Published in the National Business Review of 12 October 2007

Commission chair Paula Rebstock has issued another of her blunt warnings: cartels are affecting the competitiveness of New Zealand businesses at home and in export markets.

Seven of the ten high priority competition cases due for prosecution by the Commission involve "hard core" cartels.

"We would normally expect to initiate one or two competition cases per year, but as a result of the behaviour coming to our attention, we expect to take four to six cases in each of the next two years," she says

"Cases we are currently investigating are affecting the critical energy and transportation infrastructure sectors, and the health sector. They are affecting building costs, and office supplies, packaging, and inputs into basic industrial processes."

Ms Rebstock says the Commission is prosecuting more cartels than before.

"This is partly due to increased investigative expertise, and partly due to the Commission's Leniency Policy, which offers immunity from prosecution for the first cartel member who blows the whistle on their co-conspirators."

Markets with annual turnovers of up $500 million were affected although some markets were as small as $2-3 million dollars a year.

"These cartels are being led by New Zealanders in some cases and in others (they are) initiated by overseas companies."

New Zealand companies were not always aware the price-fixing being led from overseas flowing through local subsidiaries, she said.

She said that cartels were the worst form of anti-competitive behaviour.

Cartel practices raised the cost of inputs, and damaged the competitiveness of New Zealand companies by distorting cost structures to the ultimate detriment of consumers.

"The victims of cartels are nearly always other businesses. Consumers will eventually suffer, (but) the immediate impact is on businesses that rely on the cartel members for vital inputs. "

She cited the 2006 case involving the "tanalised" timber brand where timber companies Osmose New Zealand, Osmose Australia and two Australian-based executives were fined over $5 million for participating in a cartel in New Zealand's wood preservative chemicals industry.

"As well as the civil penalties, two individuals from the wood chemicals cartel received criminal convictions for hiding information from the Commission.

"In one instance, an executive hid papers under his floorboards, moving them to his neighbour's basement when the investigation closed in.

"You may laugh, but this is not unusual; in another case, papers that the company had failed to provide in response to a statutory notice were found behind a box of Christmas decorations.

"The secretive nature of cartels makes them difficult and expensive to investigate, and we welcomed these criminal convictions as evidence that the Court will look seriously on any attempt to hinder Commission investigations. "