Cartel racketeers fined $1.8 million

A company that took part in price-fixing in the wood preservative industry was fined $1.8 million by the High Court, as the Commerce Commission revealed yesterday it is investigating seven other suspected cartels.

Wood preservative chemical company Osmose - which operates in New Zealand and Australia - was fined $1.8 million in the Auckland High Court for price-fixing, bid-rigging and attempting to exclude competitor TimTech from the market.

Sydney-based company executive Mark Greenacre was fined $100,000, the highest penalty imposed in New Zealand on an individual cartel member, after admitting involvement.

The penalties follow a $3.6 million fine handed down in April to Koppers Arch Wood Protection and its Australian parent company, Koppers Arch Investments, after the companies admitted participating in a cartel.

Commerce Commission general manager Geoff Thorn said the wood preservative industry investigation was sparked by a complaint about anti-competitive behaviour, and was complicated by several executives lying to the commission.

Thorn hoped the $1.8 million penalty would deter other companies and encourage those in cartels to break ranks and apply for immunity from prosecution under the commission's leniency policy.

The commission updated the policy around a year ago, said Thorn, and had seven applications since. The investigations were in varying stages of completion.

Competition law specialist Alan Lear said cartels tended to be in markets with a small number of players.

Lear, an Auckland barrister, said it was rare for cartels to last as long the wood preservative chemical operation.

"Cartels are what I would call bad for business," he said. "Generally they do break down because when you control pricing, it is actually one of your key competitive tools."

The wood chemicals case is New Zealand's largest cartel prosecution and relates to activity between 1998 and 2002, when the affected part of the industry was worth around $35 million.

Proceedings are continuing against seven other corporate and individual defendants.

The previous highest company penalty for a Commerce Act offence was $1.5 million imposed on three companies that formed a cartel in the meat industry in 1998.