Commission warns Better Packaging Co for attempted customer allocation

The Commerce Commission has issued warnings to The Better Packaging Co Limited (Better Packaging) and one of its directors, Rebecca Percasky, following an investigation into an attempted customer allocation agreement in the fast-growing sustainable packaging industry.

A competitor of Better Packaging approached an existing Better Packaging customer offering cheaper pricing for sustainable packaging.

Better Packaging was concerned that the competitor’s approach included negative insinuations about them. Better Packaging raised their concerns with the competitor. In emails sent to its competitor, Better Packaging also stated it had never approached the competitor’s customers and that “no one wins if we get into a bidding war, aggressively go after each other’s customers and all drop our prices”. The emails also invited a response from the competitor and enquired about the competitor’s plans for future approaches to Better Packaging’s customers with discounted offers. Better Packaging and the competitor did not enter into any agreement.

Better Packaging and Ms Percasky deny that they attempted to enter into a cartel agreement.

However, it is the Commission’s view is that Ms Percasky’s emails went beyond challenging any insinuations and were likely to be an attempt to enter into a cartel agreement to allocate existing customers between Better Packaging and the competitor.

“The warnings issued to Better Packaging and its director highlight the importance of avoiding discussions with competitors about pricing or customer allocation even if an actual agreement is not reached,” says Commission General Manager – Competition, Antonia Horrocks.

Cartel conduct harms consumers by preventing businesses from competing to provide better quality services at better prices, and it harms businesses that are trying to compete fairly. A court can find an attempt to enter a cartel agreement is a breach of the Commerce Act.

“Businesses may have legitimate reasons to communicate with each other, including for sustainability objectives, but these are not opportunities to try to reach unlawful cartel agreements with competitors, which can harm the potential for industries to innovate and develop products and services at the lowest cost and highest quality,” says Ms Horrocks.

Individuals involved in cartel conduct that occurs after 8 April 2021 can now be liable for a term of imprisonment of up to 7 years in appropriate cases. It’s important that businesses, their directors, and employees make sure they understand how to stay on the right side of the law.

Businesses or individuals wishing to report cartel conduct should contact the Commission, and those who consider they may be party to cartel conduct should do so as soon as possible. The Commission can grant leniency to the first member of a cartel who approaches it, provided they meet the requirements for leniency. Immunity against criminal sanctions is also available in appropriate cases.

Businesses and individuals can also use the Commission’s anonymous whistle-blower tool.

Background

A warning letter

A warning explains the Commission’s view of the conduct and does not constitute a finding of non-compliance with the Commerce Act. Only the courts can decide whether a breach of the law has occurred.

The purpose of a warning letter is to inform the recipient of the Commission’s view that there has likely been a breach of the law, to suggest a change in the recipient’s behaviour and to encourage future compliance with the law.

The Better Packaging Co

Better Packaging is an Auckland-based company providing sustainable packaging that was incorporated on 2 March 2018.

Better Packaging director Rebecca Percasky is also known as Rebecca Plummer.

What is a cartel?

A cartel is where two or more businesses agree not to compete with each other. This conduct can take many forms, including price fixing, allocating markets or customers, rigging bids or restricting output of goods and services. See more information on what is a cartel.

Cartel criminalisation

The Commerce (Criminalisation of Cartels) Amendment Act 2019 came into effect in April 2021. Now, businesses and individuals can be liable for criminal conviction and individuals convicted of engaging in cartel conduct could face a term of imprisonment of up to 7 years.

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