CONSTRUCTION CARTEL IN COMCOM VIDEO

New powers given to the Commerce Commission will aid whistleblowers and increase potential punishment for price-fixing cartels in industries including construction

In a new ‘Scene of the Crime’ video from the Commerce Commission, two builders agree to rig the bid for a construction project.

One builder suggests his firm will bid high and deliberately lose the bid, allowing the other builder’s firm to win the job “with a fair margin”. They then agree to rotate who wins next time. The builders describe it as a win-win.

With new powers given to the Commerce Commission however, they could lose big time, even if the intention wasn’t as malicious as portrayed in this video.

Cartels harm consumers by raising prices above the competitive level, harming competitors by “ganging up“ and sharing customers with other cartel members, and squeezing non-cartel members out of the market. Cartels harm the New Zealand economy by making businesses pay inflated prices for goods and services.

The Commerce Commission hasn’t singled out building and construction as the only culprit – this is one of several videos using various industries as examples.

New laws criminalising cartels and strengthening the powers of whistleblowers and prosecutors mean any cartel agreement entered into after 8 April 2021 may result in seven years’ prison and increased fines up to $500,000 for participants, and a fine of $10m or three times the commercial gain from the price fixing for organisations – whichever is larger.

Some in business may not know how to avoid cartel behaviour. Just like health and safety, it can be worth having a discussion to brainstorm situations which could put staff and managers at risk of crossing the line.

The Commerce Commission spent 2020 raising awareness of the incoming law, which has given the Commission access to powers under the Search and Surveillance Act. The Commission will be able to ask other agencies it works with to apply for warrants for surveillance devices – also known as wiretapping.

Price fixing at play in previous years

While not aimed at the building and construction specifically, the law has been prompted by recent cartel scenarios in various industries. Over the past two years, cartels have been found among industries as diverse as salmon farming, air freight, horse transporters, dairy farm milking machines and Hamilton real estate. Cartel behaviour has come up occasionally in building and construction, however.

In a November webinar, the Commerce Commission stressed that the rules enable leniency for whistleblowers who expose price fixing.

The Commerce Commission website helps anyone suspecting illegal price-fixing behaviour with guidance about the definitions of price fixing, bid rigging, market sharing and restricting output. It also provides practical tips for when engaging with competitors, exceptions to price fixing rules and guidelines on leniency and immunity from prosecution.