Commerce Commission takes court action against GEA Milfos alleging cartel pricing

Thursday 21st December 2017

The Commerce Commission is taking High Court action against GEA Milfos International alleging the milk testing technology company engaged in cartel pricing with rival Smart Farm Technologies.

The regulator alleges Milfos breached the Commerce Act by engaging in cartel conduct between mid-2012 and September 2014, it said in a statement. The conduct relates to Milfos allegedly entering into an agreement with its competitor to fix, control or maintain prices of milk testing products and services and herd management systems by agreeing to use a common quote calculator to generate quotes for retail customers.

The commission also warned Smart Farm over its role in the conduct, noting that although the company is likely to have breached price-fixing rules, it chose to issue a warning rather than take court action after taking into account the extent of Smart Farm's involvement in the conduct.

The regulator said it is seeking a declaration from the High Court in Auckland that Milfos breached the Commerce Act, as well as a financial penalty and costs.

The Commerce Act prohibits contracts, arrangements or understandings between competitors containing provisions that have the purpose or effect of fixing, controlling or maintaining the prices charged for goods or services. An individual can be fined up to $500,000 and be prohibited from being a company director or manager, while a body corporate can be fined $10 million, three times the commercial gain from the breach, or 10 percent of turnover. Each separate breach of the act may incur a separate penalty.

"Competition between firms typically derives from rivalry on price, quality, service, choice and other offerings," Commerce Commission head of competition Katie Rusbatch said in her warning letter to Smart Farm. "Conduct which fixes, controls, or maintains prices reduces competition and can be detrimental to consumers."

Germany's GEA Group bought Milfos in late 2012, and its local holding company, GEA Farm Technologies New Zealand, reported a loss of $2 million on revenue of $43.7 million in calendar 2016. Smart Farm is a subsidiary of Dutch group DEC International, whose NZ holding unit generated a profit of $2.9 million on revenue of $32.2 million in 2016.

(BusinessDesk)

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