In this update, we report on two recent and significant cases, serving as a timely reminder of the consequences of getting competition law wrong:

• The High Court has issued a $420,000 fine for an acquisition that had the effect of substantially lessening competition in a market, and for which clearance was not sought; and
• Two courier companies have been fined $1.225 million for engaging in cartel conduct.

High Court hands down penalty for an acquisition

The High Court has ordered Alderson Logistics Limited and Supa Shavings (2022) Limited to pay a combined penalty of NZ$420,000 for completing acquisitions that substantially lessened competition, in breach of the Commerce Act 1986.

The penalty follows the companies’ non‑notified acquisition of the assets of two competing wood‑shavings suppliers operating in the Waikato region. At the time of the acquisitions, the target businesses were the acquirer’s closest competitors, and together the parties supplied a significant proportion of bulk wood shavings used by poultry and livestock farmers. The Court accepted that the acquisitions eliminated effective competition in the relevant markets and allowed the merged business to operate without meaningful competitive constraint for a sustained period.

Importantly, the transactions were not notified to the Commerce Commission (Commission) before completion. Although New Zealand operates a voluntary merger clearance regime, the Court confirmed that parties proceed at their own risk where an acquisition may substantially lessen competition, and that enforcement action, including pecuniary penalties, remains available where clearance is not sought.

The case reinforces that, while New Zealand’s merger control regime is voluntary, parties that proceed without engaging the Commission for clearance remain exposed to investigation and enforcement action if the transaction is later found to substantially lessen competition, including the risk of penalties.

Further, this case marks the first instance in which the Commission required the acquirer to sell off the assets it had acquired. Although divestment didn’t take place in this instance, as there were obstacles in the sale process, it serves as a reminder that divestment remains a tool in the Commission’s toolbox.

Courier companies ordered to pay $1.225 million for cartel conduct

Two New Zealand courier companies have been ordered to pay combined penalties of $1.225 million, and the Commission has signalled it will be issuing multiple other warnings following an investigation into cartel conduct in the courier sector. You can read our previous article on this case here.

Aramex was ordered to pay $700,000 and GoSweetSpot $525,000, after each admitted to entering into contractual arrangements with competitors that breached the Commerce Act. The proceedings were resolved by settlement prior to penalty hearings.

Cartel conduct is when two or more businesses agree not to compete with each other. This agreement could come in the form of fixing prices, allocating customers or markets, or restricting the output or acquisition of goods and services. These kinds of agreements are prohibited under section 30 of the Commerce Act. Individuals who engage in cartel conduct can be found criminally liable and can even face a prison sentence of up to 7 years.

Interestingly in this case, the Commission has also confirmed that nine other courier service businesses will receive formal warnings for conduct it considers was likely to breach the cartel provisions of the Commerce Act. While further detail has not yet been released, the Commission has signalled that additional information will be published on its case register in due course.

The conduct at issue arose in the context of reseller and carrier arrangements, a commercial structure commonly used in the logistics and courier sector. The Commission has emphasised that these types of arrangements can raise heightened competition law risks if they involve restrictions on how parties compete for customers or price services. The fact that the two companies did not contract with each other, but with different competitors, did not reduce the seriousness of the breaches.

What this means for businesses

This penalty for the courier companies is unsurprising, considering that cartel conduct is one of the Commission’s enforcement priorities this year (see our article on the priorities here). Businesses should ensure that pricing, customer allocation, exclusivity provisions and information‑sharing arrangements are regularly reviewed for compliance risk.

If you would like to discuss any aspect of either of these cases, or their potential implications for you or your business, please get in touch with one of our competition law experts.

Special thanks to Libby Muir for her assistance in preparing this article.