Partial Price-Fixing and Semi-Collusion

Date01 December 2021
Published date01 December 2021
Symposium: The Evolution of Competition Law and Policy in New Zealand
Partial Price-Fixing
and Semi-Collusion
Chris Noonan*
Many cartels do not directly fix the price of products. Instead, the participants may agree on a
starting price for negotiations or the price of a component of the overall price. Antitrust investi-
gations reveal that cartel agreements are also often very imperfectly implemented. Antitrust law in
the United States and the European Union has typically taken a robust approach to these practices
even where economic analysis might be unable to show that such practices always or almost always
harm consumer welfare. The decision of the New Zealand Supreme Court in Lodge Real Estate Ltd. v.
Commerce Commission offers a New Zealand perspective on the concept of a price-fixing agreement
and imperfect collusion. The Court, this article argues, reached the correct decision in Lodge.The
decision, however, evidences a pragmatic judgment, rather than the confident deployment of eco-
nomic learning or foreign case law within the statutory framework of the Commerce Act 1986. The
language of sections 30 and 30A of the Act was borrowed from an Australian statute, which in turn
had attempted to capture the state of United States price-fixing law in the 1970s. A more formalistic
and pre-Chicago approach to antitrust is evident in the language, much of which was inspired by
United States v. Socony-Vacuum Oil Co. The case also highlights some of the distinctive features of the
competition law in New Zealand. The reluctance to develop to guide in the application of the general
provisions of the Commerce Act and requiring a demonstration of an effect on price on the facts
may mark a departure from the body of pricing case law in the United States and the European Union
and risks undermining the per se prohibition of cartel conduct in the Commerce Act. Without the
same depth and breadth of cartel case law, the adoption of a more flexible approach to antic-
ompetitive agreements evident in some decisions in the United States and the European Union could
have different effects in a smaller jurisdiction.
cartels, price-fixing, semi-collusion, anticompetitive agreements
* University ofAuckland, Auckland, New Zealand
Corresponding Author:
Chris Noonan, University of Auckland, Auckland 1142, New Zealand.
The Antitrust Bulletin
2021, Vol. 66(4) 481–509
ªThe Author(s) 2021
Article reuse guidelines:
DOI: 10.1177/0003603X211045434
I. Introduction
The decision of the New Zealand Supreme Court in Lodge Real Estate Ltd. v. Commerce Commission
was decided in 2020,
shortly after The Evolution of Competition Law in New Zealand went to press. It
is the first cartel decision by New Zealand’s highest court since the enactment of the Commerce Act
The decision in Lodge offers a New Zealand perspective on the concept of a price-fix ing
agreement and imperfect collusion. An examination of the case also highlights some of distinctive
features of competition law in New Zealand.
Naked price-fixing cartels permit competitors to coordinate their conduct in a manner that reduces
market performance. They are prohibited in most jurisdictions without the need for proof of harm to
competition in a market because price-fixing virtually always result in higher prices and allocative effi-
ciency losses. However, neither reduced output nor price rises are perfect indicators of either the presence
or absence of harmful cartel conduct.
Cartels are also often imperfect. Price-fixing agreements may be
patchily implemented and many cartels survive episodes of cheating. Cartel agreements usually do not
cover all of the variables on which the cartel members compete and may only regulate one component of
price of the good or service the subject of the cartel. Demonstrating that imperfect collusion has or is likely
to raise price or reduce output may not always be possible. If proof of these effects was required,
enforcement of the prohibition on price-fixing would be more expensive and less effective.
The courts have generally approached imperfect price-fixing arrangements in a pragmatic manner,
borrowing from rather than being overly restrained by economics. Both the United States and the European
Union courts have reasoned by analogy from established categories of cartel agreements to prohibit a range
of agreements that may affect price in one way or another. Agreements on the price of a component of the
overall price of a product, discounts, credit, and rebates are prohibited as species of price-fixing—partial
price-fixing. More recent decisions may be anchored in older precedents that appear to reflect a concern for
the protection of competition as a process more than economic efficiency. In New Zealand, the courts are
required to interpret statutory language on price-fixing borrowed from Australia in the 1980s, which was in
turned derived from an understanding of United States pricing fixing law of the early 1970s. Competition
cases from both jurisdictions are often cited in the New Zealand courts.
Economics does not offer a complete account of cartel conduct. Demanding price-fixing law follow
the contours of economic theory would likely result in many false negatives; in the sense that agree-
ments reducing competition without any corresponding social gain from collaboration would be
permitted. If an arrangement must be shown to have the purpose or likely effect of raising price or
reducing output to fall within a per se price-fixing prohibition,
the prohibition of many forms of naked
partial price-fixing and semi-collusion may escape the per se rule. In this regard, a tension exists
1. Lodge Real Estate Ltd. v. Commerce Commission [2020] NZSC 25.
2. Poynter v. Commerce Commission [2010] NZSC 38 considered jurisdiction over cross-border cartels. Discussed in Chris
Noonan, Bad Poynter: International Cartels and Territorial Jurisdiction,19N
EW ZEALAND BUS. L.Q. 138 (2013). Sections 4
and 90 of the Commerce Act were amended in response.
3. See Alaska Electrical Pension Fund v. Bank of Am. Corp., 175 F. Supp. 3d 44, 57 (S.D.N.Y. 2016) (rejecting argument that a
cooperation arrangement that increased supply cannot be price-fixing). Some cartels expand output: Werner Troeskin, A Note
on the Efficacy of the German Steel and Coal Syndicates,18E
XPLORATIONS ECON.HIST. 595 (1989); Janice R. Kinghorn,
Kartells and Cartel Theory: Evidence from Early Twentieth Century German Coal, Iron and Steel Industries,14E
ECON.&BUS.HIST. 339 (1996); Lars-Hendrik Ro¨ller & Frode Steen, On the Workings of a Cartel: Evidence from the
Norwegian Cement Industry,96A
M.ECON.REV. 321 (2006).
4. See Vogel v. American Soc. of Appraisers, 744 F. 2d 598, 601 (7th Cir. 1984), where Judge Posner said: “In general, the only
types of horizontal price agreements that the antitrust laws have been held to forbid are those that have the purpose or likely
effect of raising price above the competitive level.” The only exceptions the judge admitted were monopsony and maximum
price agreements, and the merits of the latter exception were questioned. See also Clamp-All Corp. v. Cast Iron Soil Pipe
Institute, 851 F. 2d 478, 485 (1st Cir. 1988), where Judge Breyer justified the prohibition of basing point pricing because such
practices reduce cheating and stabilize a cartel.
482 The Antitrust Bulletin 66(4)

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