Between the lines: Predator pricing not easy to prove

By FIONA ROTHERHAM

Populist politician Jim Anderton is losing few votes through his trenchant criticism of petrol pricing.

It is true the multinational oil companies have been quicker than most to pass on the effects of the falling kiwi dollar and increase in crude oil prices.

Where Mr Anderton comes unstuck is in his claims that oil companies are involved in predatory pricing by dropping petrol prices in areas where they are facing competition from new entrants. But that is just business.

Mr Anderton continues his campaign at a meeting next week with Shell, second-largest player in the New Zealand market. A meeting is also planned with Gull. The meeting was delayed until after last week's decision on the Carter Holt Harvey case. Mr Anderton is awaiting a report from his ministry officials on what implications the case has for lowering prices in other sectors.

It is difficult to prove intent for predatory pricing behaviour under the Commerce Act provisions, and this aspect of the legislation may be reviewed. Using this case as a warning to the oil companies and others could backfire on Mr Anderton.

The High Court found Carter Holt breached section 36 of the Commerce Act by using its dominance in the South Island insulation market to sell its product below cost where it faced competition. Mr Anderton wants to hear why Shell sells its petrol for up to 6 cents a litre cheaper in areas where new Australian-based independent Gull Petroleum is competing.

There is no proof the oil companies sell below cost and there is no dominant player in the retail petrol market.

BP is market leader with around 30 per cent market share. The independents, Challenge and Gull, have around 5 per cent and 1 to 2 per cent respectively.

Under section 30 of the act, price-fixing can only be proven if there is collusion between the players. The commission recently won a price-fixing case against Caltex, Mobil and Shell after proving all three had colluded on the termination of an offer of free car washes. Petrol prices have changed 22 times since last July - rising on 16 occasions, falling on only six.

But industry sources say the fact all six players follow on price, sometimes instantaneously, does not mean collusion. They say, it shows there is extremely tight competition.

Gull has faced the brunt of competition rather than the Fletcher-owned Challenge, which has 42 North Island stations and 50 branded South Island stations owned by independents.

Gull is more vulnerable. It has nine stations, with plans to open three more in Auckland this year.

Gull has 18 stations nationwide listed in the Auckland telephone book, after reserving the numbers for planned outlets.

Of course, competition could have changed those plans.