Commerce Commission gets tough on anti-collusion

In the wake of an anti-collusion reminder to essential services providers, the Commerce Commission announces court outcome that sees taxi company fined $150,000 for cartel conduct.

In a 27 August media release, the Commerce Commission reminded all businesses supplying essential services in the current nationwide Covid-19 lockdown of their obligations under the Commerce Act.

The Commission stated that it recognises that the impact of the Covid-19 outbreak is significant for businesses, consumers and the economy, and that some businesses able to operate under level 4 restrictions “may need to cooperate to ensure New Zealanders continue to be supplied with essential goods and services, for example, to share staff or distribution networks or take other measures to ensure security of supply.”

“However, they also need to be aware of what they can and cannot do when talking to their competitors,” it stated. The Commerce Act prohibits anti-competitive agreements between firms such as agreements to fix prices, allocate markets or restrict output.

The Commission stated that it will not tolerate unscrupulous businesses using Covid-19 as an opportunity for non-essential collusion between competitors or anti-competitive behaviour.

“This includes competitors agreeing on pricing/pricing intentions, allocating markets or its customers or restricting the output of goods or services where it is not necessary in the current situation. For example, competing tradespeople should not agree the prices they will each charge for the provision of essential repair services during a lockdown.”

The Commission highlighted that it is committed to taking enforcement action to prevent consumer harm and that it is able to take action to stop such conduct or seek appropriate penalties when identified. Cartel conduct is punishable with a term of imprisonment of up to seven years and penalties for businesses involved.

“Businesses or individuals wishing to report cartel conduct should contact the Commission as soon as possible. The Commission can grant leniency to the first member of a cartel to approach it, provided they meet the requirements for leniency. More details on the leniency policy can be found on our website.

“The Commission advises all businesses providing essential services to engage with our guidance to ensure they stay on the right side of the law.”

With the Commerce (Criminalisation of Cartels) Amendment Act 2019 coming into effect last 8 April, cartel conduct is now punishable by a maximum penalty of a term of imprisonment of up to 7 years.

Individuals can be fined up to $500,000 and may now be subject to a term of imprisonment. Companies can be fined up to $10 million, three times commercial gain or 10 percent of turnover per year per breach.

A cartel is where two or more businesses agree not to compete with each other. This conduct can take many forms, including price fixing, dividing up markets, rigging bids or restricting output of goods and services. Penalty imposed for taxi cartel conduct The Commerce Commission announced on 30 September that the High Court had ordered Hutt and City Taxis Limited (Hutt & City) to pay a penalty of $150,000 in relation to fixing the prices of taxi fares.

The Commission had filed proceedings against Hutt & City in May 2021 alleging that Hutt & City breached the Commerce Act by agreeing with two competing taxi companies to implement a minimum charge of $25 for pick-up taxi trips from the on-demand taxi rank at Wellington Airport.

The companies discussed the design and distribution of stickers that would display the minimum charge in taxis and Hutt & City distributed the stickers to its drivers and implemented the charge when drivers began receiving the stickers.

The agreement was reached in September 2020 and it took effect in October 2020. The conduct ceased in November 2020, after the Commission began investigating.

The High Court imposed penalties of $150,000 against Hutt & City, payable in instalments over the next four years. The Court found the appropriate starting point was within the range of $500,000-$600,000. After taking into account a discount for mitigating circumstances, the end penalty was further reduced to take account of Hutt & City’s financial circumstances.

The Court noted that the fact that Hutt & City instigated the agreement, and that its directors were aware of it, and approved it (with the exception of one director), spoke to the seriousness of the conduct.

“Cartel conduct harms consumers by preventing businesses competing to provide better quality services at better prices, and it harms businesses that are trying to compete fairly,” said Commission Chair Anna Rawlings.

“Even agreements like this that are short lived can give rise to serious consequences for businesses, but also for individuals who are involved. In addition to financial penalties, since April this year, individuals involved in cartel conduct can be liable for a term of imprisonment of up to seven years so it is more important than ever that businesses, their directors and employees make sure they understand how to stay on the right side of the law,” said Ms Rawlings.

Businesses or individuals wishing to report cartel conduct should contact the Commission, and those who consider they may be party to cartel conduct should do so as soon as possible. The Commission can grant leniency to the first member of a cartel who approaches it, provided they meet the requirements for leniency. Immunity against criminal sanctions is also available.

Businesses and individuals can also use the Commission’s anonymous whistle-blower tool.