Between the lines: Market Goliath meets David

By BRIAN FALLOW

The High Court ruling in favour of the Commerce Commission and against Carter Holt Harvey is reassuring for a couple of reasons.

It shows that even under New Zealand's permissive competition law, not everything a Goliath does to a David threatening his market is acceptable.

And it shows that the commission, sometimes derided as a toothless watchdog, is prepared to go the distance against a deep-pocketed corporate.

Faced with competition from Nelson gadfly Lindsay Newton, Carter Holt's response, in the words of Tim Trevena-Brown, one of its executives at the time, was to get "down and dirty." It developed a "me too" product which it had to sell well below cost to match Mr Newton's price.

Nothing wrong with that in itself, perhaps. But it occurred in an environment in which the relationship between the company and builders' merchants was, as the judge put it, "closer than an ordinary arm's length relationship between buyer and seller."

The court choked on the combination of Carter's dominance in the insulation market and its willingness to sell below cost where it faced competition.

Economic Development Minister Jim Anderton is portraying the judgment as a warning to Telecom and the major oil companies.

Telecom is willing to cut residential line rentals by about $10 a month where it faces competition from Saturn. Mr Anderton contends that this is either below cost (and arguably predatory pricing) or it is not, indicating that Telecom is overcharging in the rest of the country.

And petrol companies, he says, have never explained why petrol is 6c a litre cheaper in places like Tauranga than in places where the big companies do not face competition from a small new entrant.

It is far from clear, however, that the court's decision in the insulation case would provide a fresh club with which to beat Telecom.

The commission concluded that in matching Saturn's pricing, Telecom's prices were still above the relevant measure of its cost.

And its case against Carter Holt did not rest on the localised nature of Carter's competitive response.

It might be more relevant, given that the Government is drawing up its first Budget, for Mr Anderton and his cabinet colleagues to reflect that Justice Williams' judgment comes six years after the event and five years after the litigation began.

It took nearly as long for the court to type the judge's decision as it usually takes the commission to decide on a clearance application.

The commission's former chairman, Dr Alan Bollard, was scathing about the delays of the court system in competition cases. In his current role as Secretary for the Treasury he is well placed to put in a good word for more resources.

As they say, justice delayed is justice denied.