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A penalty of more than $1 million has been imposed on French company Schneider Electric SA after it admitted participating in a price-fixing and bid-rigging cartel in the gas insulated switchgear (GIS) industry.
New Zealand electricity companies Mercury, Vector and Transpower were caught up in the 20-year-old scandal.
The Commerce Commission, which brought the proceedings, today said that globally, the cartel raised the cost of components used in the transmission of electricity.
"This was a covert, sophisticated and long-running cartel which took considerable efforts to hide from regulators and affected consumers," the commission said.
Schneider admitted its involvement in the cartel until it was excluded by the other participants in December 2000. It admitted breaching the Commerce Act by giving effect to the cartel in this country.
Projects potentially affected by Schneider's participation in the cartel included substation work by Mercury, now Vector, and the potential use by Transpower of GIS in Huapai.
Key features of the cartel included all tenders for GIS being considered by the cartel, which determined who would carry out the work and at what price, the commission said.
A complex system of job reporting was set up within the cartel and committees made up of cartel members made decisions on tenders and pricing.
Cartel members were also obliged to report general inquiries from potential customers about the sale of GIS, and if the inquiries were not specifically discussed by the cartel, quote prices in reply from a schedule agreed and established by the cartel.
The High Court at Auckland imposed a $1,050,000 penalty on Schneider, which also has to pay $50,000 in costs to the commission.
Commission chairwoman Paula Rebstock said the penalty imposed was lower than would otherwise be the case because the events took place before 2001 when penalties were doubled.
Future penalties for similar conduct were expected to be much higher, Ms Rebstock said.
The penalty would also have been substantially higher if Schneider had not admitted the breach at an early stage of the proceedings and agreed to cooperate with the commission's case against other defendants.
Ms Rebstock said High Court proceedings were continuing against other corporate defendants in the case and it was not appropriate to comment on the ongoing proceedings.
The commission said the global cartel ran from 1988, when a written agreement between the members was adopted, until 2004, when it was discovered by competition regulators.
In January 2007 Schneider was fined 8.1m euros by the European Commission as part of 750m euros in total fines imposed on the participants for their role in the cartel in Europe.
In New Zealand, Schneider's GIS business was carried on through an ultimately wholly owned subsidiary of Schneider, Schneider Electric (NZ) Ltd, which was unaware of the existence or implementation of the cartel, the commission said.
GIS is used to control the flow of electricity in substations. It is a system of circuit breakers - measuring and control devices to switch electric currents - using a high-pressure gas called sulphur hexafluoride to insulate the live elements of the switch.
- NZPA
