New Zealand Law Society - Pharmacy and director fined almost $400,000 for price-fixing

Pharmacy and director fined almost $400,000 for price-fixing

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The Commerce Commission says the Wellington High Court has ordered Prices Pharmacy 2011 Ltd and a director of the company, Stuart Hebberd, to pay fines of $344,000 and $50,000 respectively, after they admitted engaging in price-fixing in breach of the Commerce Act.

The Commission filed proceedings in April 2018 alleging that Prices Pharmacy 2011 Ltd and its directors facilitated a price-fixing arrangement with competing Nelson pharmacies in May 2016, in breach of Part 2 of the Commerce Act 1986. In most cases, the arrangement resulted in consumers paying $6, instead of $5, for their prescription items.

The arrangement arose from a Nelson region pharmacy owners’ meeting in April 2016 which was attended by 10 pharmacy owners. It stopped in June 2016 when pharmacy owners received additional taxpayer funding from the Nelson Marlborough District Health Board.

The Commission reports that Justice Dobson said: “…the effect of the arrangement was to fix the prices that the participating pharmacies would charge for filling prescriptions. The immediate consequence was to substantially lessen competition in the Nelson community pharmacy market, to the detriment of the customers purchasing the prescription medicines.”

Commission Chair Anna Rawlings says while the Commission accepts that the defendants did not intend to breach the Act and were motivated by what they considered to be underfunding of prescription medicines by the Nelson Marlborough District Health Board, the law exists for a very good reason.

“Competition between pharmacies is important because studies suggest that even modest changes in patient charges can result in some patients not collecting all or some of their medicines, which can in turn put pressure on other aspects of the health system such as hospitals,” says Ms Rawlings.

“This case, and the penalty imposed, are a timely reminder to health professionals of their obligations under the Commerce Act, and risks of discussing prices with competitors.

“The Commerce Act prohibits anti-competitive behaviour that can amount to price fixing. It is important that businesses and individuals are aware of the risks of engaging in this type of conduct, especially since price fixing will become a criminal offence from April 2021,” Ms Rawlings says.

A copy of the judgment will be available on the Commission’s case register shortly.

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