Price-fixing to cost Visy $3.6m
Vector feels downside of energy efficiency
AUSTRALIAN packaging company Visy has been ordered in the High Court at Auckland to pay a penalty of $3.6 million in a price-fixing case brought by the Commerce Commission.
In addition, its former senior executive, John Carroll, must pay $25,000 in the multimillion-dollar case.
The penalty followed the commission offering the company a 30 per cent discount on the penalty for settling rather than continuing with a trial.
Visy admitted liability for illegally agreeing with its competitor, Amcor, to divide trans-Tasman corrugated fibreboard packaging markets between them. They also fixed packaging prices for New Zealand.
Carroll admitted being involved in Visy’s conduct in relation to a Fonterra tender for corrugated fibreboard packaging.
The commission alleged the companies decided in advance which of the two would win customer tenders. They compensated each other when competition on tenders occurred.
This breached the Commerce provisions banning price-fixing.
The customers included Fonterra, Goodman Fielder and Coca-Cola.
Amcor applied for immunity from prosecution in 2004 under the commission’s cartel leniency policy which
Act’s long-running case. ‘‘As the Court of Appeal explained when issuing a ruling on this case last year, ‘cartel conduct has a damaging impact upon society’. Preventing price-fixing is important to protect New Zealanders from anti-competitive conduct, and the substantial penalty the court awarded should be a deterrent to others who might breach the act.’’
The commission’s case followed action by the Australian Competition and Consumer Commission where Visy and Carroll, along with other defendants, admitted being party to a price-fixing cartel with Amcor in the Australian corrugated fibreboard packaging market.
The Federal Court of Australia imposed penalties of A$36m (NZ$41m) against Visy and its owner, Richard Pratt, and A$500,000 against Carroll. Both Visy and Carroll denied the cartel arrangements extended to New Zealand.
In August last year the Court of Appeal gave the commission the green light to pursue Visy across a wider range of customers. The court overturned a High Court ruling that most of the allegations did not fall within the definition of a market in New Zealand.
The High Court had ruled in 2011 that the commission could pursue claims relating to Fonterra, but allegations relating to transactions involving Coca-Cola, Goodman Fielder, Inghams and Huhtamaki fell outside the Commerce Act’s scope. AUCKLAND households are focusing on saving energy, leading to flat or declining demand for energy across Vector’s power lines, the network company says.
Commenting on its full-year result released yesterday, Vector chief executive Simon Mackenzie said there was a clear trend for lower energy consumption in New Zealand and internationally.
‘‘We see that in Auckland where consumption per user is not increasing.’’
People were taking care to switch off lights, install low energy bulbs and invest in energy efficient products, said Mackenzie.
Net profit for the period was $206 million, or 20.4 cents a share, up from $201.7m a year earlier, despite lower electricity and gas volumes. Revenue was up 2.2 per cent to $1.28 billion.
In the year to June the total power distributed across Vector’s network fell 1 per cent to 8332GWh while gas distribution eased from 21.8 to 21.4 petajoules, although this was mainly because of warmer temperatures compared with the previous year, the company said.
As part of its strategic response, Vector was looking at the potential benefits of photovoltaic solar power cells connected to batteries. Test installations in 50 homes were helping the company understand consumer demand.
‘‘The solution is unique,’’ said Mackenzie. ‘‘It uses battery storage and control technology that integrates with our network so the energy is usable 24/7. We see this as very much where the world’s going.’’
Mackenzie said a failure by power retailers to pass on Vector’s lower costs ‘‘makes a bit of a mockery of the regulatory regime’’.
In April a price cut of 9 per cent was imposed on Vector’s residential network by the Commerce Commission, the equivalent of $60 a household each year, but only a small minority of retailers were passing on the savings, he said.
Productivity gains by Vector had led to a regulatory price reset, ‘‘and that’s something that should be shared with customers’’, but he would not be drawn on whether he thought there was a lack of competition in electricity retailing.
The company said it would pay a final dividend of 7.75c a share on September 13, up from 7.5c last year, taking the total dividend for the year to 15c.
Chairman Michael Stiassny said the company aimed to increase the dividend.
‘‘We are very aware of the need to provide certainty and clarity around the dividend. This is the bottom position and it can only increase.’’
Acting chief financial officer Shane Sampson said that over time Vector aimed to pay a dividend equal to 60 per cent of operating cashflow, less capital expenditure to replace assets.
The latest dividend represented a payout ratio of 49 per cent, ‘‘recognising there are challenging years coming up’’.
Although Vector’s electricity and gas transmission businesses were relatively flat, its technology division produced earnings growth of 13 per cent.
Technology revenue grew 13 per cent to $109m, helped by increased installation of smart meters, while earnings before interest, tax, depreciation and amortisation were $76m.
Sampson said the company aimed to maintain a credit rating of BBB+.
Vector shares closed up 1c at yesterday.
$2.65