John Small: Commerce Commission Chair on clampdown of cartel behaviour and bid rigging
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What is bid‑rigging and how much does it cost New Zealand each year?
The Commerce Commission looking at cracking down on illegal bid rigging, they think the practice is costing us about three hundred and sixty million dollars a year. Doctor John Smallers, the Commerce Commission chair, of course, needs back with us. John, morning to you. Yeah, good morning Mike. Has this come out of nowhere or has this been building for a while?
We think it's been well, this kind of activity has been um in our business community for quite a long time.
What is it? I mean, literally, take us through an example of how this unfolds.
Sure. Um ta take a household example, 'cause it doesn't have to be government procurement.
How does the Commerce Commission detect and prove illegal bid‑rigging schemes?
So you want to get some work done around the house and so you call for um you know, three quotes from three different Haides, for example. Um, you expect those quotes to be Uh based on what uh the individual people um think the job's worth and what they can do it for. you'd be pretty annoyed if you found out that those three people Uh before they put their prices and all got together and had a wee chat about who was going to win it and what the price was going to be.
Yeah. How do you prove that?
Uh, it's um the evidential hurdles are reasonably high.
Why are certain markets, like courier services and public roading, prone to cartel behaviour?
You need to have either somebody confesses, um, which does happen because we have a leniency programme Uh or we find out um you you find about find somebody tips us off. Which also happens, we've got an anonymous whistle blower um tool. Um and but either way, y you know, you need to get um uh evidence of the communication, evidence that there was an agreement between them and prove that in court.
Do you seem uh I I know you saw it in cou the courier sector which interests me, but also on the public roading. I'm assuming public roading is part of the problem is there aren't that many players in the market or am I completely wrong and the same people turn up over and over again.
There's an element of that for sure. That was the first criminal cartel
What penalties can individuals and companies face for participating in cartels?
uh had that kind of characteristic. It was a relatively specialised task. There weren't that many operators available to do it and and they knew each other.
So what's going on in the courier sector?
No, um it's not just career, it's also front. Um i it um that that's been a kind of a market allocation. um arrangement. So This is my custom and not yours, you leave them alone, otherwise, you know, I'll go after you there. It it was that kind of arrangement.
How does the Commission’s leniency and whistle‑blower program help break up cartels?
What ha what do you do with it? I mean, do these people end up in jail or are they just fined or what?
They can end up in jail. Um, a few years ago the government criminalised uh cartels. So when we when we get one of these cases we decide is this serious enough to be a criminal case or should we charge it as a civil That was criminal. You know, you you're looking at A maximum, obviously, of seven years imprisonment. Um for a person and then f for the companies, um, ten million dollar fine or ten percent of their turnover.
What impact do these enforcement actions have on deterring future bid‑rigging?
So The maximum penalties are pretty huge. Um and I would have thought be a significant deterrent. I think that's probably why we do get a few tips about these things. Yeah,
exactly. All right, go well with it. Appreciate it very much, Dr. John Small, who's the Commerce Commission chair with us this morning. For more from the Mike Asking Breakfast, listen live to News Talks Ed B from six AM weekdays or follow the podcast on iHeartRadio.
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Chapters
6 chapters
1
What is bid‑rigging and how much does it cost New Zealand each year?
0:00–0:30
2
How does the Commerce Commission detect and prove illegal bid‑rigging schemes?
0:30–1:04
3
Why are certain markets, like courier services and public roading, prone to cartel behaviour?
1:04–1:49
4
What penalties can individuals and companies face for participating in cartels?
1:49–2:16
5
How does the Commission’s leniency and whistle‑blower program help break up cartels?
2:16–2:45
6
What impact do these enforcement actions have on deterring future bid‑rigging?
2:45–3:07
Speakers
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