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High Court erred in limiting claims against packaging cartel

Wednesday 20th June 2012

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The Commerce Commission says the High Court erred in rejecting a much wider pattern of alleged cartel behaviour in the New Zealand packaging market when it dismissed much of its case against Australia’s Visy Board and a former executive last year.

The regulator has 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.

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.

By ruling that the commission only had jurisdiction over claims related to price fixing by Visy and rival Amcor for a Fonterra tender, the judge ruled out claims related to a who’s who of other manufacturers in New Zealand. The regulator had alleged price fixing in tenders for Coca Cola Amatil, Goodman Fielder, Inghams, Mainland Products, Tip Top Ice-Cream, various apple suppliers, the meat companies formerly known as PPCS and Richmond and packaging firm Huhtamaki.

“The commission had significant evidence relating to the other customers and transactions and Visy Australia’s business more generally, which the judge did not address,” the commission says in its appeal submission. It argues that the High Court ruling was “misconceived” in focusing on a ‘trans-Tasman’ market that had no basis in law and in deeming that Visy Australia wasn’t operating in New Zealand in its own right.

Visy and Carroll have already admitted price fixing in Australia, for which the privately held firm was fined A$36 million and Carroll fined $500,000, one of the biggest-ever such cases across the Tasman. Amcor made a request for leniency under Australian and New Zealand antitrust rules and in the Court of Appeal this week lawyers for the commission reminded the court that there was a suppression order on affidavits from all its leniency witnesses.

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.

The claims against Visy and Amcor that were upheld in the High Court haven’t yet proceeded because the commission wanted to pursue its appeal first.

Stephen Mills QC, appearing at the appeal hearing for Carroll, said the case against his client “pivoted off a single visit to New Zealand,” when he met executives of Fonterra in Auckland before the company put a packaging contract out for tender.

He described the commission’s powers of discovery as “discovery on steroids.”

“There has been eight years since the investigation began,” Mills told the court. “It has been extensive and intrusive.”

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

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