Fair Trading Act (November 1998) One-page fact sheets about safety standards
• Compliance Programmes and the Fair Trading Act (April 1999)
• Bicycles (1999)
• Debt Collecting and the Fair Trading Act (November 1997)
• Children's Night Clothes (1999)
• Deceptive Packaging and the Fair Trading Act (December 1994)
• Cigarette Lighters (1999)
• Environmental Claims and the Fair Trading Act (May 1995)
• Toys for Children up to Three Years Old (1999)
WELLINGTON Phone: Commerce Act (04) 498 0911; Fair Trading Act (04) 498 0911; Reception (04) 471 0180; Fax (04) 471 0771;
PO Box 2351; Landcorp House, 101 Lambton Quay
AUCKLAND Phone: Fair Trading Act (09) 377 7316; Reception (09) 377 3094; Fax (09) 377 3561;
PO Box 105-222; Gosling Chapman Building, 63 Albert Street
CHRISTCHURCH Phone: Fair Trading Act (03) 371 0298; Reception (03) 379 3284; Fax (03) 366 1311;
PO Box 25193; Riverlands House, 31 Victoria Street
Fair’s Fair and Compliance mailing lists
The Commission publishes two free newsletters. Each issue of Compliance focuses on one or two Commerce, Fair Trading or
Electricity Industry Reform Act topics in depth. Fair’s Fair contains topical information about work the Commission is doing
or has recently completed. To receive Fair’s Fair and Compliance please copy and return this form to :
Records Officer, Commerce Commission, PO Box 2351 Wellington or Fax (04) 471 0771
Please add my name to the mailing list for: Fair’s Fair Compliance
March 2000 16 FAIR'S FAIR