Former Amcor exec fined for 'major role' in Fonterra tender fix

08-Apr-2014 - Last updated on 09-Apr-2014 at 12:18 GMT

A former Amcor executive has been ordered to pay a NZ$60,000 fine for the “major role” he played in attempting to fix a 2004 call for tender by Fonterra.

James Hodgson, who was previously responsible for Amcor’s corrugated fibreboard packaging (CFP) operations in New Zealand, was yesterday ordered by the High Court of Auckland to pay a penalty of NZ$60,000 (US$52,000, AU$55,000) and costs of more than NZ$38,000 (US$33,000, AU$35,000).

According to the New Zealand Competition Commission, which brought the case, Hodgson was “instrumental in breaches” of the Commerce Act arising from a call for Fonterra business.

The High Court of Auckland ruling marks the end of a “long running case involving the cardboard packaging cartel” operated by packaging firms Amcor and Visy in Australia and New Zealand. Both have admitted forming the illegal arrangement to divide the CFP markets in the trans-Tasman region. By colluding, Amcor and Visy decided in advance which of them would win customer tenders.

Price fixing

In her judgment, Justice Patricia Courtney said that Hodgson, who refused to cooperate with the New Zealand Competition Commission, had played a “major role” in the cartel.

“It was Mr Hodgson who directed and facilitated the cooperation between Visy and Amcor in relation to the Fonterra tenders. Given Fonterra’s size and significance in the New Zealand dairy industry and its high use of CFP or cardboard, Mr Hodgson’s conduct ought to be regarded as serious,” she said.

Following proceedings brought by the New Zealand Commerce Commission, Visy was also ordered in August 2013 to pay a penalty of NZ$3.6m (US$3.1m, AU$3.3m) and its former senior executive John Carroll NZ$25,000 (US$21,700, AU$23,100) by the New Zealand High Court in Auckland for “breaching the Commerce Act by being involved in price fixing."

Its case against Visy involved the company’s conduct in relation to tenders for Coca-Cola between January and March 2001, Goodman Fielder in mid-2001, and Fonterra in July 2004.

Commenting on yesterday’s decision, New Zealand Commerce Commission chairman Dr Mark Berry branded the ruling "another important victory for the Commission in its fight against cartels."

Australian penalties

The New Zealand Commerce Commission cases followed earlier proceedings initiated by the Australia Competition and Consumer Commission (ACCC).

In 2007, the Federal Court of Australia imposed a penalty of AU$36m (US$33.7m, NZ$38.9m) on Visy and issued Carroll with a fine of AU$500,000 (US$470,000, NZ$540,000), after both admitted their involvement in the cartel with Amcor.

According to the ACCC, Amcor and Visy nominated executives to coordinate price rises and collude when negotiating quotes for customers. These executives met "regularly and secretly" in public places and communicated using prepaid mobile phones, it said.

The scheme was only discovered when Amcor management reported to the ACCC and was granted immunity from prosecution.