According to the Commerce Commission, bid-rigging in government contracts costs New Zealand’s taxpayers an estimated $360 million each year. Dr. John Small, the Commission’s Chair, emphasized that this figure shows the necessity for ongoing enforcement and public awareness. “I have a message for those involved in this illegal activity – we’re coming for you,” Dr. Small stated. He added, “Both our Anonymous Reporting Tool and leniency programme continue to generate very strong leads, and we have investigations underway where public procurement has been targeted.”
Focus on Public Expenditure
Government bodies allocate approximately $51.5 billion annually for purchasing goods and services. Combating cartels in public procurement is a key priority for the Commission, which strongly condemns any illegal practices that exploit taxpayers. The regulator is actively addressing all forms of cartel behavior, with current efforts targeting the real estate and grocery sectors. Last year, the Commission resolved cases involving customer allocation and price-fixing in the courier industry, as well as bid-rigging in public road construction contracts.
By publicizing the estimated cost, officials aim to draw attention to the issue. Dr. Small noted that when this illegal conduct occurs all Kiwis pay. “It is essential we protect the integrity of processes involving the expenditure of public funds.” The Commission is expanding its outreach initiatives to educate various industries and businesses, particularly those involved in procurement. Individuals aware of cartel activities can report them using the Anonymous Reporting Tool, while participants in cartels can seek leniency.
Defining the Offense
A cartel occurs when two or more businesses collude to avoid competing with each other. This includes practices such as price-fixing, dividing markets or customers, bid-rigging, or limiting the production or purchase of goods and services. As cartel members earn higher profits than they would in a fair competitive environment, prices rise, consumer choices diminish, and quality and service standards often decline.
Cartel behavior is prohibited under Section 30 of the Commerce Act. Since April 8, 2021, individuals engaging in cartel conduct face up to 7 years in prison, highlighting the severity of such offenses. Sections 31 and 32 outline exceptions to the cartel prohibition for vertical supply and collaborative agreements. The first cartel member to apply for leniency with the Commission can avoid civil penalties and criminal prosecution, potentially escaping imprisonment and financial fines.
