Warnings issued to freight companies
The Commerce Commission has issued warnings to eight international freight-forwarding companies.
It is in the regulator’s view that they likely entered into cartel agreements with Mondiale Freight Services or Oceanbridge Shipping – in some cases, with both – to not compete for customers.
The warnings conclude the commission’s investigation, which began in 2018, into allegations of anti-competitive conduct in New Zealand’s international freight-forwarding industry, which relates to all aspects of logistical arrangements for moving cargo in and out of the country.
The companies that received warnings are 360 Logistics Group, Aqua Air Freight Services, CH Robinson Worldwide (NZ), Go Logistics, Kerry Logistics (Oceania) Ltd, Mainstream Global, Ryders Customs and Forwarding, and Stellar International.
Mondiale and Oceanbridge were suppliers to and competitors of the warned companies.
Earlier this year, the commission agreed settlements to resolve related proceedings with Mondiale and Oceanbridge. High-court penalties of $4.9 million were imposed on Mondiale and $4.6m on Oceanbridge.
Four individuals associated with these two companies also received penalties ranging from $65,000 to $100,000. The combined penalties amounted to $9.7m.
The commission considers that the cartel agreements had the effect of removing competition, making it possible that customers were charged more for retail freight-forwarding services than they would have if these companies had actively competed for those customers’ business.
The warnings are not legal findings that a breach of the Commerce Act has occurred, but reflect the regulator’s view of the conduct.
The warnings make it clear to the businesses that their directors and staff should be aware that entering into these kinds of anti-competitive agreements is likely to be cartel conduct, which may breach the act. They also suggest changes in each recipient’s behaviour to comply with the law.
The international freight-forwarding industry is an important sector of the New Zealand economy, says the commission, which “will continue to focus on identifying potential cartel conduct in global supply chains”.
International freight forwarding refers to all aspects of logistical arrangements for the movement of cargo in and out of the country, by air or sea. Generally, international freight forwarders do not physically carry the cargo between countries. Instead, they arrange for it to be moved by a third party, such as an airline or shipping line, as well as offering a range of other related services, such as customs clearance.
The alleged arrangements in this case relate to agreements reached prior to the Covid-19 pandemic. The arrangements took place before and after the Commerce Act was amended in 2017. All conduct ceased before April 8, 2021.
A warning letter explains the commission’s opinion that the conduct at issue is likely to have breached the law. It is not a finding of non-compliance – only the courts can decide whether a breach of the law has occurred.
The purpose of a warning letter is to inform the recipients of the regulator’s view there has likely been a breach of the law, to suggest a change in the recipient’s behaviour and to encourage future compliance.
A cartel is when two or more businesses agree not to compete with each other including by price fixing, allocating markets or customers, rigging bids or restricting the output or acquisition of goods and services.
Such conduct is prohibited under section 30 of the Commerce Act. Before section 30 of the act was amended in 2017, it prohibited price-fixing. The commission alleges the conduct in this case breached both the former price-fixing prohibition and the prohibition against cartel conduct.
As of April 8, 2021, cartel conduct is now punishable with a term of imprisonment of up to seven years, underlying just how serious and harmful offending of this nature can be. Conduct that occurred before April 8, 2021, is not subject to these new penalties.
