Warnings Conclude Commission Investigation Into Cartel Conduct In NZ’s Freight Forwarding Industry

The Commerce Commission has issued warnings to eight international freight forwarding companies that in the Commission’s view likely entered into cartel agreements with Mondiale Freight Services Limited (Mondiale) or Oceanbridge Shipping Limited (Oceanbridge) – 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. International freight forwarding relates to all aspects of the logistical arrangements for the movement of cargo in and out of the country.

The companies who received warnings are 360 Logistics Group Limited, Aqua Air Freight Services Limited, C. H. Robinson Worldwide (NZ) Limited, Go Logistics Limited, Kerry Logistics (Oceania) Limited, Mainstream Global Limited, Ryders Customs and Forwarding Limited, and Stellar International Limited.

Mondiale and Oceanbridge were both suppliers to and competitors of the warned companies. Earlier in the year the Commission agreed settlements to resolve related proceedings with each of Mondiale and Oceanbridge. The High Court imposed penalties of $4.9m on Mondiale and $4.6m on Oceanbridge. Four individuals associated with Mondiale and Oceanbridge also received penalties ranging from $65,000 to $100,000. The combined penalties imposed were $9.7m. The penalty media release can be found on our website.

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 Commission’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 Commerce 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. We will continue to focus on identifying potential cartel conduct in global supply chains.

Copies of the warning letters can be found on the Commission’s case register.

Background

International Freight Forwarding
International freight forwarding refers to all aspects of the 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, but 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 8 April 2021.

Warning letters
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 Commission’s view that there has likely been a breach of the law, to suggest a change in the recipient’s behaviour and to encourage future compliance with the law.

Cartel conduct
A cartel is where 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.

Cartel 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 that the conduct in this case breached both the former price fixing prohibition and the prohibition against cartel conduct.

As of 8 April 2021, cartel conduct is now punishable with a term of imprisonment of up to 7 years, underlying just how serious and harmful offending of this nature can be. Conduct which occurred before 8 April 2021 is not subject to these new penalties.

You can find more details about cartel conduct on the Commission’s website.

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