Attempting to rig bids for tenders cost Christchurch Transport Limited and its CEO $400,000
Published21 Aug 1998
In a strong warning to any organisations or individuals attempting to rig bids for tenders, Commerce Commission proceedings have cost Christchurch Transport Limited (CTL) and its Chief Executive $400,000.
Commerce Commission General Manager John Feil said that today, after an earlier judicial settlement conference, the Christchurch High Court imposed penalties of $380,000 on Christchurch City Council owned Christchurch Transport Limited (CTL), $10,000 against CTL's Chief Executive, and ordered $10,000 costs be paid to the Commission.
CTL and its Chief Executive had admitted that they breached the Commerce Act by discussing with another bus company, Leopard Coachlines Limited, how much they should bid for, and who should win, bus route contracts tendered by the Canterbury Regional Council.
CTL is the biggest bus company in Christchurch. It and Leopard together control 96.9 percent of the Christchurch bus market.
"Fortunately, Leopard refused to enter into an arrangement with CTL," Mr Feil said. "If the price fixing had been successful, then central government and the Christchurch ratepayers who subsidise passenger transport services in Christchurch, would have had to pay more."
Justice Pankhurst said that: " it is my view that the potential for "damage", in terms of increased subsidy levels, was very significant. In other words, given the characteristics of the market, I am satisfied there was significant scope for suppression of competition which in turn could have resulted in a marked increase in the gross subsidy payment."
The Commission's case was that CTL's Chief Executive initiated meetings with other bus companies and attempted to rig bids for Regional Council bus contracts.
Justice Pankhurst said that: "The conduct in issue occurred in December 1996 and in January - February 1998."
On the first occasion, on the eve of the tender round, CTL's Chief Executive approached executives of Leopard and proposed an arrangement whereby tender information would be exchanged to facilitate a desired result. That was that Leopard should obtain the Avonhead/Ilam bus route and CTL a range of bus routes which were for tender at the same time. CTL's Chief Executive proposed that each party should tender, supposedly in competition, but with knowledge of the others' tendered subsidy level. Despite the discussions, an arrangement did not eventuate.
In January 1998 CTL's Chief Executive approached Leopard again. He suggested that Leopard enter into an arrangement whereby CTL would not tender for the Bowenvale contract in return for Leopard not bidding for certain other contracts. CTL's Chief Executive then provided Leopard with the bids that CTL intended to make to ensure that Leopard bid higher and CTL won those contracts. Again, Leopard refused to enter into such an arrangement.
Mr Feil said that competitors colluding over prices is fundamentally anti-competitive because it limits customers' ability to influence prices.
He said that the Court's response to this attempt at price fixing shows that anti-competitive behaviour in relation to prices is a serious breach of the Commerce Act that Courts will punish severely.
Justice Pankhurst said that: "Where breaches of the Act are uncovered a strong message must be sent to the commercial community."
Mr Feil said that: "In this case the attempt obviously failed, but the Court still imposed penalties and costs totalling $400,000."
This was the second major case within three days involving anti-competitive collusion over pricing.
On Wednesday, in a separate case, the Auckland High Court ordered nine North Island meat companies to pay more than $5.5 million in penalties for their part in anti-competitive arrangements relating to prices they would pay farmers for livestock.
Other Commission court action against anti-competitive price arrangements includes:
? Nine North Island meat companies, total penalties $5.51 million (section 27), including $1.5 million against each of Affco New Zealand Limited, Richmond Limited and Lowe Walker NZ Limited; court action is continuing against a tenth company
? Toyota New Zealand Limited, $250,000 penalty plus $10,000 costs (section 37)
? Country Fare Bakeries Limited and Quality Bakers New Zealand Limited, $150,000 penalty each (section 30)
? DB Breweries Limited, $110,000 penalty plus $5,000 costs (section 37)
? Seven Auckland Toyota dealers, $50,000 penalty each; action is continuing against an eighth dealer (section 30)
