Commerce Commission reminds industry: comply with statutory information requests or face prosecution
The Commerce Commission is prosecuting three airlines for not providing information and documents during an
investigation into allegations of price-fixing and other anti-competitive conduct in the air cargo industry.
The Commission has filed criminal charges against Cathay Pacific Airways, Singapore Airlines and Aerolineas Argentinas.
The charges relate to alleged non-compliance with statutory notices issued under the Commerce Act in October 2007. These
notices compulsorily required that the airlines provide documents and information to the Commission by a specified date
in November 2007.
Statutory notices are a key investigative tool used by the Commission to gather evidence in its investigations of
potential breaches of the Commerce Act including alleged cartel activity. Parties who receive notices cannot refuse to
supply documents or information to the Commission as this may prejudice an investigation.
The District Court in Auckland is being asked to determine that a failure by the three airlines to provide the
information as requested is a breach of section 103 of the Commerce Act. The penalties for breaching section 103 are
summary conviction and fines of up to $30,000 for companies.
"Any failure to comply with Commission statutory notices that form part of a Commission investigation is a serious
enforcement issue," said Commission Chair Paula Rebstock. "The information the Commission alleges was not provided in
accordance with the notices could potentially be relevant to the Commission's investigation."
Ms Rebstock said, "Cartels are insidious and cause extensive damage to the New Zealand economy. They are difficult to
detect and extremely difficult to investigate because of their secretive nature. If the current investigation concludes
that there is a breach of the Commerce Act, the Commission will be seeking to file proceedings in the High Court later
this year. The Commission will continue to strongly pursue cartels involved in price-fixing and other anti-competitive
conduct."
Ms Rebstock said that increasing the effectiveness of the Commission's enforcement activity against cartels was a
continuing strategic priority for the Commission. The Commission's leniency and cooperation policies are the most
effective tools in helping to detect and investigate cartels. Statutory notices are also an effective tool and the
Commission relies heavily on them to gain evidence from the parties under investigation.
As the investigation into an alleged cartel in air cargo markets to and from New Zealand is continuing, the Commission
will be making no further comment at this time.
Background
Cartels Cartels are groups of businesses or executives who, instead of competing against each other to offer the best
deal, secretly agree to work together and keep prices high. Cartels harm competitors by sharing customers with other
cartel members, rigging bids, agreeing to charge higher prices than they would be able to charge in a competitive
market, restricting volumes and by squeezing non-cartel members out of the market. Cartels harm the New Zealand economy
by making consumers and other businesses pay inflated prices for goods. This also results in exports being more
expensive and thus less competitive in overseas markets.
Alleged cartels operating in the air cargo market The Commission is investigating allegations that certain airlines have
colluded and reached agreements and understandings on the level of cargo rates including fuel surcharges on
international flights to and from New Zealand. Airlines earn more than an estimated $400 million each year transporting
air cargo to and from New Zealand. A number of airlines are cooperating with the Commission's investigation. Overseas
competition authorities are also investigating the air cargo market.
In the United States – British Airways, Korean Air, Qantas and Japan Airlines have settled and agreed to pay record
fines. Most recently, Air France KLM has also settled in the US courts and has been fined US$350 million. In total, the
US courts have already awarded penalties of US$1.2 billion against airlines for participation in a cartel that has
increased air cargo rates to and from the United States. At least one US air cargo executive will pay a fine and also
serve a sentence in a US prison as a result of his activity in a cartel.
Previous criminal prosecutions for non compliance with Commerce Act statutory notices In June 2005, the Commission
obtained convictions against Koppers Arch (NZ) Limited and its former General Manager under section 103 of the Commerce
Act for deliberately withholding relevant documents that the Commission had requested through statutory notices in the
wood preservative chemicals cartel investigation. In August 2006, as part of the same cartel investigation, the
Commission obtained convictions against Osmose New Zealand Limited for also failing to provide documents that had been
requested by the Commission through a statutory notice and the former Osmose Australasian Group General Manager for
providing misleading and deceiving information in an interview.
Leniency and Cooperation The Commission encourages participants in cartels to approach the Commission as soon as
possible to admit liability. Companies or individuals who bring a cartel to the Commission's attention can gain immunity
from prosecution through the Commission's Leniency programme. Companies or individuals who wish to admit their guilt
once the Commission has started to investigate a cartel can cooperate with and assist the investigation in return for a
lower level of enforcement in the form of discounts on penalties, subject to the agreement of the High Court.
The Commission's leniency and cooperation policies are published on the Commission's website www.comcom.govt.nz
ENDS