The Commerce Commission welcomes a Court of Appeal ruling today confirming the New Zealand Courts' jurisdiction over overseas residents alleged to have breached the Commerce Act.

In March 2007 the High Court ruled that the Commission can pursue legal proceedings against three defendants in the wood chemicals cartel case who were living overseas when the cartel was operating.

Those individuals, Elias Akle, Andrew Poynter and Neil Harris had appealed the ruling in the Court of Appeal.

"Today's ruling by the Court of Appeal reinforces the view that agreements that breach the Commerce Act that were entered into overseas - but aimed at New Zealand markets - can be the subject of legal action here," said Commerce Commission Chair Paula Rebstock.

The Court of Appeal in its judgment noted, "Increasingly, large international entities are responsible for the manufacture and distribution of goods. If such entities enter into anti-competitive arrangements overseas directed at a New Zealand market, we do not accept that they can insulate themselves from liability in New Zealand."

"This ruling is not only important to the wood chemicals case. Many New Zealand businesses are now managed from abroad, or are subsidiaries of overseas companies. But what is important to the Commission is that individuals who are overseas residents, but who conspire to breach the Commerce Act can not hide behind their overseas residence to avoid the full force of the law," Ms Rebstock said.

Elias Akle and Neil Harris were executives of the Osmose group of companies. Andrew Poynter was an executive with the Fernz Timber Protection Group. Akle was also a Fernz Timber Protection Group executive before Osmose purchased the Fernz Timber operation in February 2001. The Commission lodged proceedings against them because, even though they lived outside of New Zealand and their alleged actions took place outside of New Zealand, the wood chemicals cartel affected New Zealand businesses and consumers.

A full hearing will need to be held to determine whether any of the individuals has breached the Act. If the defendants do not appear at Court the Commission can seek judgment in their absence.

The judgment is available on the Commerce Commission's website.

Background

Wood chemicals cartel civil action.

In February 2008,three Nufarm companies, which operated the Fernz Timber Protection brand, were fined a total of $1.9 million for price-fixing and market sharing with competitor Koppers Arch. Terrence Mullen, formerly the Managing Director of Koppers Arch Investments Pty Limited was also fined $35,000 after admitting his personal involvement in the cartel.

In April 2006, the High Court imposed $3.6 million in penalties on Koppers Arch Wood Protection (NZ) Limited and its Australian parent company, Koppers Arch Investments Pty Limited.

In October 2006, Osmose New Zealand and Osmose Australia were fined a total of $1.8 million for their participation in the cartel. Two further executives have also been fined, in one case $100,000 for participation in the cartel.

The cartel operated in New Zealand's wood preservative chemicals industry from 1998 to 2002. The affected part of the industry was worth an estimated $35 million in 2002, and included the iconic 'Tanalised' timber brand.

Criminal convictions for hindering investigation.

The Commission's investigation was hindered by the defendants at various stages. In June 2005 Koppers Arch NZ and its former General Manager Roy Parish pleaded guilty to breaching the Commerce Act by not producing company documents when required to by the Commission. The company was convicted and fined $25,000 and Roy Parish was convicted and fined $8,000.

In August 2006, Osmose New Zealand pleaded guilty to not providing documents required by the Commission's investigators, and was fined $13,000. Australian-based executive Mark Greenacre admitted he lied to Commission investigators when he denied involvement in the cartel. He was fined $7,000.

Cartels.

Cartels are groups of businesses or individuals who, instead of competing against each other to offer consumers the best deal, secretly agree to work together and keep prices high. Cartels harm competitors by sharing customers with other cartel members and by squeezing non-cartel members out of the market. Cartels harm the New Zealand economy by making other businesses pay inflated prices for goods, resulting in more expensive end products that cannot compete overseas. An OECD survey has confirmed that parties to cartel agreements usually realise that their conduct is harmful and unlawful, causing them sometimes to go to great lengths to keep their agreement secret.