Covid-19

Firms can work together but can’t price fix

Firms still need to be careful about 'crisis cartels' even though the Government has reassured  businesses they won’t feel the heavy hand of the Commerce Commission, competition law specialist Glenn Shewan tells Mark Jennings.

* Watch Mark Jennings' full interview with Glenn Shewan in the video player below*

On Sunday, Minister of Commerce and Consumer Affairs Kris Faafoi asked the Commerce Commission to take account of the exceptional circumstances created by Covid-19 when monitoring business behaviour in coming weeks.

He said essential sectors like supermarkets and telecommunications companies may need to work in a more collaborative way than the Commerce Commission would normally be comfortable with.

The commission responded quickly with its own statement reassuring business that “It has no intention of taking enforcement action under the Commerce Act against businesses who are cooperating to ensure New Zealanders continue to be supplied with essential goods and services during this unprecedented time.”

But then came a warning. “The Commission will not tolerate unscrupulous businesses using Covid-19 as an excuse for non-essential collusion or anti-competitive behaviour. This includes sharing information on pricing or strategy where it isn't necessary in the current situation.​"

Bell Gully partner Glenn Shewan says companies need to heed the Commission’s warning and be careful not to cooperate to the point where they form “crisis cartels".

“You have a major crisis or shock such as this and it can compel competing businesess to start cooperating together just to address the pressing issues they're facing at the moment. The issue with that can be where they overstep the mark and replace the competition that would otherwise exist between them with cooperation particularly on prices and capacity.”

Shewan says industry shocks in the past have led to agreements that have fallen foul of the Commission.

He cites the case of the real estate industry banding together to counter a significant increase to listing fees for properties on Trade Me.

“Real Estate agents came together quite legitimately to discuss how they were going to address this cost, unfortunately they overreached somewhat in agreeing to the price they would pass through to their customers which the Commerce Commission took as a breach of the Commerce Act and successfully obtained penalties from the court.”

Shewan recommends businesses planning to cooperate during the current crisis should seek advice if they are unsure where the line is likely to be drawn.

Bell Gully is a foundation supporter of Newsroom.

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