The Commerce Commission has calculated the cost of bid rigging in public procurement for the first time.
Businesses colluding over who should win a public service contract have been warned by the commission that "we are coming after these people".
The organisation's chairperson John Small told Q+A that a conservative annual figure for bid rigging was $360 million a year, but it could be as high as $650 million.
The estimate assumes about 3.5% of contracts are rigged, and that rigged contracts cost around 20% more.
"There's some reason to think that the public sector is particularly at risk, partly because these are these are often ongoing, frequent contracting relationships," he said.
"And also the scale of the projects are often big, so there's a lot of money at stake. But that said, it happens in private contracting as well, or it can happen in a mix of the two."
Bid rigging had been uncovered in the construction industry, Small said.
In December 2024, the commission completed its first-ever criminal prosecution for cartel conduct, in the form of bid rigging, against construction firm MaxBuild.
The company was fined half a million dollars, and a director received six months community detention and 200 hours of community service for colluding with another company to rig bids so they could work for NZTA and Auckland Transport.
The Government spends about $51.5 billion on procuring services and goods every year.
The cost of bid rigging represents less than 1% of that total spend.
For comparison, bid rigging equals about one and a half times the entire budget for the school lunch programme, about $212.4 million.
According to the commission, catching out “inherently secretive” bid rigging involves a mixture of education programmes and an honesty system, including an anonymous whistleblowing tool and a leniency programme. The latter allows people who believe they're part of a cartel arrangement to raise the alarm in exchange for leniency.
Kiwis appear to like reporting cartel conduct — in the last two years, anonymous reporting has risen about 30% each year.
Over the last 12 months, the commission received 34 anonymous reports.
“[New Zealand] has almost as many leniency applications as they do in the United States,” Small said.
The Commerce Commission was also tackling cartel conduct in the grocery and real estate sectors. Court action is being pursued against four Harcourts franchises in Christchurch and their franchisor for price fixing.
Following the commission’s 2022 market study into the groceries industry, the Government gave the Commission greater powers and a grocery commissioner.
It was also given the power to force the supermarkets to sell wholesale on fair terms.
In July, after 20 months, the agency closed the inquiry and chose not to back new regulations.
When asked why his agency didn’t push for change, Small said: “We’re pretty sure that we can get better results by enforcing what we’ve got now … we’re pivoting to enforcement in this area rather than spending what would likely be 12 to 18 months arguing about a new form of regulation, where we need to consult and we’re subject to judicial review".
For the full interview, watch the video above
Q+A with Jack Tame is made with the support of New Zealand On Air
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