An Auckland construction company has been fined $500,000 as part of the country’s first criminal prosecution for cartel conduct, where two or more businesses agree not to compete with each other.
The company’s director has also been sentenced to six months of community detention and 200 hours of community work.
Earlier this year, Munesh Kumar, and his company Maxbuild Limited, admitted to bid rigging of publicly funded projects in Auckland, between January and May 2022.
Those projects were the Northern Corridor Improvement Project and The Middlemore Railway Bridge Project.
Bid rigging is a process where two or more companies agree on who will bid higher in a tender process, so that the lower priced bidder wins or stands a better chance of winning. It is a form of anti-competitive behaviour.
A second company and its director have pleaded not guilty to their charges.
They have ongoing name suppression.
While Maxbuild won a contract to provide concrete remediation for two bridges on the Northern Corridor Improvement Project through bid rigging, at a profit of more than $160,000, the company’s contract for the Middlemore Railway Bridge Project was withdrawn in May 2022 after the Commerce Commission started investigating.
Defence lawyer Gary Hughes told the court Kumar had been “desperate” because of the stresses of Covid lockdowns and the impact they’d had on his business.
He noted Kumar had shown remorse for the offending, fully co-operating with the Commerce Commission investigation.
He said Kumar was also facing medical issues, the details of which were permanently suppressed.
However prosecution lawyer John Dixon KC, representing the Commerce Commission, told the court there was a pattern of “repeated behaviour”, given the offending related to two separate projects.
He described the offending as “doing a favour for a friend”.
‘Sends a strong message’ — Commerce Commission
Responding to the outcome today, Commerce Commission chair Dr John Small said it was pleasing that the defendant acknowledged his offending and pleaded guilty early.
“The sentencing today sends a strong message to businesses that the commission will not tolerate cartel conduct, and we are prepared to lay criminal charges to enforce the law.
“Bid rigging of publicly funded contracts loads extra costs onto taxpayers and the New Zealand economy as conduct of this type undermines fair competition. The criminalisation of cartel conduct in 2021 underlines just how serious and harmful this offending is.”
Small said the commission would continue to enforce cartel laws as a priority.
“It should be clear to businesses that the commission will not hesitate to bring criminal proceedings when the law has been breached and New Zealanders are harmed. We will do that to make sure that kiwis reap the benefits of fair prices, quality services and greater choice.”
