$3.6m fine in price-fixing case

In the first sign of a crackdown by the Commerce Commission, a record $3.6 million penalty has been imposed on a leading wood chemical company for price fixing and running a cartel with its supposed competitors.

Koppers Arch Wood Protection, which makes chemicals used to treat fence posts and decking timber, has pleaded guilty to being in a cartel and trying to shut out a new rival.

The $3.6 million penalty, handed down in the High Court at Auckland yesterday, is made up of $2.85 million for price-fixing and $750,000 for attempts to shut out the new competitor from the $35 million-a-year market.

It will also pay $100,000 court costs.

"This record penalty is a tremendous result and should make others think twice before engaging in this kind of illegal behaviour," said commission chairwoman Paula Rebstock.

"Koppers' illegal gains came at the expense of ordinary New Zealanders - farmers paying more for their fence posts or home-owners paying more for their decking timber."

Koppers Arch is best known for its range of tanalised products. The subsidiary of two US-based companies, it employs 23 people in New Zealand.

Four other companies are also facing prosecution by the commission over the cartel.

These are Osmose New Zealand and TPL, based in New Zealand, and Australian companies Nufarm Australia and Osmose Australia.

Rebstock said Koppers Arch had hurt New Zealand businesses and the economy, because those using the chemicals had paid more than a fair price for them.

She said last month the commission was going after cartels operating here.

Cartels could be big or small, domestic or international and be conducted with "pen and paper, or with laptop and email".

"The commission does not discriminate," said Rebstock.

"Wherever cartels may be, the commission will use all the tools at its disposal to discover, pursue and attack them. New Zealand is a country where cartel participants should never feel safe."

Competition lawyer at law firm MinterEllisonRuddWatts Andrew Matthews said cartels were a "hot topic" internationally. New Zealand's law, when compared with other countries, stacked up fairly well. There were moves afoot in Australia to make cartel behaviour a criminal offence, which meant people could go to jail.

In this latest case, the commission said Koppers Arch had agreed with its competitors to:

* Share pricing information.

* Simultaneously raise prices.

* Not compete on price.

* Not compete for customers.

* Try to shut out a new entrant, TimTech Chemicals, from the market.

* Try to eliminate TimTech from the market once it had entered.

This all happened between 1998 and 2002, in markets for two types of chemicals used to preserve wood. The investigation began after a complaint from TimTech.

Legal action against other companies said to be involved in the cartel are proceeding.

In June last year, Koppers Arch and its former general manager, Roy Parish, pleaded guilty to breaking the law by not providing documents when required to by the commission. Parish even hid company documents under his house.

Parish and another manager, Mark Boyle, left the company early last year.

In a press release issued from Australia, Koppers Arch Wood Protection group general manager Julie Giles said: "In the case of Koppers Arch Wood Protection, the identified behaviour ceased almost four years ago and we have undergone significant changes since then."

She said the company believed the behaviour identified by the commission "had not had a significant impact" on the New Zealand market.