Glory seekers could sink their company

By VICKI JAYNE

It doesn't matter that you did it for the greater glory of the company. Employees, contractors or agents can be held liable for breaching the Commerce Act.

The act was amended last year to give it more and sharper teeth, and to bring us in line with a key trading partner, Australia.

In doing so, the Government sent an unmistakable message to the Commerce Commission and the courts that it wants to see individuals punished for their conduct.

And painfully.

The penalties can be severe - up to $500,000 against an individual, and his or her company would also face fines.

The formula for such fines against businesses is whatever is the greater - $10 million, or three times the commercial gain from the prohibited conduct.

And if you're caught price-fixing, your company can't protect you or indemnify you from a fine, and you can be barred from a management job for up to five years. Flout that ruling and the fine can be up to $200,000 - or jail for as long as five years.

The act aims to protect consumers by banning anti-competitive behaviour.

The three main planks of the legislation are:

* A ban on contracts, arrangements, or understandings that have the effect, or likely effect of substantially reducing competition in a market.

* A ban on using market power in an anti-competitive way, such as pricing below cost to get competitors off the scene.

* A ban on the acquisition of a business which might create a monopoly.

Anyone caught knowingly "aiding, abetting, counselling or procuring a contravention" is also liable.

So what sorts of things are likely to attract the commission's attention, and why should managers worry about what their staff are up to in the name of commerce?

Last year's High Court case involving car dealer Giltrap City Toyota and one of its employees, Andrew MacKenzie, is an example.

After an eight-year battle, both company and staffer were found guilty of entering into a 1993 price-fixing agreement with other car dealers.

However, Justice Susan Glazebrook said it wasn't appropriate to fine MacKenzie, who was described by his lawyer as having "gone on a frolic of his own" which his bosses would have disapproved of.

Justice Glazebrook acknowledged that Giltrap executives did not know of, support or condone the price-fixing.

But she said staff involved in the price-fixing were "acting within the scope of their actual or apparent authority, and within the scope of their employment.

"The law is that, as a consequence, Giltrap City Toyota was also a party to the arrangement and involved in giving effect to it ... "

However, the saga is still wending its way through the courts - Giltrap has appealed against its conviction and $150,000 penalty.

Another case, from 1995, is also a good illustration.

South Auckland lawyers Martin Strong and Brett Abraham told a rival that his conveyancing fees were too low, and that they would reduce theirs to $100 - less than the standard local fee - until he bumped up his.

Strong arranged for 25 cards to be made, advertising that his firm would do conveyancing for $100, showed them to the other lawyer, and invited him to lift his fees.

The other lawyer complained to the commission; Strong and Abraham admitted they had been aiming to price-fix by trying to set minimum fees.

Elisabeth Welson, a partner at law firm Simpson Grierson in Wellington, is helping companies set up Commerce Act compliance programmes, so that staff whose actions might risk breaching the act have the relevant training, and that there are processes in place to check what they do.

Although the concepts behind the act are relatively simple, its application in practice is not always so.

Many insurance companies also offer directors and officers liability insurance.

But some of those don't provide cover for fines, penalties and defence costs arising out of a breach, so statutory liability insurance, may also be required.

However, managers cannot presume they will always be covered insurance companies often refuse cover for knowing, wilful or intentional breaches of the law.