New Wool Products upset at Privy Council decision

1.00pm

New Wool Products today questioned a Privy Council ruling overturning a decision that the company was the victim of anti-competitive behaviour.

It said it was surprised by the finding that Carter Holt Harvey had not breached New Zealand competition law.

"You have to wonder at the reality of the justice system," managing director Lindsay Newton said.

The case goes back to the early 1990s, when New Wool Products developed a woollen insulation product, Wool Bloc, which proved successful in the Nelson-Marlborough region.

Carter Holt's Insulation New Zealand Company (INZO) , which produced the fibreglass insulation product Pink Batts, responded by launching a similar product called Wool Line.

However, sales of the product were low because it was more expensive than Wool Bloc, so the company ran a "buy one get one free" promotion in parts of the country.

The move resulted in Wool Line sales picking up and New Wool Products was forced to close its doors several times in 1994 because of reduced demand for its product.

Carter Holt stopped the two-for-one deal after the Commerce Commission started investigating, and reached an out-of-court settlement with New Wool Products.

However, the commission still took it to the High Court, which ruled that Carter Holt used its dominant position in the market to deter competition.

The Court of Appeal subsequently upheld that ruling.

Carter Holt, which argued that its actions were a normal competitive response, said the Privy Council decision was significant for the wider business community, given the common practice of companies selling below cost for competitive reasons.

"Mistakenly describing competitive behaviour like INZCO's as predatory can impede the very conduct that the competition laws are designed to protect," said its counsel Nicholas Short.

The Privy Council ruling overturns a $525,000 fine handed down to Carter Holt.

The Commerce Commission declined to comment on the ruling, saying it was still reading it.

However, Mr Newton said he was grateful for the commission's actions, because it stopped Carter Holt's two-for-one deal and allowed his company to reopen.

"Looking back on it, although it was frightening at the time, it is just a part of the company's history now," he said.

The judgment comes as New Zealand severs its links with the Privy Council in favour of its own Supreme Court.

Carter Holt has since sold INZCO.

- NZPA