Friday, April 04, 2014

A cost of doing business

Stuff reports that the Commerce Commission wants to fine a Swiss company $3 million for participating in a cartel:

The Commerce Commission is pushing for a fine of more than $3 million against freight company Kuehne + Nagel over "hardcore" cartel conduct.

Kuehne + Nagel is one of half a dozen companies prosecuted by the commission over a freight-forwarding cartel, which was separate to an air cargo cartel also taken to task by the competition regulator.

Both sides had agreed Kuehne + Nagel should pay a penalty of $3.1m, plus $100,000 in costs, the High Court in Auckland was told today.

At the penalty hearing commission lawyer Nick Flanagan said the behaviour of Kuehne + Nagel was "hardcore cartel conduct".

Which sounds great, until you start thinking about it. This cartel ran for five years. And you can bet they made more than a paltry $3 million out of the price-fixing. Which means that they profit despite the prosecution. The fine is nothing more than the cost of doing business.

If we want to end cartel behaviour, we need actual deterrents. Jail time for those who form cartels would be a start. So would forfeiture of cartel profits. And much, much bigger fines. We need to make it unprofitable for companies to break the law. Until we do, they'll continue breaking it, and laugh all the way to the bank while doing so.