Forestry giant Carter Holt Harvey agreed to pay $1.85 million in penalties for price-fixing in the Auckland timber market when appearing in the Auckland High Court yesterday. Read the article here. This is surprising for two reasons in particular.
First, New Zealand is widely considered as an easy place to do business and not to have issues with either corruption in the public sector or collusion in markets. New Zealand was ranked highest in the 2013 global anti-corruption perceptions index. Most people would not have thought this conduct could occur in such a developed market.
Second, both companies involved here are large corporates that will be all over their obligations under the Commerce Act. This highlights an issue for all large corporates that have significant diversity in their location and operation and where individual store or region managers may not be aware of obligations under the Commerce Act and may engage in prohibited behaviour which is otherwise undetected by senior management.
Fletcher Building’s conduct is a good example of the checks and balances that large organisations should use. In this case the conduct was discovered during an internal audit and reported to the Commerce Commission. This shows the immunity that the Commission gives to informants working well in practice, especially where this type of collusion at lower levels in companies will always be a risk and the incentive to disclose behaviour is an excellent incentive to ensure the behaviour is stopped.