The High Court has imposed penalties totalling over $9.7 million to two international freight forwarding companies found to have engaged in longstanding cartel agreements with their competitors.
Mondiale Freight Services Limited (Mondiale) and Oceanbridge Shipping Limited (Oceanbridge), and four individuals associated with the companies, faced civil proceedings filed by the Commerce Commission in December last year.
The Commission alleged that they each breached the Commerce Act by agreeing with other freight forwarders not to compete for customers. Mondiale and Oceanbridge were in separate cartels and did not enter into cartel agreements with each other.
The separate cartel agreements were reached prior to the COVID-19 pandemic, the Commission said.
The Commission agreed settlements to resolve the separate proceedings with each of the defendants, it said.
In a recent ruling, the High Court imposed penalties of $4.9m on Mondiale and $4.6m on Oceanbridge. The four individuals associated with the companies received penalties ranging from $65,000 to $100,000.
Commission chair Anna Rawlings says 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 says.
The High Court acknowledged that the cartel conduct arose from practical concerns held by Mondiale and Oceanbridge regarding 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 says.
“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.
“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,” she adds.
‘We are sorry’
In a statement, Mondiale chief executive Ray Meade says the firm accepts the court decision and the penalties imposed.
“We have cooperated with the New Zealand Commerce Commission from the outset.
“We understand the need to meet all our obligations under the Commerce Act, and we are sorry this did not happen in this case. Since this matter was first brought to our attention in 2018 we have moved quickly to review and strengthen comprehensive compliance practices across all our operations,” Meade says.
The High Court found that Mondiale had not been aware it was in breach of the Commerce Act at the time of the practice and the company had held the view it was acting ethically in order to respect the trust and confidence of its wholesale freight forwarder customers, he says.
He says Mondiale had settled with the Commission at the earliest possible opportunity and that the conduct had stopped immediately when Mondiale was informed of the potential issue.
Meade says the company had acted quickly in 2018 to make changes as soon as possible to its practices to reflect best practice and entered into a settlement as soon as it could to resolve the matter on terms acceptable to Mondiale and the Commission.
“We have a focus on compliance and an ongoing extensive programme of competition law training to ensure we are all aware of our obligations and fully comply with all requirements right across our organisation,” he says.
*Click here for more information on cartel activity and steps on how to report it including the Commission’s anonymous whistleblower tool.
