‘Cheating the system’: What New Zealand’s first criminal cartel prosecution means for SMB leaders.

Cartel conduct is now a criminal offence in New Zealand. Two firms have just learned that the hard way. One was fined $500,000, another $30,000. One director received community detention and community work. Both now carry criminal records.

This wasn’t a civil dispute. It was a criminal prosecution, the first of its kind in New Zealand by the Commerce Commission.

The Circumstances

The case involved rigged bids for taxpayer-funded road and bridge contracts.

• One company led the conduct and benefited.
• The other 'played along' to stay in the game, even though it didn’t profit directly.

The Commerce Commission uncovered: 

• A spreadsheet with shared pricing.
• Evidence of meetings and coordinated tender bids.
• Email and text trail showing explicit collusion.

The High Court described the conduct as: 

‘Inherently deceptive, hidden from the customer, and difficult to detect.’

For SMBs, that’s the issue. Even participating in the conduct, not leading it can lead to prosecution, criminal conviction, and reputational damage.

What is a Cartel?

A cartel is when two or more competing businesses agree to avoid competing with each other. This can include:

• Fixing prices
• Rigging bids (as in this case)
• Dividing markets
• Limiting output

These practices are illegal because they drive up prices, reduce choice, and harm trust in the market especially when public money is involved.

Why This Matters for Business Owners 

• Small businesses aren’t exempt: These laws apply to all, regardless of size.
• The Commission is active: They are investigating, prosecuting, and educating.
• Cartel conduct is criminal: Under Section 30 of the Commerce Act, price fixing, bid rigging, sharing markets or restricting output can lead to up to 7 years in prison.
• Public projects are in focus: ‘Cheating the system’ isn’t just unlawful, it’s theft from taxpayers.

As Commerce Commission Chair Dr John Small said:

‘Where we suspect businesses and individuals are cheating the system, we will take action against the conspirators.’

Things To Consider

To safeguard your business:

• Review your tendering processes: Every bid must stand on its own merits.
• Train your people: Make sure team members understand what counts as illegal coordination. DO NOT enter into activity that may be deemed cartel trading
• Set clear policies: Build procurement and bidding policies that align with the law.
• Create safe reporting channels: Staff need a way to report behaviour that doesn’t feel right.
• Build governance discipline: Use tools like cartel trading policy statements, whistleblower policy and board structures to ensure independent oversight.

Simple formula for safe tendering:

Open competition + Fair pricing + Compliance with the Commerce Act = Sustainable business and trust.

Final Thought

This case is a milestone. It’s also a warning. Collusion is a crime. For SMB leaders, the message is clear:protect your culture, safeguard your business, and lead with integrity.

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To read the ComCom summary click here