PHOTO: Head of Competition Katie Rusbatch
With cartels continuing to rear their head in New Zealand, the Commerce Commission wants to raise business awareness of how to avoid and how to spot anti-competitive conduct .
Put simply, a cartel is where two or more businesses agree not to compete with each other to make money. This conduct can take many forms, including price fixing, dividing up markets, rigging bids or restricting output of goods and services. The end result is that consumers are deprived of a fair deal that can flow through to higher prices and a reduction of choice and quality.
Over the past 6 years, the Commission has prosecuted 11 cartel cases across markets ranging from livestock, cardboard packaging and waste oil through to real estate, air freight and timber, Head of Competition Katie Rusbatch says.
“It doesn’t matter whether businesses set out to break the law, even attempting to make an agreement not to compete with each other, whether it’s acted on or not, is illegal under the Commerce Act. It also doesn’t matter if the agreement is formalised in writing or just an understanding,” says Miss Rusbatch.
“One of the common ways we have seen agreements made is through discussions between competitors when they meet at industry association events. It’s important that businesses understand the risk of engaging with competitors on matters relating to their respective commercial positions or plans.”
“Advisers, like accountants, play an important role in protecting their clients and are often uniquely positioned to spot the red flags that could suggest their client is at risk of, or involved in, cartel conduct.”
Red flags
The following red flags could suggest businesses are at risk of, or involved in, cartel conduct:
- Sharing pricing information with competitors
- Allocating customers or contract types with competitors
- Sharing commercially sensitive information with competitors
- Secret or fictitious payments to or from competitors
- Agreeing retail prices with a wholesale customer when both businesses also sell at the retail level
- Communicating with competitors about the main contract during tenders
- Joint bidding with competitors to reduce the amount of bidders in a tender
- Not bidding in a tender as a result of communications with a competitor
- Restricting the production of a product or service in conjunction with competitors
- Cooperating with competitors to exclude others from markets
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