The Commerce Commission has laid New Zealand's first-ever criminal charges for cartel conduct against two construction companies and two directors for alleged bid rigging of publicly-funded construction contracts in Auckland.
The proceedings were filed in the Auckland District Court.
The charges follow a Commission investigation into allegations the companies and their directors colluded to rig bids for infrastructure projects in Auckland.
Commerce Commission Chair John Small said the criminal proceedings sent a strong message to businesses that the Commission will not tolerate cartel conduct, and is prepared to lay criminal charges to enforce the law.
"Cartel conduct harms consumers through higher prices or reduced quality, and it harms other businesses that are trying to compete fairly. The criminalisation of cartel conduct in 2021 underlines just how serious and harmful this offending is," he said in a statement on Tuesday morning.
"Bid rigging of publicly funded construction contracts loads extra costs onto taxpayers and the New Zealand economy as conduct of this type undermines fair competition. The Commission will not hesitate to bring criminal proceedings in appropriate cases to ensure Kiwis are getting the benefits of fair prices, quality services and more choice."
What is a cartel
The Commerce Commission said a cartel is where two or more businesses agree not to compete with each other by price fixing, allocating markets or customers, or restricting the output or acquisition of goods and services. Bid rigging is a form of price fixing and can also involve allocating markets or customers.
"Bid rigging or collusive tendering is when there is an agreement among some or all of the bidders about who should win a tender or have an unfair advantage in the tender," the statement said.
The Commerce Commission said this may involve potential bidders not bidding for a tender to support the proposed winner or bidders may agree to the prices that each party will bid.
This often occurs in the form of "cover pricing", which the Commission describes as where one or more parties submit a tender bid or bids at an inflated price with a view to increasing the prospects that another designated firm wins the tender.
"Such an agreement prevents open and effective competition and means procurers are unlikely to achieve best value for money for their business, customers, and in some cases, taxpayers," the statement said.
Cartel conduct is prohibited under section 30 of the Commerce Act. As of April 8 2021, cartel conduct is punishable with a term of imprisonment of up to 7 years, underlying just how serious and harmful offending of this nature can be.
