High Court of NZ slaps $9.7m fines to freight forwarders for cartel conduct

International freight forwarding companies, Mondiale and Oceanbridge, have been fined by the High Court of New Zealand with a total of $9.7 million for allegedly “engaging in longstanding cartel agreements with their competitors.”

The Commerce Commision filed proceedings against the defendants, including four individuals associated with the companies, saying they breached the Commerce Act by agreeing with other freight forwarders not to compete for customers.

The Commerce Commission said Mondiale and Oceanbridge were in separate cartels, which were reached prior to the COVID-19 pandemic.

The companies did not enter into cartel agreements with each other.

NZ’s High Court imposed penalties of $4.9 million on Mondiale and $4.6 million on Oceanbridge. The four individuals associated with the businesses received penalties ranging from $65,000 to $100,000.

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

“These cartel arrangements had the effect of removing competition, making it possible that customers were charged more by counterparties for retail freight forwarding services than they would have been if Oceanbridge and Mondiale had actively competed for those customers,” Rawlings said.

The court acknowledged that the cartel conduct arose from practical concerns held by Mondiale and Oceanbridge on providing wholesale freight forwarding services to other freight forwarders while also being their competitors.

However, the court found that the cartel conduct was a serious breach of the Act, engaged in and endorsed by persons at the highest levels of both companies, and occurred over a number of years.

“The liability attaching to these cartel arrangements demonstrates the risks that can arise when businesses who supply their competitors aren’t careful to manage those relationships in a lawful way,” Rawlings said.

“In addition to financial penalties, individuals involved in cartel conduct, after 8 April 2021, can now be liable for a term of imprisonment of up to seven years in appropriate cases,” she said.

“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.”

In February 2022, the High Commerce of New Zealand, along with the Australian Competition and Consumer Commission, joined five of its counterparts in other ‘Five Eyes’ countries to fight potential cartel conduct in supply chains in the wake of COVID-19.

NZ’s Commission said that 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 in appropriate cases.

Businesses and individuals can also use the Commission’s anonymous whistleblower tool.

Source: Commerce Commission New Zealand