22 Feb 2019

First Gas fined $3 million for anti-competitive behaviour

3:02 pm on 22 February 2019

The gas pipelines company First Gas has been fined $3.4 million for anti-competitive behaviour by the High Court.

18072016 Photo: Rebekah Parsons-King. Wellington High Court.

Photo: RNZ / Rebekah Parsons-King

The company was investigated by the Commerce Commission and admitted it essentially forced out smaller competitor GasNet from distributing gas in the Bay of Plenty.

Chairperson Mark Berry said First Gas, which bought much of Vector's gas network, had a concerted strategy designed to force GasNet to leave market.

"First Gas sent a clear message to its competitor that its Bay of Plenty investment was under threat. GasNet's shareholder decided its best course of action was to sell the business and agree to a restraint of trade that would prevent it from returning."

Dr Berry said one of the tactics was to build duplicate gas lines in housing subdivisions.

He said the effect was to reduce competition in the market.

In her judgment Justice Jill Mallon said senior First Gas staff engaged in a concerted effort on a reluctant seller to remove a competitor, and had reduced competition as well as likely future competition.

The size of the fine along with the price First Gas paid meant that the assets acquired will not be profitable over their lifetime.

"In the context of a business which is almost entirely regulated, this means First Gas will incur a material loss from the acquisition. The general and specific deterrent objective is therefore met by the penalty," the judge said.

Dr Berry said the Commission would always treat business competition as a priority and companies should seek approval in such circumstances.

First Gas said it accepted its action was likely to reduce competition and should have sought Commerce Commission approval.

"We made an error by not seeking Commerce Commission approval in the purchase of another gas infrastructure provider - it was an expensive oversight that could have prevented any breach of competition laws," it said in a statement.