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Cartel – “Hard Core Conduct”

07 April 2014

The Commerce Commission recently brought a case against 6 multi-national forwarders who colluded to disadvantage local importers, in breach of the Commerce Act. The defendants were accused of imposing surcharges to cover the costs of complying with security measures required by airlines and national authorities.

Prosecutors for The Commerce Commission proved that these companies formed a “Gardening Club” and used code words as a cover for their actions, specifically, price fixing, in order to drive up freight rates, in breach of natural competition. This level of pre-meditation raised the bar as far as level of offending went in that it was deliberate, prolonged, and was subject to a great deal of subterfuge.

The costs to New Zealand importers (and ultimately the consumer), are unknown, but it is estimated to be in the millions of dollars.

To their credit, 5 of the 6 companies involved, pleaded guilty early on and received negotiated “discounts” on the fines that would normally have been imposed,

Panalpina               $2.7million
Geologistics          $2.5million
Bax                         $1.4millon
EGL                        $1.15million
Schenker               $1.1million

Kuehne & Nagel, a substantial player in the New Zealand market, initially argued in the High Court that the Commerce Commission had no jurisdiction in this matter, and lost. A subsequent ruling from the Court of Appeal supported this view, and found Swiss forwarder Kuehne & Nagel guilty, in the words of Commerce Commission prosecutor, Nick Flanagan, of “Hard Core Cartel Conduct”, perhaps inspired by Justice Sir Peter Mahon’s famous quote “an orchestrated litany of lies” during the of Erebus enquiry.

The Commerce Commission and Kuehne & Nagel have agreed that a fine of $3.1 million, plus $100,000 in costs is appropriate, and this is now subject to confirmation by the Court.

Final word: 
One wonders if those clients who were cheated by one or more of these companies, have considered the merit in dealing with organisations proven to be prepared to flout New Zealand Law at their expense.

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News added by: Don Malcolm 07 April 2014

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