Friday, 22 July 2016

Time to revisit "hard core" cartels

Earlier this week the European Commission fined four truck makers €2.93 billion (NZ$4.6 squillion at the current exchange rate). A fifth, the German company MAN, wasn't fined because it ratted the others out, and under the Commission's cartel leniency policy (and our own Commerce Commission's), the first company in the door to renege on the others gets off any fine (though it and its cartel mates remain exposed to civil suits for damages). A sixth company, Swedish based but Volkswagen controlled Scania, didn't settle with the Commission and is being pursued separately. Full details here.

This was your classic "hard core" cartel - secret, prolonged (14 years), deliberate, and significant. As the European Competition Commissioner said
there are over 30 million trucks on European roads, which account for around three quarters of inland transport of goods in Europe and play a vital role for the European economy. It is not acceptable that MAN, Volvo/Renault, Daimler, Iveco and DAF, which together account for around 9 out of every 10 medium and heavy trucks produced in Europe, were part of a cartel instead of competing with each other.
The European Union hasn't criminalised cartels, meaning that executives can't be jailed. Member countries weren't prepared to give the Commission the authority, and have gone their own ways: some have chosen the criminalisation route (the UK, Ireland), most haven't. But if ever there was a European case where executives needed to have their collars felt, this was it.

By coincidence, a couple of days earlier the ACCC announced that NYK, the Japanese shipping company, had pleaded guilty to criminal cartel conduct involving the shipping of vehicles from Japan to Australia in 2009-12. It's been a while coming: this was the first criminal case since the Aussies criminalised cartels in mid 2009. We don't know who the other alleged parties to the cartel are. We don't know if anyone at NYK is packing their toothbrush.

When I see cases like these, I can't help thinking - again - that we made the wrong decision last December in flagging away cartel criminalisation in New Zealand. I've posted before that "Hard core" cartelists are criminals and what our response should be: Let hard core cartels off the hook? Nah.

Bear in mind that I'm a bleeding-heart raised-in-the-Sixties liberal, and I'm hard to convince that we should imprison people for anything short of grievous bodily harm or broadcasting reality TV programmes. Bear in mind, too, that I'm generally pro business, strongly pro markets, and slow to buy into heavier regulation or enforcement without an industrial strength, convincing, evidence-based case. But when these genuinely "hard core" cartels crop up, even I am prepared to reach for the handcuffs.

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