Court told oil bosses lied to cover up price-fixing

Executives at three of the big four oil companies lied to Commerce Commission investigators to cover up a price-fixing conspiracy, it was alleged in the High Court at Auckland yesterday.

Senior counsel for the commission, Rod Hansen, QC, told Justice Salmon that Caltex, Mobil and Shell colluded over the withdrawal in May 1996 of free or discounted car-wash promotions in the Auckland area.

"They were no longer serving their original purpose," said Mr Hansen. "They were costing the companies money. But none was prepared to go it alone for fear the others wouldn't follow.

"They avoided that by coming to an understanding that they would all withdraw the promotions at the same time."

The commission is seeking as yet unspecified penalties under the Commerce Act.

Mr Hansen said that the free car wash worth $2 (or a $2 discount on more expensive washes) with every $20 purchase of petrol at many petrol stations represented an integral part of the "price" of the petrol.

It was a valuable consideration and its removal was effectively an increase in the price of fuel.

Mr Hansen said the steps taken to withdraw the promotions amounted to a blatant price-fixing arrangement, made worse by the oil companies' steps to conceal its existence.

"Regrettably, these steps extended to executives of all three companies lying to Commerce Commission investigators."

A costly stalemate had developed, with the companies locked into the free offer.

The promotions were no longer fostering sales or helping to achieve a competitive advantage. They were merely costing the petrol companies dearly in lost revenue from the car washes and increased costs in maintenance of the car-wash plants.

There was a major incentive for the oil companies to discontinue the promotion - but a major disincentive to go it alone.

"The commission's case is that the defendants opted for the best of both worlds by coming to an arrangement or understanding that they would cease the promotion at or about the same time," said Mr Hansen.

Their opportunity arose fortuitously as a result of the premium unleaded petrol crisis in early 1996, when a petrol additive was said to be responsible for car engines catching fire.

The oil companies formed working groups to discuss technical aspects of the problem, but the commission says that other issues were also raised.

"The commission says that the opportunity was taken by the three defendants to get rid of the free car-wash promotions, which had become a costly albatross around their necks," said Mr Hansen.

The contemporaneous withdrawal of the promotions and other circumstances showed there had been a conspiracy.

Initially the oil companies steadfastly denied any "improper communications" but Mr Hansen said there had now been belated admissions.

Mobil had acknowledged that a senior manager lied on oath to the investigators, and a senior Shell manager also acknowledged giving false evidence.

"The evidence leads inexorably to the conclusion that the explanations put forward by the defendants for the coincidental withdrawal of the promotions were not simply irrational and implausible, but part of an elaborate cover-up."