7.10.2021

Penalties imposed for a single phone call attempting to enter a price-fixing agreement

The High Court in Commerce Commission v Specialised Container Services (Christchurch) Ltd recently imposed pecuniary penalties under the Commerce Act 1986 (the Act) for an attempt to enter into a price-fixing agreement with a competitor in the form of a single phone call.  The decision highlights the risks of holding discussions with competitors and illustrates that a single conversation may result in a contravention of the Act.

A copy of the judgment can be accessed here. 

Background 

The first defendant, Specialised Container Services (Christchurch) Limited (SCS Christchurch) is a shipping container depot operator in Christchurch and is part of a group of companies involved in operating container depots around New Zealand.  The second defendant, Grant Tregurtha (Mr Tregurtha) is a director and shareholder of SCS Christchurch. 

In late 2017 to early 2018, SCS Christchurch’s biggest competitor, Lyttelton Port Company (LPC) (with a 70 per cent market share) announced that it would be introducing a Vehicle Booking System (VBS) whereby customers could book time slots to drop off or collect their containers at the depot for a booking fee of $5.50.  Soon after, SCS Christchurch also announced that it would be introducing a similar VBS for a booking fee of $6.50.

On 9 January 2018, Mr Tregurtha made a phone call to the General Manager of LPC and asked whether LPC would be willing to charge the same or similar VBS booking fee of $6.50 (stating that $6.50 was the “going rate” for VBS booking fees for Auckland and Tauranga).  LPC responded that it would not be discussing price with SCS Christchurch as both were competitors.  As of 31 March 2020, SCS Christchurch had become insolvent and no longer operates its container depot.

Both Mr Tregurtha and SCS Christchurch admitted that the phone call contravened s 30 of the Act by being an attempt to enter into a price-fixing arrangement with a competitor (being a contract, arrangement, or understanding to charge the same or similar VBS booking fee), and that both were liable to pay a penalty.  The issue for the Court was the amount of pecuniary penalties that should be imposed for this anti-competitive behaviour. 

The decision 

Under s 80(2B)(a) of the Act, the maximum penalty that could be imposed against Mr Tregurtha as a director is $500,000.  For SCS Christchurch, under s 80(2B)(b) the maximum penalty is the greater of $10 million, or three times the commercial gain obtained from the breach (if readily ascertainable), or 10 per cent of the company turnover from trading in New Zealand.  The Court accepted that a range of $400,000 to $520,000 was appropriate for SCS Christchurch and $25,000 to $30,000 for Mr Tregurtha as a starting point.

In assessing the appropriate penalty under the Act, the Court held that the following factors should be considered (alongside deterrence):

  • Impact on the market;
  • Nature, duration, and seriousness of the contravening conduct;
  • Whether the conduct was deliberate;
  • Any benefit, loss, or damage which results from the contravening conduct;
  • Seniority of the employees or officers involved in the contravention;
  • Market share and/or degree of market power held by the defendant;
  • Role of the defendant; and
  • Size and resources of the defendant. 

The Court found that although the contravening conduct was a mere attempt to price fix in the form of a single phone call, and had no real impact on the market, the likely impact would have been substantial due to the importance that New Zealand places on its imports and exports.  The defendants would therefore derive a significant commercial benefit from the contravening conduct.

As SCS Christchurch had become insolvent (and that it would not be in the interests of justice to impose an amount which could not be met), the Court imposed penalties of $62,500 on SCS Christchurch and $24,000 on Mr Tregurtha as the director and individual involved with the conduct.  SCS Christchurch was also required to pay costs to the Commerce Commission in the sum of $12,500.  

Our comment

The decision highlights the risks of holding discussions with competitors and illustrates how to respond if you are approached by a competitor to discuss pricing (or other commercially sensitive matters).  It also reminds directors and businesses of their obligations and appropriate behaviour to ensure the conduct does not breach the Act.

If you have any questions about this judgment, or investigations by the Commerce Commission, please get in touch with our Disputes Team or our Business Advice Team.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

 

 

 

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

Force Majeure – Not A Get Out Of Jail Free Card
Woolworths Group Ltd v Twentieth Super Pace Nominees Pty Ltd [2021] NSWSC 344
17.06.2022 Posted in Trade and Transport
Payment Claims: Incorrect Due Date From Delayed Delivery
Nicholls Group Projects Ltd v Plan Design Build Homes Ltd
20.05.2022 Posted in Construction
Employment Court Deems Gloriavale Residents Employees
The definition of “employee” in the Employment Relations Act 2000 (ERA) can at times be tricky to navigate; recent cases involving builders, couriers, and uber drivers can attest to the issues tha...
18.05.2022 Posted in Employment
New proposals on modern slavery place higher responsibilities on NZ organisations
Over recent years, modern slavery has become a more prominent issue in New Zealand.
13.05.2022 Posted in Business Advice
Insurance Contracts Bill – submissions on exposure draft closing soon
As we reported in late February, the Ministry of Business, Innovation and Employment (MBIE) is seeking submissions on the exposure draft Insurance Contracts Bill.  Submissions close on 4 May 2022. MB...
20.04.2022 Posted in Insurance
Matariki and Fair Pay Agreements
Matariki Te Pire mō te Hararei Tūmatanui o te Kāhui o Matariki (Te Kāhui o Matariki Public Holiday Bill) received Royal Assent yesterday, and the new Act comes into force today – 12 April 20...
12.04.2022 Posted in Employment
A Landmark Change? – Proposed reform of the occupational regulation of engineers
Engineers engage in building work that is critical to public safety. Despite this, few restrictions are placed on who can carry out and supervise complex and specialised projects that require high levels of professional judgement, skill and technical competence.
07.04.2022 Posted in Construction
Send us an enquiry
For expert legal advice, please complete the form below or call us on (09) 375 8700.
  • This field is for validation purposes and should be left unchanged.
-->