Appeal Court reinstates NZ regulator's cartel case against Visy Board

Friday 31st August 2012

The Court of Appeal has overturned a High Court ruling and reinstated the Commerce Commission's case against Australia's Visy Board and a former executive.

The regulator had appealed the April 2011 ruling by Justice Paul Heath that reduced the number of claims it could pursue against Visy and its former general manager Rod Carroll, arguing the High Court erred in rejecting a much wider pattern of alleged cartel behaviour in the New Zealand packaging market.

The Federal Court of Australia has already imposed penalties of A$36 million against Visy Board and its owner, Richard Pratt, and A$500,000 against Carroll. But the company and the executive have denied the cartel arrangements extended to New Zealand and objected to the commission pursuing its claims in New Zealand, according to the regulator's statement.

"This is an important ruling for the commission," chairman Mark Berry said in a statement. "We challenged the High Court decision because we felt it set an unrealistically high bar for us to take enforcement action against overseas defendants."

Berry said that in particular, the Court of Appeal "clarified that if a defendant is resident in or carrying on business in New Zealand, then its conduct offshore will be covered by the Commerce Act provided that conduct 'relates to' New Zealand markets." That would help the regulator "take effective enforcement action against cartel conduct targeting New Zealand," he said.

The commission's argument is that Visy and rival Amcor had a broad understanding in Australia, referred to as the 'overarching understanding' on market sharing and price fixing which was subsequently extended to New Zealand. Below this was what it called "a series of discreet understandings" in relation to New Zealand supply contracts.

Amcor made a request for leniency under Australian and New Zealand antitrust rules. Leniency rules are the equivalent of what the US calls 'turning state's evidence'. They are designed to encourage cartel members to cooperate with antitrust investigations to help ensure successful prosecution while mitigating their own punishments.

Visy and Amcor compete with Carter Holt Harvey in the New Zealand packaging market.

BusinessDesk.co.nz

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