Fine sought for 'hardcore cartel conduct'

NIKO KLOETEN
Last updated 11:10 04/04/2014

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The Commerce Commission is pushing for a fine of more than $3 million against freight company Kuehne + Nagel over "hardcore" cartel conduct.

Swiss-owned Kuehne + Nagel is one of half a dozen companies prosecuted by the commission over a freight-forwarding cartel, which was separate to an air cargo cartel also taken to task by the competition regulator.

Both sides had agreed Kuehne + Nagel should pay a penalty of $3.1m, plus $100,000 in costs, the High Court in Auckland was told today.

At the penalty hearing commission lawyer Nick Flanagan said the behaviour of Kuehne + Nagel was "hardcore cartel conduct".

Losses to New Zealand consumers couldn't be ascertained but that was common in cases like this, he said.

The "covert" cartel behaviour included the creation of a fictional "gardening club" with code words referring to gardeners, greenhouses and marrows, Flanagan said.

One message sent by an employee involved in the cartel warned that "we do not want all the leaves blowing out of control".

The commission considered a starting point of $3.5m to $4m was appropriate for Kuehne + Nagel, which has pleaded guilty to the charges.

"A total discount of 20 per cent is appropriate ... this is less than that given to other freight forwarders but this party has pleaded guilty much later," Flanagan said.

Kuehne + Nagel's lawyer, Iain Thain, said the employee involved in the cartel was employed by a UK subsidiary of the company.

"Kuehne + Nagel New Zealand was at all times unaware of this price-fixing agreement."

The maximum penalty for the charges was $10m, Thain said.

Justice Geoffrey Venning reserved his decision, which he said would be made "within a few days".

Kuehne + Nagel is the last defendant out of six freight forwarding companies taken to task by the Commerce Commission for breaches of the Commerce Act. The other companies penalised for their part in the freight-forwarding cartel were Panalpina ($2.7m), Geologistics ($2.5m), BAX ($1.4m), EGL ($1.15m) and Schenker ($1.1m).

The commission alleged collusion on surcharges imposed to cover the costs of complying with security measures required by airlines and national authorities.

All defendants but Kuehne+Nagel have since settled with the commission, and the High Court has ordered penalties under the Commerce Act totalling $8.85m.   

In 2012 the Court of Appeal confirmed the commission's jurisdiction in its case against Kuehne + Nagel, confirming an earlier High Court ruling.

Kuehne + Nagel International, based in Switzerland, unsuccessfully argued it couldn't be held liable for the actions of its New Zealand subsidiary.   

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- Fairfax Media

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