A $500,000 civil works project is at the centre of unprecedented Commerce Commission charges of alleged bid-rigging by sub-contractors.
The defendants can’t be named before their first appearance on January 25, but last night District Court Executive Judge Brooke Gibson cleared Newsroom to report interviews with the two men.
The successful tenderer says his “back was against the wall” during Covid, when he was alleged to have rigged a bid to win the contract.
The contract was put out to tender by a motorway works alliance comprising the NZ Transport Agency Waka Kotahi, HEB and Fulton Hogan. None of the alliance members is facing charges but last night, all three refused to comment while the matter was before the courts.
None would say how they had discovered the alleged criminal conduct or whether they had reported it to the Commerce Commission, as the appropriate enforcement authority.
Both of the defendants say the rules around cartel behaviour are unclear.
“A lot of us don’t know, but I don’t want to make excuses ,” says the successful tenderer.
“None of us knew how serious this was. If I knew this was going to be a criminal [matter], there’s no way – I would have folded. I would have shut my business down … then write off all my debts and start again.”
“I’m obviously going to be the poster boy for this. And this is going to ruin my reputation completely. My life has completely turned upside down.“
Sub-contractor, facing cartel charges
“What I’ve said to the Commerce Commission is, after this is done and dusted, I’d love to work with you guys to go and educate people. Because everybody I’ve spoken to, including some of the people that vouch for me, this is a normal part of business that a lot of people were doing, and continue to do, right?”
“I’m obviously going to be the poster boy for this. And this is going to ruin my reputation completely. My life has completely turned upside down.”
He says, to avoid all doubt, he is refunding all the money in question. “I want to be able to look my kids in the eyes.”
The other company director facing charges says “it’s a very fickle line” and unfortunately, people outside the industry don’t understand it.
“Some of these tenders that we do are massive amounts of money and time to do them. And for somebody to use you as a pricing tool,” he says.
“It’s been commonplace in this industry to talk about prices and stuff for years, ever since Satan was a boy, to be honest. And the worst players in the industry are the bigger players. There were some mitigating circumstances within this case.
“There was never any financial gain, or anything like that. It was just in a stressful situation, after all the bloody lockdowns and stuff that’s happened.
“The bigger players beat us little players up all the time, and I have wasted years of my life and money trying to appease these people that f*** us over. The ones that you really want are them, not us.”
A cartel is where two or more businesses agree not to compete with each other by price fixing, allocating markets or customers, or restricting the output or acquisition of goods and services.
Civil Contractors NZ, which represents 827 companies in the sector, says it’s important that illegal behaviour is dealt with by the appropriate authorities. It sent out a reminder to members this week, telling them that if they aren’t clear on their obligations, they should seek professional legal advice or contact the Commerce Commission for support directly.
Chief executive Alan Pollard says it’s important there is 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,” he says.
Cartel charges carry a maximum sentence of seven years in prison or a fine not exceeding $500,000 for the directors, and a fine not exceeding $10 million for the companies. Laws against cartel conduct were strengthened in changes to the Commerce Act in 2021.
Bid rigging is a form of price fixing and can also involve allocating markets or customers. It occurs when there’s an agreement among some or all of the bidders about who should win a tender or have an unfair advantage in the tender.
This may involve potential bidders not bidding for a tender to support the proposed winner or bidders may agree the prices that each party will bid.
“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,” says Commerce Commission chair Dr John Small.
“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.”
Six years ago, two men were jailed in the country’s largest bribery case, brought by the Serious Fraud Office.
Former Projenz managing director Stephen Borlase and Auckland Transport senior manager Murray Noone were found guilty of bribery and corruption in a road maintenance case. The pair had been engaged in a seven-year corrupt relationship.
And in 2021, the High Court ordered Specialised Container Services in Christchurch and its director Grant Tregurtha to pay penalties in relation to an attempted price fix of vehicle booking system fees. he had tried to make an agreement with a competitor to charge the same or similar fee to customers of its container depot.
