New Zealand Companies Guilty in Landmark Cartel Conviction

The two firms pleaded guilty to rigging bids on taxpayer-funded Auckland projects, in New Zealand’s first cartel conviction.

Part of the $700 million Northern corridor improvement project, showing two of the bridges under construction in February 2021. Courtesy of the NZ Transport Agency

Two construction companies will face penalties in New Zealand’s first prosecution for cartel conduct under laws introduced in 2021.

A company whose name is suppressed has admitted colluding with contractor Munesh (Max) Kumar and his company, MaxBuild Ltd.

Kumar admitted the charges in December last year and was sentenced to six months of community detention and 200 hours of community work. MaxBuild was fined $500,000.

Both companies and their directors were initially charged, but in the High Court at Auckland this week, charges against one director were withdrawn, while the company entered guilty pleas.

Lawyer Sam Lowery, acting for the company and its director, said permanent name suppression would be sought at sentencing in October.

Commerce Commission chair John Small said the case showed cartel conduct would not be tolerated.

“The criminalisation of cartel conduct in 2021 underlines just how serious and harmful this offending is,” he said.

“Bid rigging of publicly funded construction contracts loads extra costs onto taxpayers and the New Zealand economy.”

The Commission said charges against the director were dropped due to ill health, and because the company had accepted responsibility.

“The Commission decided it was not in the public interest to continue to pursue the individual defendant, considering his ill health and the guilty plea of his company,” a spokesperson of the Commission said.

The unnamed company operates in both construction and remediation, and offers bridge jointing services.

Cover Pricing Scheme

Between January and May 2022, the two companies engaged in “cover pricing,” where one firm submits a deliberately high, non-competitive bid to make another rival’s bid appear more legitimate.

Court documents show the companies used this method on two publicly funded projects: the $700 million Northern Corridor Improvement project and the Middlemore Railway Bridge repair project.

While the suppressed company made no direct financial gain, it benefited from maintaining its client relationship and being invited to tender for future work.