Justice Fitzgerald says the fact that the behaviour involved projects that were publicly funded made the case even more concerning. Photo: RNZ / Simon Rogers
An Auckland construction firm, which is the second company to be sentenced over bid-rigging behaviour in two transport infrastructure projects, has avoided more than half a million dollars in fines and was given a significantly lower fine of $30,000 due to its lack of financial ability to pay.
The company, which continues to have interim name suppression, pleaded guilty last month over cartel conduct in relation to the Northern Corridor Improvement Project (NCIP) and Auckland Transport's Middlemore Bridge project in 2022.
The Commerce Commission had dropped charges against the company's director, who also has interim name suppression, due to his ill health and the company's guilty plea.
In December 2024, Munesh Kumar, also known as Max, of MaxBuild, was sentenced to six months' community detention, 200 hours' community work, and his company MaxBuild was fined $500,000.
On Thursday, the second company was sentenced at the High Court in Auckland by Justice Sally Fitzgerald, in the country's first criminal case for cartel conduct.
Justice Fitzgerald said that while it was accepted that Kumar was the instigator in both instances, the second company was an active participant in collusive behaviour in agreeing Kumar's requests.
In both projects, Kumar approached the company's director to ask them to submit a higher bid, so that MaxBuild could win the bid.
Justice Fitzgerald said the second company saw financial benefits further down the track, despite not directly benefiting financially at the time.
She said both the Crown and defence agreed that the company could benefit from submitting a bid without undertaking the work, and preserve the relationship with parties, including prospect of being invited to bid for future projects.
Justice Fitzgerald said the company's culpability was lower than MaxBuild, but added "I don't see it as so much lower".
She adopted a starting point of a $700,000 fine, taking reference from the starting point adopted for MaxBuild - which was a million dollars.
A five percent discount was given as the company had no previous convictions, and a 10 percent discount was given for its guilty plea, arriving at a fine of $595,000.
However, Justice Fitzgerald agreed to reduce the punishment to a sentence of a $30,000 fine - the upper-limit of the company's ability to pay as advised by both the defence and the crown prosecutor.
The company is no longer trading and its bank account was $19,000 in overdraft.
Justice Fitzgerald said she hoped the fine of $595,000 - which would have been imposed if the company had the capacity to pay - would have served as a deterrent.
She said the practice of "cover-pricing" by the company was harmful in its potential to reduce competition in the market place, increase prices and reduce the quality of services.
She said it could also diminish confidence in the competition process and increase the costs of compliance.
The fact that the behaviour involved projects that were publicly funded made it more concerning, Justice Fitzgerald said.
Commerce Commission committed to stamping out cover-pricing
The Commerce Comission's investigation into the case began in April 2022, when an employee of the second company inadvertently sent an email to the joint venture overseeing the NCIP, that included a spreadsheet revealing the company's pricing agreements with MaxBuild.
The Commission subsequently conducted six search warrants at several commercial and residential properties - which further revealed that the offenders had also bid-rigged the Middlemore Bridge project.
The Commission's chariperson John Small said the case set a precedent and reinforced that the Commission would hold cartels accountable.
"Cartel detection and enforcement are a priority for the Commission, and we are particularly concerned when we see conduct that targets taxpayer-funded projects.
"Where we suspect businesses and individuals are cheating the system by committing these crimes, we will take action against the conspirators," he said.
Small said cover-pricing was an issue the Commission was detecting more of and was committed to stamping out.
He said there was ongoing work in educating procurers about bid-rigging.
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