Criminal charges laid against two construction companies and two directors for alleged bid rigging

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Photo: RNZ / Cole Eastham-Farrelly

The Commerce Commission has filed criminal charges against two construction companies and two directors for alleged bid rigging of publicly funded construction contracts in Auckland.

It is the country’s first-ever criminal prosecution for cartel conduct, with the criminal proceedings filed in the Auckland District Court.

The commission said it followed an investigation into allegations the unnamed companies and their directors colluded to rig bids for infrastructure projects in Auckland.

Commission chair John Small said the charges sent a strong message to businesses that the competition watchdog would not tolerate cartel conduct – where two or more businesses agreed not to compete with each other, through methods such as price-fixing, which was criminalised in 2021.

Bid rigging occurred when there was agreement among some or all of the bidders about who should win a tender or had an unfair advantage in the tender, the commission said.

“Cartel conduct harms consumers through higher prices or reduced quality, and it harms other businesses that are trying to compete fairly,” Small said.

“Bid rigging of publicly funded construction contracts loads extra costs onto taxpayers and the New Zealand economy as conduct of this type undermines fair competition.

“The commission will not hesitate to bring criminal proceedings in appropriate cases to ensure Kiwis are getting the benefits of fair prices, quality services and more choice.”

Those found guilty face up to seven years in jail.

Small said evidence in the case related to matters that occurred after cartel conduct was criminalised in 2021.

He gave little away about the specifics of the case in an interview with Midday Report, or on whether the case was brought forward as a result of a whistleblower.

“I don’t want to say that, but I can tell you that we’ve got a range of intelligence and detection methods. We do quite often get tip-offs.”

He added that those involved in cartel conduct may apply for leniency if they came forward.

The commission said a court date had yet to be scheduled.

Consumer New Zealand chief executive Jon Duffy said bid rigging was an unfair practice.

“It could mean that whoever is commissioning the project is actually paying more for the services that these companies were offering than they should’ve been if the normal competitive process was allowed to follow through.”

Duffy said he was pleased the Commerce Commission had taken the matter seriously.

Civil Contractors New Zealand chief executive Alan Pollard.
Photo: supplied

Competition lawyer Andy Matthews said he would not be surprised if the case was brought forward as a result of the commission’s whistleblower policy.

“If they discover that they are a party to a cartel or alleged cartel they can approach the commission, be the whistleblower, seek immunity for being first in and then providing evidence against their fellow cartelists.”

He said the policy had been successful for detecting and punishing cartels internationally.

Construction Industry Council chief executive Tommy Honey said the alleged conduct was an exception in the sector, not the rule.

“It’s a novel thing for the construction sector and quite surprising, because I would say that the kind of activity that they are alleging is almost non-existent from our awareness of the sector.”

Civil Contractors New Zealand chief executive Alan Pollard said it was important there was a fair and competitive construction market.

“The industry itself prides itself on its professionalism and integrity and it has shown that over many many years. If any of this sort of behaviour was occurring we would be extremely disappointed and we would certainly support the commission and its work to ensure it doesn’t happen again.”